Agriculture is a source of livelihood in Africa and equally a significant driver of economic growth. For instance, in 2013, Nigeria witnessed an approximately 6 percent growth in its agricultural sector. African governments’ intervention in agriculture has mostly been through the supply of financial subsidies and farm inputs to farmers. 90% of these subsidies get lost to middle men through what is described as “agric-corruption”. However, governments’ adoption of the electronic-wallet (e-wallet) system has proven to be a game changer for Africa and beyond.
Economic value of agriculture in Africa
African governments understand the critical position the agricultural sector occupies in the socio-economic development of the continent. The World Bank and Rockefeller Foundation Africa posit that agriculture remains the continent’s largest economic sector. It contributes 15% to Africa’s Gross Domestic Product (GDP), almost more than $100 billion annually.
In Sub-Saharan Africa alone, the sector contributes 22.9% to the continent’s GDP. It recently declined to 17.1 percent due to ineptitude and high profile corruption in the sector.
On these bases, some African governments are beginning to handle investments in the agricultural sector with some seriousness. Through their ministries of agriculture, these governments have supported individuals and local farming associations to revitalize the sector. This support is provided in the form of training, financial subsidies, farm inputs like fertilizer and planting seeds, among others.
Governments’ aspirations through these actions are to modernize the sector and boost food production to reduce hunger and increase GDP. Some African governments are already transforming agriculture from a profession to a business, thereby generating gainful employment opportunities and lowering the rate of rural-urban migration.
Agric-Curruption in Africa
Nevertheless, the mischief of corruption (agric-corruption) appears to be hampering governments’ drive to augment the agric-sector GDP in Africa. The World Bank projects that agriculture in Africa has the potential to make up a $1 trillion industry by 2030. However, this will only happen if African governments address the massive corruption in this sector.
Agric-corruption is common among the intermediaries contracted by governments to deliver agricultural subsidies to farmers and small farming groups. These intermediaries are largely responsible for the embezzlement of financial and material support to individual and small groups of farmers.
Intermediaries’ withhold larger percentages of yearly aid to farmers and sell the non-financial aid in open markets. Others collect the aid from government and re-sell at higher prices. Consequently, governments have not been able to achieve their objectives of investing in, and boosting this sector.
For instance, the Nigerian government in four decades spent $5bn dollars on farm input subsidies. Unfortunately, the middle men embezzled the money and only 11 percent of farmers received subsidies.
The outcome of this corruption in the agricultural sector is absolutely low production and of course low profits and overall low agricultural GDP. However, governments’ desire to tackle agric-corruption has led to the adoption of the e-wallet system. This system is now functional in a number of African countries, including Nigeria, Zambia, Kenya and Ghana, etc.
What is an e-wallet?
Tech revolutionists describe e-wallet as a type of password-protected electronic card which is used for online transactions. The transactions are carried out on a computer or a smartphone; that’s why it’s also called the digital wallet. The functionality of this digital wallet can be equated to that of a credit or debit card.
An e-wallet needs to be connected to an individual’s bank account before payments could be effected. It is therefore, a type of prepaid account whereby users can deposit money for any future online transactions.
The Case of Nigeria
The Nigerian government like most African governments, supports its agricultural sector through financial subsidies, fertilizer and other inputs. The Federal government spent billions of dollars for decades, in vain, as middle-men siphoned the resources.
However, the result was not surprising, as agricultural productivity nose-dived even as government spending increased. Dwindling harvests and incomes from the agricultural sector triggered rural-urban migration. Consequently, there was an effectively transfer poverty from otherwise fertile farmlands to overcrowded urban areas.
Goodluck’s goodluck Scheme
In 2012, the federal government was in full quest for an anti-corruption innovation in the distribution of subsidies to farmers. This led to the introduction of the Growth Enhancement Support Scheme (GES), under the government of President Goodluck Jonathan.
The e-wallet system uses mobile phones to conduct basic transactions. Thus, the government is effectively delivering subsidies to farmers. These include making payments to farmers and having them access fertilizer subsidies directly from companies through their mobile phones.
The country’s present administration has sustained this technological innovation for a while now and it has successfully eliminated the corrupt middlemen from the system. Research findings show that there are over ten million Nigerian farmers with access to the e-wallet system.
Also, a billion-dollar industry has expanded ten-fold to include seed companies, provision of inputs, and fertilizers. For example, in 2014, the e-wallet system beneficially impacted 40 million Nigerians. Seed and fertilizer companies could sell and market directly to farmers, bypassing government and middlemen.
Impact in terms of GDP
This has also significantly led to increase in fertilizer usage with the e-wallet system, thereby eliminating obstacles that currently limit yields and output. Between 2012 and 2014, the e-wallet system added an estimated $30 – 40 billion to Nigeria’s GDP. This indicates a drastic drop in the food import bill from $16 billion in 2011 to $4 billion in 2014. The federal government has successfully moved out of the supply chain. The Nigerian government has created new private-sector agribusinesses to ensure that farmers get the fertilizers they need.
The e-wallet is a Federal, State, and private sector partnership. It’s an innovative business in mobile and digital services in Africa. The creation of farming groups is very important. The groups use a mechanism such as cross guarantee to borrow. Young farmers are ready to adopt digital financial services like the e-wallet to help them transform agriculture into a business.
The World Bank has appreciated the success of the e-wallet system as an antidote to agric-corruption. This innovation inspired other African countries like Zambia, Tanzania and Ghana, who have adopted the innovation. Non-African countries like India, Brazil, Afghanistan and China are now attracted to this innovation.
E-wallet system for distributing fertilizers and seeds by cellphones, which worked so well in Nigeria, goes global! https://t.co/7hQAMfXwD3
— Akinwumi A. Adesina (@akin_adesina) August 8, 2017
Thus, tackling corruption in the agric-sector using innovative technologies is critical for GDP improvement in Africa. In the recent AU summit, African leaders committed themselves to tackling corruption in every sector of national life.
This decision is part of the Agenda 2063, which is part of the guiding vision of the African Union. The AU has the responsibility to set the agenda and uphold shared values in anti-corruption. It has powerful instruments, including the Convention on Preventing and Combating Corruption, ratified by 38 countries.
The AU has hopes of weeding out corruption in the agricultural sector with more digital initiatives. This will go a long way to improve the lives of the African farmer and by extension the economy.