id21 viewpoints

Do institutions block agricultural development in Africa?

An African farmer travelling to market passes through seven checkpoints in 100km, in a vehicle he has to rent. He is not certain that the prices for his produce will make the trip worthwhile. He lacks the political influence to push governments to ease transport costs, and the market information to bargain for better prices.

This farmer is fictional, but his problems are real. Agriculture supports the livelihoods of two thirds of people living in sub-Saharan Africa, but addressing the obstacles facing African farmers requires looking beyond markets and into courtrooms, polling stations, villages and farms.

Institutions are the rules and constraints that shape economic interactions. They include formal laws and policies (as well as enforcement mechanisms for these), informal traditions and customs, and normal social behaviour patterns (‘social norms’). Institutions are important for economic development and for creating dynamic agricultural markets. However, institutional barriers can also prevent economic development and agricultural progress. These barriers exist where formal norms are missing, or when their enforcement is weak. Barriers are also created by contradicting institutional frameworks, and by clashes between formal rules and informal customs and social norms. For example:

• Many formal policies fail to stimulate institutional change. For example, market reforms (such as liberalisation) suffered from an absence of specific rules, such as established grades and quality standards for agricultural produce.
• Policymakers, development economists and aid workers often overlook cultural and informal norms. These determine the decisions of traditional authorities and judges and can also influence the actions of government officials.
• Informal and formal institutions influence each other. For example, if formal land tenure reform ignores traditional customs, it will fail to have any impact and may even create legal uncertainty that undermines the rights of vulnerable people.
• Social norms determine acceptable or expected behaviour in households, clans or kin groups and within communities. These institutions are essential for allowing farmers to manage risks and to obtain credit and information - important ‘safety nets’ against bad harvests or disease.

Social norms also create problems. Egalitarian customs that demand the compulsory redistribution of crops, income, and sometimes wealth are a tax on asset accumulation and discourage farmer from investing. Social norms that discriminate against certain people (foreigners, women or poor people), or prohibit certain transactions (typically land negotiations) limit agricultural development and hold back progress. However, social norms do respond to policy reforms and changes in the economic environment. For example, legislation in Ghana that allocates part of intestate property to surviving spouses have altered social norms and strengthened the traditionally weak land rights of Akan women.

Social norms do not need to be seen as a solution, or vilified as backward. They must be acknowledged as part of the institutional environment that influences economic decisions and outcomes, particularly in rural areas of sub-Saharan Africa. We need to understand the economic significance of existing cultural norms to anticipate the effects of policy reforms. Successful institutional reforms for agricultural development require:

• Changes to formal institutions that complement cultural norms and encouragement and support for the evolution of traditional customs.
• An accessible, trustworthy way to enforce agricultural contracts that will enable farmers and traders to go beyond ‘cash-in-hand’ economies.
• Political institutions that allow farmers to organise themselves and address local problems collectively to give them some influence in the policy formulation process.

Contributor
Juan R. de Laiglesia

Further information
Juan R. de Laiglesia
OECD Development Centre
2, rue André-Pascal
75775 Paris Cedex 16
France
Tel +33 (0) 1 4524 9382
Fax +33 (0) 1 4430 6150

Email Juan.Delaiglesia@oecd.org

June 2006

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