markets and policies for improving the food security and incomes of poor african farmers
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April 5, 2004TRANSCRIPT
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Markets and Policies for
Improving the Food Security and
Incomes of Poor African Farmers
Joachim von Braun
April 5, 2004
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Overview
I. Conceptual Framework: On
Markets, Institutions, and Policies
II. Poor African Farmer Within and
Without Markets: Developments,
Opportunities, Constraints
III. Implications for Policy and
Research
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On Markets and the State
• Market: “the organization that coordinates the production of goods and services through voluntary transactions”
• State: “an organization for monopolizing legitimate coercive power. … coordinates peoples activities according to set rules and regulations” (Hayami 1997)
Markets do not work without State, and
States do not without Markets
African Market and Government Failures are linked
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Role for Institutions in Markets
Reducing Transactions Costs
Managing Risk
Building Social Capital
Enabling Collective Action
Redressing Missing Markets(Orden, Gulati, Torero 2004)
Broad Concept of Agricultural Markets Beyond the Supply Chain
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State Roles for (not in) Markets
Rule of Law and Enforcement of Contracts
Taxation, Fiscal, Exchange Rate Policies
Human Capital and Science Policy Investment
Infrastructure and Information
Insurance and Risk management and Safety Nets
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Roles for Other „Informal”
Institutions
Africa is rich in institutional diversity
Social capital and trust-building to circumvent market failures
Offer opportunities to participate in markets (e.g. overcoming small scale)
Cooperation without cooperatives
Optimizing market institutions must take these other institutions into account
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Poor African Farmers Operate in
Agricultural and Many Other Markets
Land Markets +
Off-farm Labor Markets ++++
Credit Markets ++
Crop and Livestock Output and Input
Markets +++++
Risk and Insurance Markets +
Failures in one market affect all
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Agricultural Markets Through a Poor
Farmers Supply-Chain Lens
Resources „Markets‟
Input Markets
Output Markets
Processing Markets
Retail MarketsFinancial Markets -- Insurance Markets --Labor Markets
Problem of weak elements and disconnected chain
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Overview
I. Conceptual Framework: on Markets and Related Policies
II. The Poor African Farmer Within and Without Markets: Developments, Opportunities, Constraints
III. Implications for Policy and Research
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The Food and Nutrition Security
Situation
1. Bad trends
2. Worse than expected
3. Regional diversity
4. Increased vulnerability to Market
shocks (HIV/AIDS,…)
5. Scope for hope due to less wars
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Increasing Food Insecurity (FAO 2003)
0 10 20 30 40 50 60 70 80 90
Central Africa
East Africa
Southern Africa
West Africa
Millions
1999-2001
1990-1992
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Food Insecurity Worse than Expected (Source: Smith, forthcoming)
0
10
20
30
40
50
60
70
80
90
Ugan
da (1
999)
Ken
ya (1
997)
Tanza
nia (2
000)
Guinea
(199
4)
Gha
na (1
998)
Moz
ambiqu
e (199
6)
Rwan
da (2
000)
Zambia
(199
6)
Bur
undi (
1998)
Eth
iopia
(1999
)
Malaw
i (199
7)
Perc
en
t o
f p
eo
ple
foo
d e
nerg
y d
efi
cie
nt
Household Consumption Survey Based Estimate
Country Food Availability Based Estimate
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Local Risk Factors:
Child Malnutrition in Africa, 1990s
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Farm Size Holdings, SSA (FAO, various years, 1990s
59%
21%
13%
7%
0%
10%
20%
30%
40%
50%
60%
70%
< 1 ha 1- 2 ha 2- 5 ha 5 ha and
above
% o
f T
ota
l H
old
ing
s
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In Agriculture and Other Markets:
Income Sources of Farmers(Sources: von Braun and Pandya-Lorch 1991; Reardon 1997)
1980s 1990s
Country % Off-Farm
Income
Country % Off-Farm
Income
The Gambia 15 Namibia 56
Burkina Faso:
Sahelian Zone
72 Malawi 34
Burkina Faso:
Sudanian Zone
25 Zimbabwe 31
Rwanda 62.9 Rwanda 30
Kenya 48 Mozambique 15
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African Markets in a Global
Context
Old Global Risks Coming Back?
Africa in International Trade
Regional African Trade
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World Grain Production, 1960-2003
500
700
900
1100
1300
1500
1700
1900
1960 1965 1970 1975 1980 1985 1990 1995 2000
millio
n t
on
s
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Land Productivity: Stagnant Cereal Yields (Source: WDI, 2003)
0
500
1000
1500
2000
2500
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
kg
/ha
Sub-Saharan Africa
World
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World Grain Stocks, 1960-2003
0
100
200
300
400
500
600
700
1960 1965 1970 1975 1980 1985 1990 1995 2000
millio
n t
on
s
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Wheat International Price(US No.2, Soft Red Winter Wheat , Delivered US Gulf ports (Tuesday))
90
100
110
120
130
140
150
160
1998 1999 2000 2001 2002 2003 2004
U$S
/To
n
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SSA‟s Share of World Agricultural
Exports (Source: Diao et al 2003)
0.0
5.0
10.0
15.0
20.0
25.0
1970 1975 1980 1985 1990 1995 2000
%
Total ag exports
6 traditional crops
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Africa Most Globalized:
Trade as % of GDP (Source: WDI 2003)
0
10
20
30
40
50
60
70
1990 1992 1994 1996 1998 2000
% o
f G
DP
Sub-Saharan Africa
South Asia
Latin America & Caribbean
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High Regional Tariff Rates in SSA (Source:
World Economic Prospects 2004)
Agriculture Trade:
SSA to SSA: 33.6% Tariff
SSA to Industrial Countries: 23.6 % Tariff
Industrial to Industrial: 15.3% Tariff
Non-Agriculture:
SSA to SSA- 20.6% Tariff
SSA to Industrial Countries- 4.2% Tariff
Industrial to Industrial Countries: 1% Tariff
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Benefits of Global Trade Liberalization for
IMPACT Commodities, 2025
4.6
0.4
5
0
1
2
3
4
5
6
SSA North Africa All Africa
US
$ b
illi
on
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Size of Africa‟s Agricultural Markets
(US$Billions) (Source: Diao 2003)
Traditional
Exports to Non-
Africa
8.6
Non-Traditional
to Non-Africa6.1
Other to Non-
Africa1.9
Intra-African
Trade1.9
Domestic 50.0
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On Infrastructure and Institutions
Infrastructure and the Basic Geographical
Dilemma: High per capita Costs
Institutions with Infrastructure:
(De-) Regulation, Decentralization
The High “Transactions Costs”
confronting small farmers
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Infrastructure: Total Roads Network
(100,000 km) (Source: WDI 2003)
10
15
20
25
30
35
40
45
1990 1995 1999
100,0
00 K
m
Sub-Saharan Africa
South Asia
Latin America & Caribbean
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Infrastructure: Mobile Phones per
1,000 people, 1996-2001 (Source: WDI, 2003)
0
5
10
15
20
25
30
1996 1997 1998 1999 2000 2001
tele
phones p
er
1,0
00 p
eople
Sub-Saharan Africa
South Asia
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Transactions Costs and Physical Marketing Costs:
Micro-Level Data (Ethiopia: Gabre-Madhin 2001)
Markets search labor cost capital holding cost marketing cost
Surplus 9 6 86
Deficit 14 7 79
Central 17 11 72
percentage of total costs
Issues in TAC: all transactions? Profit margins?
Research issues: e.g. institutional efficiency,
local monopolies
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Overview
I. Conceptual Framework: on Markets and Related Policies
II. Poor African Farmer within and without Markets: New Developments, Opportunities, Constraints
III. Implications for Policy and Research
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I. Crucial Areas for Pro-Poor
Market Development
Infrastructure Development in
Rural Areas
Ag. Science, Research and
Technology for Small Farmers
Domestic Trade Banking
Market Risk Management
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II. More research for building …
a deep micro-level understanding of the
dynamics and structures of market
and non- market institutions, and
their relationship to poverty and food
insecurity of the small holders.
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Optimizing across Market and
Non-Market Institutions
Markets across the Agricultural Supply Chain
Factor Markets: Land, Labor, and Capital
Institutions
Land Labor Capital
Intermediate Factor: Fertilizer, Seeds
Outputs: Crops and Livestock
Retail
Market Institutions ? X X X X X
Informal Institutions: i.e., collective action
X ? X X X ?Non-
Market
Institutions
Government Intervention
X X ? ? ? ?
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III. Africa‟s Four Big
Market Policy Issues
1. State failure leads to Market
Failure: governance, contracts,
corruption
2. Realistic Policy Road Maps Toward
Market Strengthening Missing
3. Reduction of International and
Intra-Regional Trade Barriers – the
policy forums missing or weak
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Big Market Policy Issues (cont.)
4. The Market Response - to - Geography –Time - Bomb:
High unit cost of market access in an environment of small and geographically dispersed actors
Address with infrastructure, institutional innovation and migration
Needed: Centers of rural growth off-coast, connected with infrastructure to coast
small holder market development is an investment in peace and security
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In Sum
Recognize: Markets do not work without State (and States do not work without Markets)
Identify: Synergy in Market and Non-market Organizations Serving transactions Relevant for the Poor
Develop: Realistic „Roadmaps‟ for Institutional Innovation for and in Markets Serving Africa‟s Poor Farmers