Investment Patterns in Agriculture and Their Impact on Agricultural Output in Selected African Countries


Authors : OLUWAYEMISI OLADUNNI GBOLADE

Volume/Issue : Volume 6 - 2021, Issue 10 - October

Google Scholar : http://bitly.ws/gu88

Scribd : https://bit.ly/3EpcrNr

The Food and Agricultural Organisation (FAO) of the United Nations categorises investments in agriculture as domestic private, domestic public, foreign private, and foreign public investments. The main objective of this study is to estimate the impact of the categories of investments in agriculture on agricultural output in Africa. The patterns of investments in agriculture in Africa, and the direction of causality between the investment categories in agriculture and agricultural output in Africa were also examined. Agricultural output index, agricultural gross fixed capital formation, general government expenditure on agriculture, public spending on agricultural research and development (R&D), foreign direct investments, and development flows to agriculture are prominent variables of the study. The data sources of these variables include the FAO of the United Nations, the International Food Policy Research Institute (IFPRI), and the United Nations Conference on Trade and Development (UNCTAD). The agricultural output model was constructed using balanced panel data on 36 membercountries of the African Union covering the period of 1980 - 2018. Three panel data models were evaluated for the study, namely, Pooled Ordinary Least Squares (Pooled OLS), FixedEffects (FE), and Random-Effects (RE) models, with the FE model emerging superior. The results reveal that foreign private investments (FPRI) are the largest source of investments in agriculture in Africa, followed by domestic private investments (DPRI), domestic public investments (i.e., domestic public investments in terms of general government expenditure on agriculture {DPGE} plus domestic public investments in terms of public spending on agricultural R&D {DPRD}), and foreign public investments (FPUI). Furthermore, with the exception of DPGE and FPUI, which are positively correlated with agricultural output, but statistically insignificant, the categories of investments in agriculture have a significant positive impact on agricultural output in Africa, with the order of significance being DPRI, DPRD, and FPRI. Finally, there is unidirectional causality between the investment categories in agriculture and agricultural output in Africa, with causality from investment category to agricultural output in the cases of DPRI, DPRD, FPRI, and FPUI, but the other way round in the case of DPGE. Based on these findings, agricultural development initiatives in Africa should be geared towards increasing domestic private sector participation in agriculture. Agricultural research and development (R&D) policy framework should be designed to focus on agricultural science and technology. An environment that is conducive for foreign investment should be created and sustained across Africa.

Keywords : domestic private, domestic public, foreign private, and foreign public investments in agriculture; and agricultural output in Africa

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