The common claim is that market failures in agricultural R&D lead to underinvestment in research if left to the private sector; research opportunities that would be socially profitable go unexploited. These market failures arise because some research is privately unprofitable due to appropriability problems -- whereby the innovator (or investor) cannot appropriate all the benefits -- or the transaction
sizable share of the operational and, perhaps, even capital costs also consist of locally not internationally traded goods and services.
Table 7—Expenditures per researcher by cost category in US dollars (1991) Salaries
Country Local TAa Total Operating Capital Total
(current dollars per researcher)
Burkina Faso 21,46 33,117 54,586 22,074 22,056 98,716 Cape Verde 36,56 41,379 77,939 30,330 4,678 112,94 Cote d'Ivoire 35,87 56,471 92,349 25,316 2,707 120,37 Ethiopia 16,17 8,586 24,757 10,530 10,088 45,374 Ghana 25,07 10,185 35,259 9,859 22,813 67,930 Kenya 19,11 12,660 31,778 10,771 6,772 49,320 Madagascar 11,72 25,140 36,866 8,680 2,664 48,210 Malawi 20,05 22,599 42,653 19,133 7,477 69,262 Mali 14,67 16,190 30,866 12,173 8,812 51,851 Mauritius 35,30 0 35,307 25,737 9,298 70,341 Niger 34,13 27,273 61,407 3,920 1,615 66,942 Nigeria 9,748 1,812 11,560 5,477 4,490 21,527 Rwanda 28,81 36,735 65,547 17,072 4,533 87,152 Senegal 34,48 45,031 79,515 17,965 3,498 100,97 South Africa 66,08 0 66,088 18,929 6,133 91,150 Togo 20,75 30,000 50,753 15,079 6,115 71,946 Zimbabwe 34,61 16,744 51,355 15,791 9,281 76,426 Weighted average 30,02 6 12,760 42,786 13,505 7,087 63,377
a TA indicates technical assistance.
costs involved in having farmers take collective action to finance (or execute) research that is beyond their individual reach are too high. Alston and Pardey (1995b) give a comprehensive and critical review of the evidence regarding market failures in agricultural research and discuss the principles and practices involved in designing ideal arrangements to finance or conduct research.9
One of the principles Alston and Pardey propose for solving the underinvestment problem is that the solutions or arrangements one may recommend depend on which type of market failure we are attempting to rectify. Thus developing a
9See also Thirtle and Echeverria (1994) who discuss some of the roles of public and private agencies in African agricultural research.
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detailed understanding of the existing pattern of investments and the institutional context within which research funds are raised, allocated, and spent is an invaluable first step in designing appropriate policy interventions to deal with such policy problems.
INSTITUTIONAL DIFFERENCES
Table 8 presents data on the financing arrangements for agricultural research in 13 African countries. There are substantial differences in the sources of support for
government versus semi-public agencies. While government agencies developed in ways that are broadly consistent with the aggregate country data, semi-public agencies receive about 80 percent to 90 percent of their funds from earmarked taxes and own income. Moreover, since the mid-1980s the share of funds for semi-public agencies coming from general taxpayer revenues shrank while there was a noticeable increase in donor-sourced funds being channeled to these agencies.
RESEARCH INTENSITIES
To place agricultural research expenditure aggregates in a more meaningful context, it is common to scale these measures according to the size of the agricultural sector. Various research spending ratios are possible and are presented below.
Table 8—Sources of funding as a percent of total funds available
Source of funding 1986 1987 1988 1989 1990 1991
(percentage) Government research agencies
Government 57.9 51.5 52.6 51.1 51.4 49.9 Own income 5.3 5.4 6.1 5.5 4.5 4.2 Taxes 0 0 0 0 0 0 Donor 35.5 41.7 39.8 42.5 43.1 45.1 Other 1.3 1.3 1.4 0.9 1.0 0.7 Total 100 100 100 100 100 100
Semi-public research agencies
Government 11.3 8.5 6.2 7.4 5.8 4.4 Own income 32.1 15.0 17.6 11.3 17.8 17.6 Taxes 50.0 66.6 65.3 59.5 69.1 69.6 Donor 3.9 8.3 9.7 19.4 5.8 7.3 Other 2.8 1.5 1.3 2.4 1.6 1.1 Total 100 100 100 100 100 100
Total research agenciesa
Government 55.9 49.6 50.4 49.0 49.0 47.5 Own income 6.5 5.8 6.7 5.8 5.1 4.9 Taxes 2.3 3.5 3.6 3.9 4.0 4.2 Donor 34.0 39.7 37.9 40.3 40.9 42.7 Other 1.4 1.4 1.4 0.9 1.0 0.8 Total 100 100 100 100 100 100
Note: Based on data from Burkina Faso, Cote d’Ivoire, Ghana, Kenya, Madagascar, Malawi, Mali, Niger, Nigeria, Rwanda, Senegal, Zambia and Zimbabwe.
a Government plus semi-public research agencies.
Research Spending Intensities
Figure 4 tracks developments in agricultural research expenditures as a percentage of AgGDP for various groupings of African countries. There is no persistent pattern of growth in the overall intensity of research spending. The 19 country average in Figure 4 increased throughout the 1960s and much of the 1970s then declined steadily from a peak in 1981 of 0.93 percent down to 0.69 percent by 1991; below the level of intensity that prevailed 20 years earlier.
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This sample average masks some major differences in research intensities among Nigeria, South Africa, and the rest of Africa. South Africa's research intensity ratio trended upward for much of the post-1961 period. At 2.55 percent in 1991 it is significantly higher than many other countries in the region. The instability in the ratio evident from Figure 4 reflects weather-induced fluctuations in agricultural output rather than any significant year-to-year fluctuation in research spending.
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In contrast to South Africa's persistent upward trend, Nigeria's research intensity ratio grew steadily throughout the 1960s and early 1970s but declined precipitously during the past decade from 0.81 percent in 1981 to a lowly 0.19 percent in 1991. In 1991 research intensity ratios for a 17 country African sample (excluding Nigeria and South Africa) averaged 0.92 percent compared with 0.69 percent for the 19 country sample that includes these systems.
Research intensity ratios for a larger, 24 country sample are available for 1991 (Figure 5). The research spending intensity for this group of countries averaged 0.73 percent in 1991. Six countries spent more than 2 percent of their AgGDP on agricultural research; namely Cape Verde, Botswana, Namibia, South Africa, Zambia, and Swaziland. South Africa and also Mauritius (which have intensity ratios close to 2 percent) have reasonably well-developed research systems even by developed-country standards, hence their comparatively high research intensities. The intensive agricultural research
investments in Cape Verde, Swaziland, and Zambia reflect the significant share of donor funds provided to these (relatively small) countries. In the case of Botswana, sizeable domestic support for agricultural R&D comes from substantial government revenues generated by taxing a relatively large and quite prosperous nonagricultural sector.
Government Spending Intensities
Using a political economy framework to account for observed differences in government spending on agricultural R&D, Roe and Pardey (1991) looked at the share of total and agricultural spending by governments earmarked for agricultural R&D.
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Table 9 presents contemporary government spending shares for various African countries grouped by income level. Data for Nigeria and South Africa have been reported separately and they have been excluded from the respective middle and high income classes whose averages they would dominate.
Whereas the conventional research intensity ratio (i.e., agricultural research spending as a share of agricultural output) in South Africa has been rising and consistently among the highest of all African countries since 1961, agricultural research expenditures have constituted a falling and relatively small share of total government spending. In 1991 South Africa spent only 42 cents per hundred dollars of total
government spending on agricultural R&D compared with 59 cents per hundred dollars in 1971 (Table 9). This contrasts with the 16-country average presented in Table 9 whose share of R&D spending relative to total government spending was 2.5 times higher than the corresponding South African spending ratio. Aside from the exceptional case of Nigeria, poorer African countries nowadays commit much more of their public-sector resources to agricultural R&D than Africa's richer countries. However, both Table 9 and Figure 6 show that governments in poorer and richer African countries alike are giving less priority to agricultural R&D in 1991 than 1971.
Table 9—Agricultural research expenditures as a percentage of government expenditures Category 1971 1981 1991 (percentage) Low income (7)a 1.14 0.88 1.14 Middle income (5) 1.91 1.16 1.13 High income (4) 1.57 1.16 0.58 Subtotal (16) 1.57 1.06 1.06 Nigeria 1.50 0.84 0.27 South Africa 0.59 0.44 0.42 Total (18) 0.97 0.76 0.60
Note: Income classes were defined as follows: low, less than $750; middle, $750-1500; and high, greater than $1500 of 1991 per capita income measured in terms of
1985 PPP dollars. a Number of countries.
DONOR FUNDING
Funding in the form of loans and grants from international donors accounted for around 34 percent of total expenditures on agricultural research during the early 1980s (Pardey, Roseboom, and Anderson, 1991). As a group (excluding South Africa), African NARSs became increasingly reliant on donor-sourced funds in recent years and this percentage increased to about 43 percent in 1991 -- 49 percent if Nigeria is also excluded (Table 10). Whether this reflects a temporary trend to shore up cash-strapped
government research systems in African countries that continue to carry extraordinarily high levels of foreign debt, or a crowding out of alternative, local sources of finance is unclear. Analogous observations were made by Alston and Pardey (1995b) regarding the crowding out of private sources of support by state and federal public funding of
39 Table 10—Source of funding, 1991
Country Local Foreign
(percentage) Botswana 85.5 14.5 Burkina Faso 22.2 77.8 Cape Verde 23.8 76.2 Côte d'Ivoire 53.5 46.5 Ethiopia 55.0 45.0 Ghana 64.1 35.9 Kenya 63.0 37.0 Lesotho 77.1 22.9 Madagascar 41.4 57.0 Malawi 44.6 55.4 Mali 34.0 66.0 Mauritius 90.0 10.0 Namibia 90.0 10.0 Niger 43.3 56.7 Nigeria 94.0 6.0 Rwanda 29.4 70.6 Senegal 35.9 64.1 South Africa 100 0 Sudan 54.5 45.5 Swaziland 78.7 21.3 Tanzania 35.0 65.0 Zambia 20.2 79.8 Zimbabwe 74.2 25.8 Total (23 countries) 66.3 33.7
Total, excl. South Africa 57.5 42.5
Total, excl. South Africa and Nigeria 51.5 48.5
The dependence on donor funding varies markedly among countries. At one extreme is Nigeria which received only 6 percent of its funds from donors during the latter half of the 1980s. Countries as diverse as Burkina Faso, Cape Verde, Mali, Rwanda, Senegal, Tanzania, and Zambia got more than 60 percent of their support from international sources. Data on donor shares for 1991 are presented in Table 10.
Grouping countries in various ways provides different perspectives on the nature of donor support for African agricultural research (Table 11). Per capita income
differences definitely matter when accounting for differences in the degree of donor support. The share of donor support is considerably higher in the poorest African countries (62 percent) compared with the richer African countries (2.8 percent, or 14 percent if South Africa is excluded).
Previous analysis, using a much larger sample including NARSs from around the world, showed that developing countries with small populations invest relatively more in agricultural research than developing countries with large populations (Pardey,
Roseboom, and Anderson 1991). This partly reflects the disproportionately large amount of donor funds directed to "small" countries when funding is measured on a per capita basis. The data in Table 11, however, do not fully support this earlier finding. One observes the lower intensity of donor support to NARSs in countries with medium compared with large sized populations, which is consistent with the earlier results. But those African countries with relatively small populations receive a much lower intensity of donor support than expected. It may well be that
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Table 11—Donor support of African agricultural R&D, 1991.
Donor share (percentages) GDP/capita (1991) Low income (<$ 750) 62.4 Middle income ($ 750-1500) 31.8 High income (>$ 1500) 2.8 Population (1991) Small (<5 million) 20.2 Medium (5-20 million) 53.8 Large (>20 million) 24.3 Former colonialties Anglophone 26.3 Francophone 60.7 Other 48.2 Weighted average 33.7
the effects of smallness are offset by the preponderance of relatively rich countries (such as Botswana, Mauritius, and Namibia) with less than five million people in our sample; and as noted, richer African countries receive much lower levels of donor support for R&D than poorer countries.
Colonial precedents appear to have persistent influences in terms of the amount of foreign support to agricultural R&D. In 1991, donor funding accounted for 61 percent of total support to the national agricultural research effort in francophone countries and only 26 percent in anglophone countries (36 percent if South Africa is excluded). Part of the difference between francophone and anglophone countries reflects the higher proportion of expatriate researchers working in francophone systems.
Given the substantial but uneven reliance on donor funding for agricultural R&D throughout Africa, Figure 7 presents the research intensity ratios given in Figure 5 but
also decomposes these intensities in terms of the source of funds. If all sources of funds are included, the 23 country sample average is 0.72 cents of research spending per dollar of AgGDP; ranging from a high of 6.3 cents per dollar for Cape Verde to a low of 0.19 research cents per dollar of output for Nigeria. Measuring research spending intensities in terms of spending by governments from local sources (i.e., net of international loan and grant funds) changes things considerably. The average spending intensity is lowered by a third from 0.72 cents to 0.48 cents of research spending per dollar of AgGDP. Moreover, the ranking of countries in terms of research intensities based on spending from all sources versus those intensities that include spending from domestic sources only are quite different. Botswana (rather than Cape Verde) invests its own funds more intensively in agricultural R&D than any other country in the sample. At the other end of the spectrum, Burkina Faso, Nigeria, Rwanda, and Sudan spend less than 0.2 percent of their AgGDP on agricultural research from local sources.
The fragile state of many African economies and the large array of demands placed on the public sectors in these countries makes it likely that continued, and in some cases substantial, donor support for research will be necessary for some time to come. However, it is questionable if these extremely high levels of support can
be sustained indefinitely. Certainly serious thought should be given to the appropriate amount to spend on R&D, the design of mechanisms for disbursing donor funds to avoid crowding out domestic sources of support (which may well have been the case over the past few years at least), and the development of means by which funds can be mobilized and deployed to stimulate rather than dissipate the productive potential of the resources committed.