Agriculture, Land Access and Economic Growth in Africa: An Instrumental Variable Approach

The sector accounts for the single most important productive sector in the region, in terms of its share of Gross Domestic Product, employment creation, and source of food livelihood for the majority of the populace. The growth and development of nations in Africa depend largely on the improvement of the productivity, profitability, and sustainability of farming. Agricultural activities on the continent are largely based on smallholder farms averaging two hectares or less, making equitable access to agricultural land crucial for improved agricultural productivity. Agricultural land access has been heralded as a plausible explanation for agriculture being less effective in driving economic growth in Africa. Farmers, especially poor and vulnerable ones, face the challenge of accessing land, which is a critical factor in agricultural productivity. Research has shown a positive relationship between access to farmland and growth in agricultural output. Developing an efficient land reform that improves land access for agriculture is likely to lead to a sustained economic development. The study uses data from databases of the World Development Indicators (WDI) and the Food and Agriculture Organisation Statistics (FAOSTAT) to analyze the relationship between agricultural output and economic growth in Africa. The time series data covers the period of 1996 to 2015, and a panel was compiled for twenty-six African countries. The explanatory variables in the study model include Gross Domestic Product (GDP), agricultural output, land available for agriculture, total population, inflation, GDP deflator, domestic credit provided by the financial sector, and exchange rate. The study found a statistically significant influence of the agricultural sector in enhancing economic growth in Africa. The growth in agricultural output, which had a positive impact on economic growth, was due to the expansion of the land area used for agriculture. Domestic credit provided by the financial sector and inflation rate play a significant role in explaining Africa's economic growth. The study also found that the size of agricultural land area remains almost unchanged in the last decade when compared to the steady rate of agricultural land expansion over the last century. Trend analysis of GDP growth, agricultural land area, and the value of agricultural output in Africa shows that the continent has been experiencing declining economic growth since 2014. The size of the agricultural land area remains almost unchanged in the last decade, and there was a decline in the size of agricultural land area in 2009 by about 3% which has since then been slowly expanding. The study's findings suggest that developing an efficient land reform that improves land access for agriculture is likely to lead to a sustained economic development in Africa.