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Saturday, November 17, 2012

Trade Not Universal Cure For Africa’s Chronic Hunger

The lion economies are on the prowl. McKinsey Global Institute, a business think tank, shows that sub-Saharan Africa’s real GDP growth rate jumped to an annual average of 5.7%, up from only 2.4% over the previous two decades.
However, impressive GDP growth rates in Africa have had no impact on Africa’s chronic hunger and malnutrition. According to the first Africa Human Development Report by UNDP, over 200 million Africans are undernourished and one third of Africa’s children are stunted. Africa’s chronic hunger and malnutrition impairs livelihoods, undermines human development and creates intergenerational poverty traps.
The US, the world’s largest exporter of maize and wheat, is facing the most severe drought in 50 years. Similarly, severe weather has also visited havoc in other major grain exporting countries like Australia, Brazil, Russia and India. Consequently, global food prices hade jumped 6%, with price of maize going up 23%.
Rising food prices is bad for Africa’s poor households who spend over 50% of their earnings on food. Similarly, rising food prices have severe impacts on Africa’s trade balance because only 5% of food imports come from within Africa. Moreover, Africa’s food imports are projected to double by 2020 hence the macroeconomic impacts of food importation will only get worse.
Africa’s chronic hunger, the rise in global food prices and the ever-growing food import bill has turned global attention to Africa’s agriculture and food policies. In a recent report, “Africa Can Help Africa”, the World Bank argues that increased regional trade has the potential to: expand the regional market for food staples; boost agricultural production in surplus zones; and, ameliorate price volatility, improve national and regional food security.

Agricultural potential is not equitably allocated within and among countries. Africa has traditional areas of food deficit and food surplus. Drought prone areas, such as the Horn of Africa and the Sahel often experience crop failure. Highly productive agricultural zones such as Eastern Uganda, Northern Zambia, Southern Mali, and Southern Tanzania are food surplus areas.

Given the differences in weather patterns across countries, regional food production tends to be less variable than production at the country level. Moreover, seasonal variability in rainfall and production, which will increase with climate change, is not limited to national borders. The World Bank argues, rightly, that an Africa food security model based on national self-sufficiency goals alone cannot work.

The report, Africa Can Help Africa, offers four messages worthy of careful reflection:
1.     Removing regional trade barriers offers benefits to farmers, consumers and the economy. Farmers gain incentives to increase production to supply expanded markets. Consumers benefit from reduced price volatility and improved access to food. Local and regional economies benefit from jobs created by the value chains created through labor markets, input supply markets, storage and distribution, including transportation and financial services;
2.     Remove regulatory barriers to trade and competition along the farm to fork value chain. Trade barriers deny African farmers access to higher yielding seeds and better fertilizers available elsewhere in the world. What is needed is a consistent and stable policy regime to regulate trade in agricultural inputs as well as enabling the creation of public-private partnership that reduce the transaction costs of coordination failures and information asymmetry across the value chain;
3.     Build and reform institutions that guarantee market stability and efficiency.  The primary objective is to support informational and distribution functions of food markets. In this regard, commodity exchange and warehouse receipts are essential. Weather-indexed insurance can lessen the impacts of climatic shocks on farmers. The idea is that if rainfall or critical climate parameter falls below a certain threshold, a farmer would receive compensation for production losses;
4.     Political economy issues that constrain open regional trade must be addressed. Commitments to opening up regional trade in food, implementation has generally been weak.  Opening up agricultural and food staples to regional trade will inevitably create winners and losers. Where reform reduces the gap between producer and consumer prices, farmers and poor consumers will gain; middlemen and political rent seekers will lose. Hence, governments must explain the benefits of a regional approach to food security and build political and social consensus for integrated agricultural markets.

It is not uncharacteristic of the World Bank to propose a classical neoliberal market approach to dealing with Africa’s chronic food insecurity. In our quest to solve problems we often get trapped in a linear construct, which leads inevitably to non-integrated and limited solutions. Cross border trade must be part of an ecosystem of solution options, including attracting Africa’s youth to agriculture, adaptation to climate change and careful stewardship and monitoring of natural capital (e.g., soil, water, pollinators) critical to sustainable agriculture. Complex problems abhor simplistic approaches.

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