Agricultural Distortions and Economic Growth in Southern Africa: Evidence from Mozambique, Zambia and Zimbabwe (1970-2011)

Douglas Ncube

doi:10.2174/1874331501711010035

Abstract

Introduction:The first decade of 2000 was considered Africa’s decade of unprecedented growth as it was the fastest growing region in the world. This growth is believed to have largely been a benefit of the commodity super-cycle which is beginning to tail-off. Analysts perceive that growth in Africa is currently more threatened by global trends and region specific risks around agriculture and politics.Statement of the problem:It has been noted that African countries have experienced stagnant or declining agricultural productivity growth rates, increasing rural poverty, hunger and malnutrition coupled with low competitiveness in global markets over the decades.Methodology:Using the database on Distortions to Agricultural Incentives, the World Development Indicators and the Penn World Tables, the determinants of economic growth in Southern Africa and the impacts of a pro or anti agricultural policy regime on economic growth were investigated. In this study, three Southern Africa countries were investigated, that is, Mozambique, Zambia and Zimbabwe.Results:The Panel Data Analysis results suggest that 1% decrease in the degree of anti-agriculture policy bias results in a 0.1% increase in real per capita GDP. Further, 1% increase in the share of gross capital formation in GDP results in 0.04% increase in real per capita GDP.Conclusion:The study showed that reducing direct and indirect, implicit and explicit taxation to agriculture relative to non-agriculture sector would result in improved economic growth in the three Southern African countries of Zambia, Zimbabwe and Mozambique.

Highlights

The first decade of 2000 was considered Africa’s decade of unprecedented growth as it was the fastest growing region in the world
The average Relative Rate of Assistance to agriculture is -50.60% which shows that on average the agriculture sector in the three sample countries is taxed by approximately 50% relative to the non-agriculture sectors
With regards to testing the hypothesis of the determinants of economic growth, the analysis shows that reducing the degree of taxation on agriculture relative to non-agriculture sector in the three Southern African countries is significantly associated with positive economic growth

Summary

Introduction

The first decade of 2000 was considered Africa’s decade of unprecedented growth as it was the fastest growing region in the world. The neoclassical approach is, bound by certain assumptions and conditions that often do not hold in reality These include the assumption that: the enforcement of policies is perfect and costless; there is perfect information and there are no externalities (positive or negative); and, the elasticities of factors of supply, cost shares, and substitution remain constant (Alston and James) [2]. Based on these and other assumptions, the normative neoclassical approach asserts that a market with no distortions is the best allocator of resources and would be most efficient welfare-wise

Methods

Results

Conclusion