Solutions exist: fertile land, seeds and trade opportunities
Fortunately, you will find a solution to the problem within Africa. The potential to improve agricultural production in Africa is enormous. Yields for most crops certainly are a fraction of what farmers elsewhere on the globe are achieving, and output could easily increase twofold or threefold if farmers were to use updated seeds and technologies. Also, large swathes of fertile land in Africa remain idle. For instance, 400 million hectares of the Guinea Savannah zone (a location how big is India) may be used for agriculture but significantly less than 10% of this has been cultivated (World Bank 2009).
Open regional trade is vital because demand is now increasingly concentrated in cities that require to be fed from food production areas through the entire continent. Different seasons, rainfall patterns and variability in production, that may increase as the climate changes, aren’t conveniently confined within national borders. A style of food security in Africa based around national self-sufficiency is now a growing number of untenable. Cross-border trade in food provides farmers in Africa with the chance and incentives to provide the growing demand.
But the prospect of Africa’s farmers to fulfill a lot of the rising demand for food in Africa through regional trade isn’t being exploited. Currently, only 5% of Africa’s imports of cereals is supplied by African farmers. Farmers in Africa face more barriers in accessing the inputs they want and in getting their food to consumers in African cities, than do suppliers from all of those other world. African smallholder farmers who sell surplus harvest typically receive significantly less than 20% of the buyer price of their products, with the others being eaten away by various transaction costs and post-harvest losses. This clearly limits the incentive to create for the marketplace.
Barriers along the worthiness chain
A lot of the key barriers to trade in food staples relate with regulatory and competition issues along the worthiness chain. As tariffs attended down it is becoming increasingly apparent a tangled web of rules, fees and high cost services are strangling regional trade in food in Africa. Sometimes the policies that are restricting trade are deliberately protectionist. Oftentimes, however, they reflect poorly designed and/or badly implemented policies caused by insufficient broad stakeholder participation and weak capacity in government departments and agencies. Regulations limit usage of inputs of seeds and fertilisers and extension services that are critical if productivity potentials should be achieved. In Ethiopia, using improved hybrid maize could donate to a quadrupling of productivity and replace commercial imports (Alemu 2010). Farmers in Malawi pay 3 x more for fertilisers than do their counterparts in Thailand.
Transport and logistics costs, specifically for small farmers, can gobble up as much as half of the delivered price of staples. Since there is plenty of dependence on further improvements in infrastructure ,the primary reason for high transport costs is often insufficient competition (USAID 2011). Transport cartels remain common in many parts of Africa, and the incentives to purchase modern trucks and logistics services have become weak.
Opaque trade policy
Opaque and unpredictable trade policies continue steadily to raise trade costs. Trade in staples in Africa is still affected by measures such as for example export and import bans, variable import tariffs and quotas, restrictive rules of origin, and price controls. Often they are decided upon without transparency and so are poorly communicated to traders. This creates uncertainty about market conditions and limits cross-border trade. Inefficient distribution services also hamper regional trade in food. The indegent in the slums of Nairobi pay more pro rata for food staples compared to the wealthy pay at supermarkets. This reflects that in lots of countries the distribution sector isn’t effectively linking poor farmers and poor consumers. Price controls imposed over the region and the cartels set up in a number of African countries represent a significant impediment to competition.
Each one of these barriers raise costs and increase uncertainty, make regional markets smaller, and increase volatility. Indeed, the cost of maize in Africa has been more volatile compared to the world price of maize. Policies that reduce transaction costs and increase competition in the provision of services, that affect the production and distribution of food staples, would decrease the gap between consumer and producer prices.
Current policies constrain institutions
The development of institutions that could support African farmers in reducing risks and raising productivity is compromised when the trade policy environment for staples is difficult and uncertain. Effective standards regimes rely upon private sector involvement, however in many countries the procedure of defining standards is often dominated by government agencies. Private investments in storage capacity, which would lessen the enormous post-harvest losses and invite farmers to market when prices are most favourable, are undermined when policies that influence prices, such as for example export bans, are uncertain and lack transparency. Commodity exchanges, that have the potential to lessen transaction charges for farmers by reducing the quantity of intermediaries and improving the conditions of exchange, cannot thrive without even-handed and predictable policies. Operating across borders allows exchanges to build sufficient trading volume to exploit scale economies and become more profitable.
Institutions which will help address food security concerns therefore decrease the political risk from reform is only going to flourish when there is a change in the manner that food trade policies are defined and implemented. For instance, futures and options markets offer an option to holding physical stocks through food security reserves, and weather-indexed insurance can mitigate the impacts of climatic shocks on farmers.
Political economy issues limit implementation of open regional trade
Despite commitments towards checking regional trade in food, implementation has been very weak. Few governments have sought to create a constituency for reform. Checking food staples to regional trade will result in both winners plus some losers. Where reform reduces the mark-up between producer and consumer prices, it really is farmers and poor consumers who’ll gain while intermediaries earning rents, both in public areas sector agencies and in the private sector, will eventually lose. Reform becomes particularly difficult when politicians themselves get excited about the production and distribution of food. The lack of a well balanced and predictable policy environment reduces trust and constrains private-sector investment in food staples, which limits production and trade. And it encourages governments to keep to hedge against the failure of the private sector to adequately supply food when shortages do arise.
Two key features can help governments in creating constituencies for reform:
- An inclusive dialogue on food trade reform informed by timely and accurate data on global, regional, and national markets.
In lots of African countries decisions about food trade policies are created mainly at the best levels of government, all too often without critical analysis and consideration of options. Food trade policy is rarely at the mercy of open discussion, and the interests and views of the broad band of stakeholders in food staples trade policies are seldom represented.
- A reform strategy that delivers a clear transitional way to integrated regional markets, rather than single but politically unfeasible jump to competitive markets.
The type and selection of the barriers to trade along the worthiness chain, and the necessity to spend money on market-supporting institutions, show that delivering integrated regional grocery stores involves greater than a one-off commitment, and that reforms can’t be implemented at the stroke of a pen. Thus, for most policymakers the purpose of open and competitive regional markets won’t occur throughout their electoral terms. The reform strategy thus must define incremental steps that encourage investment by offering certainty to the private sector about policies. It will deliver real and visible benefits, while allowing policymakers to go at a pace in keeping with their capacities and political risks.
With as much as 19 million people coping with the risk of hunger and malnutrition in west Africa’s Sahel region, and the demand for food throughout Africa predicted to double over another decade, governments can act now to overcome these political economy realities and remove barriers along the worthiness chain.
A regional method of food security in Africa allows governments to better and efficiently meet their objectives of ensuring usage of food because of their populations. This brings the chance of not only advantages to farmers and consumers but also of a substantial number of new jobs in activities along the worthiness chain of staples – in producing and distributing seeds and fertilisers, in advisory services, consolidating and storing grains, transport and logistics, distribution, retailing, and processing.
The views expressed listed below are those of the writer and don’t necessarily represent those of the institution with which he’s affiliated. This column summarises an extended report which is available, as well as an accompanying film and interviews, at http://go.worldbank.org/PQ65YEGB60
Alemu , Dawit (2010), "The Political Economy of Ethiopian Cereal Seed Systems: State Control, Market Liberalisation and Decentralisation", Future Agricultures Working Paper, 17.
USAID (2011), "Regional Agricultural Transport and Trade Policy Study", West Africa Trade Hub Technical Report, 41, USA Agency for International Development.
World Bank (2009), Awakening Africa’s Sleeping Giant: Prospects for Commercial Agriculture in the Guinea Savannah Zone and Beyond, Washington, World Bank.