Successful agricultural transformations: Six core elements of planning and delivery
How can
countries increase their odds of a successful rural transformation?
The most
effective way to improve the lives of millions in
poverty is to support agriculture in developing countries. Most of the world’s
poor are farmers, and those who are not spend much of their income on food.
Transforming a country’s agriculture sector can create jobs, raise incomes,
reduce malnutrition, and kick-start the economy on a path to middle-income
growth. In fact, almost every industrialized nation began its economic ascent
with an agricultural transformation. Recent examples include Brazil, China, and
Vietnam, each of which at least doubled the value of its agriculture sector
within 20 years of starting its transformation. Many other countries in Africa,
Asia, and Latin America are earlier on the path of transformation.
For some, agricultural transformation has
not advanced as planned or has stalled. Navigating the complexity of a
transformation is invariably tough for governments, even though they may
prioritize agricultural investment and recognize how important it is to get
right. This is especially true in an era in which governments are seeking
agricultural transformations that meet multiple goals simultaneously. In
addition to traditional economic development and poverty reduction goals,
governments are also focusing their agricultural transformation plans on Sustainable
Development Goals (SDGs) by considering, for example, climate-smart strategies,
women’s economic empowerment, and biodiversity.
The drivers of agricultural transformation
are multidimensional, interrelated, and change over time, but they can be
organized into categories to provide a better opportunity for pragmatic
diagnostics and decision making on national priorities. After running more than
30 country diagnostics, we found that the drivers fall into three main
categories. First, there are elements of “transformation readiness.” Changes to
a country’s institutional framework, governing mechanisms, and political
environment can significantly influence the likelihood of accelerating an
agricultural transformation. Second, the quality of the national agricultural
plan or strategy is critical. Last, there are drivers related to delivery
mechanisms. This category focuses on what is needed to translate the national
agricultural plan into on-the-ground impact. This includes the ways in which
countries manage decision making and progress against targets as well as how
they use change agents to support the large-scale behavior change among
smallholder farmers that underpins a successful agricultural transformation.
In this article, we consider the second and
third categories. We focus on six core elements of a national agricultural plan
(“what to do”) that increase the odds of a successful rural transformation, and
then reflect on elements of the on-the-ground delivery of an agricultural
transformation (“how to do it”). In a companion article, “Readiness for
agricultural transformation,” we identify a set of common institutional,
organizational, and political components that increase the likelihood of
success for a government’s good agricultural transformation policies and
investments.
What to
do: Six core elements of an agricultural transformation plan
Although rural families often make their
living from many different types of work, improvements in farming have proved
to be the path toward widespread, poverty-reducing growth in the rural economy.
Successful agricultural transformations have focused on the farming household,
providing opportunities for farmers to earn a better income. For some, that
will mean raising farm productivity or shifting the mix of production to
include higher-value crops and livestock. For others, the right choice will be
to do less farming and take advantage of employment options off the farm. As
farmers have more money in their pockets, they spend more in the local economy,
creating jobs, opportunity, and more demand for agricultural goods. The
question is how to accelerate, sustain, and scale these growth cycles. For
that, a well-crafted agricultural plan is required as part of a country’s
overall economic development approach. There are six elements that distinguish
a superior agricultural plan.
Prioritized and differentiated strategies
Developing an agricultural transformation
plan demands prioritization—a plan will not succeed if it tries to cover
everything. Instead, it should focus on the changes that are most likely to
kick-start rural economic growth. Successful plans identify goals in a limited
number of crop and livestock value chains, cross-cutting agriculture sector
enablers (such as lower transportation costs or access to irrigation), and
specific geographies.
Ethiopia and Morocco are experiencing
transformations that show clear focus in terms of crops, transformation
enablers, and geographies. Morocco’s Plan Vert started with seven value chains,
expanded to nine, and focused on six geographic areas. Ethiopia’s agricultural
transformation plan initially prioritized three value chains and five
geographic areas. Countries often prioritize a combination of both food
security crops as well as export or higher-value commodities. Rwanda’s Crop
Intensification Program, launched in 2007, for instance, balanced land use
between intercropping of diverse crops and monocropping of a set of six
priority crops. The country’s 2013 agricultural transformation plan included
specified priority agricultural value chains in both food and export
commodities (including apiculture, dairy, fisheries, and meat).1Our
experience suggests that many countries’ agricultural transformation plans are
overly ambitious, cover too many value chains, and fail to focus critical
resources. Eight of the 13 national agricultural plans that we analyzed in
Africa didn’t set clear priorities.
A second related success factor is differentiation.
Successful agricultural transformation plans differentially target agri-food
systems and geographic areas with tailored strategies. For example, more
productive land that is already well connected to markets, such as irrigated
land in Morocco, can support large- or small-scale farms; agribusiness is
easier to scale there. In more remote areas, though, with bad roads,
poor-quality land, and less well-connected markets, different strategies are
needed. These might involve greater focus on staple crop productivity and
social safety nets. Most plans don’t make these distinctions.
A third related success factor lies in
weighing the trade-offs among multiple objectives. Governments work toward a
number of different goals, including growth in agro-processing, reduced
unemployment, lower poverty incidence, food self-sufficiency, economic growth,
increased exports, or lower rates of malnutrition. If these trade-offs are
explicitly considered and communicated when developing the agricultural
transformation plan, it is possible to tailor the choice of value chains,
cross-cutting enablers, and geographies to differentially achieve the
government’s chosen goals. For example, one strategy might focus on raising the
productivity of smallholder farmers’ food crops in a particular region where
rural poverty and stunting (from malnutrition) rates are high, while a
concurrent strategy focuses on what is needed to accelerate growth in the
coffee sector to boost export revenue and job creation. When the trade-offs among
multiple objectives are not explicitly integrated into the agricultural
transformation plan, progress is characterized by underdelivery across too
many, sometimes competing, objectives.
Market-driven opportunities for farmers
Agricultural transformations often focus
too much on volume rather than value and on productivity of row crops rather
than opportunities for high-value crops, downstream processing, and livestock.
Farmers everywhere are businesspeople. Farming households in developing countries
balance a portfolio of crops, livestock, and nonfarm work. Because they feed
their families with some of the farm output as well as sell into markets, they
make decisions based on their potential profit, risk, and cash flow across
family food consumption as well as sales. Too often, agricultural plans
recommend particular commodities without paying attention to this basic
calculus of farmer household economics. Successful agricultural transformation
plans give farmers the opportunity to raise their household incomes.
In Morocco, for example, important public-
and private-sector stakeholders concluded that the most effective way to
address rural poverty was to grow high-value crops (for example, tomatoes and
olives) on irrigated lands (while accelerating investment in irrigation) to
supply regional urban, European, and other export markets. This choice
dramatically increased the income opportunities for small farmers and has led
to an average land productivity increase of 30 percent.
In some cases, high-value crops or
livestock will not be a viable opportunity for farmers, and promoting the
intensification of row crops makes more sense. Even then, the focus should be
profitability for the farmer, including attention to sustainability, quality,
storage, and processing.
Change agents identified and mobilized
The success of any agricultural
transformation relies on how well millions of smallholders and small- and
medium-size enterprises can be helped to change farming practices as quickly
and effectively as possible. The critical enabler, without which an
agricultural transformation is likely to fail, is a frontline “change agent”
that helps farmers modify their practices. Change agents are people who farmers
trust and interact with regularly. The high-level objectives of a
transformation are realized in practice only when they are effectively
translated to smaller, on-farm shifts. For example, increased productivity in
the dairy sector might be achieved through farmers accessing better animal
health technologies and better cattle breeds or joining dairy cooperatives to
sell their milk. Change agents provide the critical interface with farmers. To
catalyze this, a change agent might be the person providing extension
knowledge, offering financing for farming inputs such as fertilizer,
aggregating crops, or facilitating marketing services. For example, a change
agent can help farmers make the transition from growing wheat to more
complicated but lucrative opportunities such as raising tomatoes, vegetables,
and orchard crops.
Effective change agents exist in both the
public and private sectors. Many scholars cite countries’ investments in
national agricultural extension services as critical to agricultural
transformation. Ethiopia’s investments in expanding the agricultural extension
system are believed to have accelerated its agricultural transformation. Other
mechanisms for organizing farmer-facing change agents, though, have also played
critical historical roles in transformation. Agricultural cooperatives, for
example, can provide technical assistance to farmers but can also fundamentally
change the farmers’ risk and potential revenue by providing access to storage,
equipment, finance, and marketing services. Small-scale stockists, or input
dealers, also have an important influence on the changes required among
smallholder farmers if agricultural transformation is to succeed (for example,
promoting the adoption of improved, higher-yielding varieties of seed).
Morocco designated farm managers who
interacted with a large number of smaller farmers through contracts as the main
category of change agent. In each case, the countries made a big effort to
recruit, support, and manage the performance of these change agents. Other
kinds of organizations with change agents include warehouse aggregators, food
processors, inputs distribution centers, and farmer collectives.
The appropriate choice of change agent
might vary depending on what part of the transformation plan is involved and
the characteristics of the country’s agri-food systems. The key is to ensure
the use of appropriate metrics and incentives, sufficient training, and
performance management of the change agents. Selecting change agents is
critical in every agricultural transformation, yet we rarely see this step
addressed systematically.
Finding the right starting points for scale
Change in agricultural systems requires
multiple parallel advancements. For example, improvements in agricultural
extension and seed systems might enable farmers to switch to a more productive
hybrid seed, but lack of access to fertilizer (upon which the hybrid depends)
could prevent productivity increases and leave the farmer unwilling to buy
hybrid seed next time. As in any complex economic system, when so many elements
are interrelated, any one of them can become a constraint and stall progress.
A common reaction to this interdependency
problem is to try to move all elements ahead in a highly prescribed way,
specifying interventions up and down value chains and creating complex plans with
a high potential for failure. Instead, the best agricultural transformation
plans have two critical characteristics: they anticipate the need for agility,
and they selectively focus on the points of the system where small changes are
likely to cause larger shifts. These focus areas could be within specific
geographies or within particularly influential value chains.
Overly prescriptive and inflexible
strategies in agricultural transformation fail because of the complexity of
agriculture-based economies. For example, designing a national promotion of new
varieties of high-yielding maize among smallholders, along with investment
plans for storage and marketing, may not work if the storage facilities are not
placed in the right locations. Suppose the production of maize in some areas
outstrips storage capacity. Roads are bad, and transport to other markets is
prohibitively expensive. In these areas, the glut of maize depresses the local
market price, and farmers may return the next season to growing their old,
cheaper varieties of maize because they lost money on the new one. A different,
less top-down approach might be to enable change agents to set local targets
and work with farmers who know the economics of maize production all too well.
As changes begin to occur, the most critical success factor is that the plan
allows for learning and that it is flexible enough to be adjusted as
understanding progresses.
As localized systems, parts of value
chains, or changes in geographic regions are better understood, the learning
from those successes can be applied at greater scale. Starting with less
comprehensive and prescribed plans and demonstrating success with more flexible
learning models can also attract champions, additional talent, and more
investment that can be used in scaling up.
This is normal change management in the
private sector. For example, a transformation of 50 manufacturing plants may
start with three plants and scales up from there. But in public-sector
transformations, the need for equity across the population often leads to
single-solution national programs, such as untargeted fertilizer subsidies.
These broad interventions often do not succeed, because stakeholders have not
taken the time to learn the nuances of where and how best to implement them.
Pragmatic approach with an investor mind-set
Approaching transformations with an
investor mind-set is critical to the success of the process. In kick-starting
agricultural transformations, coordination among government, donors, and civil
society is critical, but it is equally important from the start to plan for
private-sector engagement. Without this, the transformation may proceed more
slowly, stall, or not reach scale.
Agricultural transformation plans with an
investor mind-set include three strategic planning components. First, the plan
identifies public investments that complement likely private-sector investment.
These are investments in areas where returns are low and/or risks are high.
They can include typical public goods (such as rural advisory services or
training) as well as investments in commodities or geographies that are
important to transformation but unlikely to garner private investment. Second,
a good agricultural transformation plan identifies public investments designed
to catalyze additional private-sector engagement. This may be, for example,
through risk guarantees, cost sharing, innovative public–private partnerships,
targeted subsidies, or provision of infrastructure conditional on private
investment. Last, agricultural transformation plans with an investor mind-set
anticipate changes in the enabling environment that will be necessary as the
transformation progresses to support increasing private-sector engagement.
These policies, laws, and regulations are usually across multiple sectors in
addition to agriculture, including banking, trade, and land policies.
Progress on enabling policies
Agricultural transformation is more than
changes in farming practices. It is about catalyzing transformation of a
country’s rural economy. As such, more than agricultural trade and subsidy
policies are in play. For example, laws and regulations that influence banking,
labor, infrastructure, land ownership and access, access to water,
telecommunications, taxes, and insurance are also critical considerations.
Land policy is often cited as a pivotal
factor in determining whether a country’s agricultural transformation can
simultaneously achieve sustained progress and inclusivity (contributing to
widespread poverty reduction). Land policy is a good illustration of how
critical it is for policies to be dynamic—changing over time to prevent
transformations from stalling. For example, land ownership or tenure may be key
at the start of an agricultural transformation as a way of influencing farmers’
investment in their production. However, rental markets may soon become
important as some farmers move out of agriculture into other jobs and need
income from their land.
Finally, effective policy making for
agricultural transformation needs to become more evidence-based over time.
Policy makers should invest in making use of existing data and analytics to
comparatively assess the costs and likely outcomes of different potential
transformation programs. Policy makers also need to use data and analytics to
set reasonable targets and redirect programs where outcomes are not meeting
targets. Evidence-based policy making builds better plans and integrates
accountability into the systems responsible for implementing the policies.
How to
do it
The first part of this article focused on
best practices for what to do in a successful agricultural transformation and
what should be included in a high-quality national agricultural plan. The
delivery elements of transformation, however, are often even more neglected and
represent a big opportunity to increase success rates. Even in the private
sector, McKinsey research shows that 65 percent of transformations that aim to
improve the performance of large companies fail to accomplish their goals. The
most important factor that distinguishes successful transformations is
attention to the soft side—the “how to do it” part.
Willingness to change
The most important factor in the soft side
is the willingness of governments, donors, farmers, companies, and civil
society organizations to take risks and change behaviors to pursue a better
outcome. Sometimes a new prime minister or agricultural minister arrives with a
vision to transform the sector, and the momentum of good leadership spurs
progress. Other times, change readiness can be encouraged through incentives
(for example, compacts through the Millennium Challenge Corporation or
contingent private-sector investment commitments), through exposure (for
example, World Economic Forum regional meetings or rankings in internationally
accepted development indices), or by showing a way forward that convinces key
stakeholders.
However it occurs, commitment from the
highest levels of government is needed before and during the development of
agricultural transformation plans. Both political and financial capital are at
stake for public-sector investors, and securing high-level commitment will
ensure the development process produces more clearly defined practical plans
that have a higher likelihood of being implemented.
Sometimes, though, a country is just not
ready for change, either because it is undergoing conflict or because the wider
political system itself is not ready to work on agricultural transformation.
Key stakeholders should make a big effort
to ensure and maintain a country’s change readiness. But there should be a
clear-eyed evaluation—if change readiness really is not present and there is no
good prospect for movement, then it is best to stop wasting resources. In the
meantime, many steps can be taken to improve the national welfare, but this
does not have to be approached with a transformation mentality.
Leadership alignment
For a transformation to succeed, there
must be a common understanding of the plan, stakeholder roles, and approach to
management of the process. At the highest level, key government ministries, the
local and international private sectors, and donors must be aligned. Ethiopia
and Morocco both invested more than a year of intense study and stakeholder
engagement to craft their agricultural transformation plans. Nigeria undertook
a process of deeply engaging 24 bank CEOs and key government leaders in
developing its agricultural bank lending program, NIRSAL. Many tools and
processes exist to achieve common understanding, but getting there requires
commitment from leaders across different sectors.
The alignment must also extend from the
national to local level, into provinces and districts, and across multiple
ministries. Transformation planning, leadership alignment, and budget coherency
that is developed at the national level, and only in the ministry of
agriculture, will fail when the interventions interact with more local
governments or with other enabling issues (for example, transportation, trade,
or finance). In addition to alignment between national and local decision
makers, successful planning often includes an appropriate decision-making
mandate for lower governmental levels (for example, states in Nigeria,
provinces in Morocco, and districts in Ethiopia) and cross-ministerial
collaboration processes.
Leadership skill building
Most successful transformations can be
traced to specific single individuals who had an extra-ordinary impact on the
project. Often this is left to chance, but there is great upside to a more
systematic approach to supporting key leaders, from high-level government
officials to frontline employees. In private-sector transformations, leadership
training and peer networks are made available, even when the goal is just a few
million dollars of profit improvement. In large-scale public-sector transformations,
where the goal is to improve the lives of millions of people, the return on
investment for leadership skill building is tremendous.
A well-known principle in adult learning
is that skill building works best when it is connected to real work and
practical problem solving. With this in mind, we believe there is great value
in the creation of an academy focused on building the next generation of
leaders in an agricultural transformation. Here, groups of 20 or so leaders
responsible for agricultural transformations in their countries jointly go
through an 18-month leadership journey using a “field and forum” approach. They
would assemble every few months for intense technical and leadership training,
and then return to their roles at home, with remote access to both expert
support and a peer network. This approach costs relatively little but produces
better individual leaders and facilitates alignment in a country’s top team.
Managing the transformation
An agricultural transformation is not just
a planning exercise. It takes management over time. Our experience suggests
that creating a project management office (PMO) can greatly increase the
chances of carrying out a successful large-scale change program. A PMO can
concentrate talent, monitor implementation, act as a source of truth, and, in
general, help get things done. The office can apply accepted project management
technologies to break the transformation into discrete initiatives, each with
specific goals, timing, and responsibility. A PMO is also charged with engaging
relevant stakeholders when problems arise.
There is a case for using existing
structures such as ministries rather than creating a temporary new
organization. However, our experience shows that, depending on the country, the
positives of a PMO (improved coordination, management of progress toward
targets, increased ability to learn and adjust implementation over time) can
greatly outweigh the negatives (high transaction costs, the potential for added
complexity in political channels). Most large-scale transformations in the
private sector use versions of PMOs. Some countries with recent success in
agricultural transformations are using PMOs (including Ethiopia and Morocco).
There has been strong progress on country
and state-level agricultural development plans throughout the world, but we
believe there are still large opportunities for improvement, as described in
the first part of this article. The how-to elements of a transformation
described in the second part offer an even greater opportunity to accelerate
agricultural transformations. Our experience suggests that they are the biggest
controllable factors leading to successful conclusions. They are
high-return-on-investment actions that can make the “what to dos”—the larger
investments in areas such as processing facilities, roads, and fertilizer—have
a much likelier chance of success.
Agricultural transformation is essential
to the future well-being of developing nations and therefore also to a world
with more equitable economic development. We hope that this article contributes
to the thinking about agricultural transformation and encourages governments
and other stakeholders to reflect on the steps they should take ne
By Sara Boettiger, Nicolas Denis, and Sunil Sanghvi
https://www.mckinsey.com/industries/chemicals/our-insights/successful-agricultural-transformations-six-core-elements-of-planning-and-delivery?cid=other-eml-alt-mip-mck-oth-1712
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