ARC/04/4.4 ![]() |
TWENTY-THIRD REGIONAL CONFERENCE FOR AFRICA |
Johannesburg, South Africa, 1-5 March 2004 |
IMPLEMENTATION OF THE COMPREHENSIVE AFRICA AGRICULTURE DEVELOPMENT PROGRAMME (CAADP) OF NEPAD – ESTABLISHEMENT OF REGIONAL FOOD SECURITY RESERVE SYSTEMS IN AFRICA |
II. RATIONALE FOR FOOD SECURITY RESERVE SYSTEMS IN AFRICA AND REASONS FOR RENEWED INTEREST
A. POOR MARKET INTEGRATION IN COUNTRIES WITH HIGH PREVALENCE OF UNDERNOURISHEMENT
B. THE UNEVEN EVOLUTION OF CERAL AVAILABILITLY IN AFRICA SINCE 1990
C. GROWING INCIDENCE OF FOOD EMERGENCIES AND ROLE OF SAFETY NETS
D. NEED TO AVOID FOOD AID DEPENDENCE AND STIMULATE LOCAL PRODUCTION
III. EXPERIENCE WITH PHYSICAL FOOD SECURITY RESERVES
A. EXPERIENCE WITH PHYSICAL RESERVES IN THE SAHEL, THE HORN AND SOUTH AFRICA IN THE 1980S AND 1990S
B. SUCCESSFUL MODELS FOR NATIONAL FOOD SECURITY RESERVES
C. OPERATIONAL CONSIDERATIONS FOR THE MANAGEMENT OF PHYSICAL STOCKS
IV. EXPERIENCE WITH MARKET MECHANISMS TO MEET FOOD NEEDS
V. POLICY RECOMMENDATIONS FOR ESTABLISHING REGIONAL FOOD SECURITY RESERVE SYSTEMS IN AFRICA
A. APPLICATION OF AN INTEGRATED FOOD SECURITY RESERVE SYSTEM APPROACH
B. DEVELOPMENT OF REGIONAL FOOD SECURITY NETWORKS WITHIN NATURAL TRADING AREAS OR MARKETSHEDS
Table 1: Indicators of degree of access to markets in Africa, by Sub-Region
Table 2: Prevalence of undernourishement in Africa, 1999-2001 AVE
Table 3: Net agricultural production growth rates in Sub-Saharan Africa, 1992-2001
Table 4: Utilization of cereals and contribution of Food Aid, Sub-Saharan Africa by Sub-region, 1990-2001
Table 5: African Countries facing severe food shortages and approximate number of affected persons, 1999-2003
Graphs 1-4 Composition of cereal supply in Sub-Saharan Africa by Sub-region, 1990/91 – 2003/04 (forecast)
1. In their Declaration on Agriculture and Food Security in Africa, African Heads of State and Government attending the African Union (AU) Summit in Maputo in July 2003 resolved “to ensure the establishment of regional food reserve systems, including food stocks, linked to Africa’s own production, and the development of policies and strategies under the African Union and the Regional Economic Communities, to fight hunger and poverty in Africa”. In the same declaration, African leaders also resolved to revitalize the agricultural sector through special policies and strategies and the creation of enabling conditions for private sector participation, with emphasis on the removal of constraints to agricultural production and marketing, and to engage in consultations with different stakeholders, aimed at promoting their active participation in all aspects of agriculture and food production.
2. As one of a number of instruments needed to implement the AU resolution, a project proposal on “Disaster Prevention and Emergency Response to Food Crisis” had been developed by WFP in collaboration with NEPAD. The proposal was put forward within the framework of the Flagship Programs of the NEPAD Comprehensive Africa Agriculture Development Programme (CAADP), and was endorsed by the AU Summit in July 2003.
3. However, in giving their endorsement, the African leaders recognised that a detailed review of existing and/or past experiences would be needed, and recommended a multi-partner joint preparation process. As a first step toward implementing the multi-partner joint preparation process, FAO has prepared this document, with contributions from WFP, for consideration at the 23rd FAO Regional Conference for Africa in March 2004, and subsequent forwarding to the next Agriculture Ministerial Meeting of NEPAD.
4. Food markets in much of Africa are not functioning efficiently as outlets for the surplus production of small farmers or reliable sources of supply in emergencies because there are many locations where trading networks are underdeveloped. Hence many local markets tend to be thin, and function independently of larger and more central national and regional markets. This lack of market integration implies that production shortfalls cannot easily be accommodated via intraregional or interregional and international trade, and hence the incidence of food emergencies is high, there are frequently observed sharp variations in consumer prices from one season to another or one place to another, and in periods of high prices some markets may not be supplied at all. Further, when production shortfalls occur, large numbers of people who normally depend on their own production for food, enter the market as consumers, creating additional demand at a time when local supplies are usually relatively scarce. People fall into temporary food insecurity, and sometimes into chronic poverty, if they are forced to sell assets or go deep into debt to cover their basic food needs.
5. In a well-integrated market, price differentials across space and through time should vary by no more than the cost of storage, handling and transport. Also, changes in base prices in the price-setting markets should be transmitted quickly to the outlying local markets. The unification of the price-setting process throughout a well-integrated market occurs through a process called arbitrage, whereby private traders are always behaving so that their expected return from future sale of stored commodities equals the return they could obtain by selling in the present, and their expected return from sale in a distant market equals the return they could obtain by sale in the local market. If the process is working as it should, consumers should face reasonably uniform and stable prices throughout the year at all points of sale within that market.
6. In developing countries where per capita incomes are low and food insecurity is a widespread phenomenon, it is common to find that domestic markets are not well-integrated. There are several reasons for this. First, road and rail infrastructure are poorly developed, physical infrastructure and transport equipment are often in a poor state of repair and the availability of food storage infrastructure is frequently limited. Second, communications between regions are often poor and lack of market information limits price transparency needed for arbitrage to take place. Third, the degree of bureaucratic, regulatory control within countries is often excessive, and its implementation not always transparent or predictable, creating another cost for private traders. With transport and marketing infrastructure poorly developed, foodstuffs do not move quickly and easily throughout the national territory. Often, prices vary significantly from one place to another, as well as seasonally. Where these conditions prevail, underdevelopment of the marketing system is clearly a source of food insecurity.
7. Even if there is good integration between relatively large primary and secondary markets (increasingly the case in African countries where market liberalization has begun to take hold, according to several recent studies1), many rural inhabitants live in relatively isolated areas with poor market access, as shown in Table 1. Further, as shown in Table 2, per capita availability of food in countries with high prevalence of undernourishment is usually barely above the average minimum requirement for the population as a whole, and the food deficits of those who are chronically undernourished are relatively large. This means that the food security situation for large numbers of the population in these countries is continuously precarious, and thus an issue of great political importance for their elected leaders.
8. Agricultural production on the African continent is virtually all rainfed, with only 7 percent of arable land irrigated. As a result, fluctuations in inter-seasonal and inter-annual rainfall can cause large variations in food production. In some parts of Africa, recurring widespread droughts appear to be on the increase. Floods also frequently destroy crops and stored grain, even though their impacts tend to be more localized.
9. Variations in production can occur as farmers respond to economic incentives, producing more when prices of inputs are low and prices of harvested crops are high, and less when prices are not so favourable. Finally, production levels can also be affected by the impact of other factors, e.g., disease epidemics among able-bodied adults or the presence of civil conflict, which are having profound effects in some parts of the continent. The high variability of cereal production for the continent as a whole is shown in Table 3.
10. Although there has been a trend increase in agricultural production over the decade, the amount of food produced per capita has hardly increased at all. Yet, despite this, for Africa as a whole, per capita dietary energy supplies have increased by nearly 10 percent. The reason for this is the growth in imports.
11. For each sub-region in sub-Saharan Africa, Graphs 1-4 show the contributions of production, stocks and commercial imports to food availability over the decade, compared to the contribution of food aid. The data underlying these graphs confirm the growing importance of trade in protecting the food security of African people, and support an approach to food reserve policy that limits the maintenance of physical stocks largely to the amount needed to maintain supply flows while waiting for imports to arrive or domestic supplies to be mobilised.
12. The graphs reveal significant differences among the sub-regions, with sharp fluctuations in supply being observed in Eastern and Southern Africa, and significant overall growth evident only in West Africa. The effect of these differences on food use is shown in Table 4, which indicates that per capita consumption of cereals remained relatively flat throughout the 1990s in all sub-regions except West Africa. The overall higher level of cereal availability and strong growth performance in West Africa shown in Table 4, along with the higher degree of market integration in that sub-region shown in Table 1, and the relatively low incidence of food emergencies shown in Table 5, all help to explain why the prevalence of under nourishment is so much lower in this sub-region than elsewhere on the continent.
13. During the 1990s, food aid represented only a small share of total cereals use in all sub-regions; it was most important in Eastern and Southern Africa, where quantities delivered represented around 5 percent of total use, or 7 percent of food use in Eastern Africa, and 6 percent of total use or 9 percent of food use in Southern Africa. In both sub-regions food aid deliveries tended to vary with the fluctuations in production shown in the graphs.
14. As a consequence of a combination of adverse weather, drought and declining productivity in some parts, continuing civil strife in several countries and the effects of HIV/AIDS and economic problems in southern Africa, the estimated number of people facing severe food shortages in Africa climbed to around 40 million in 2002 and 2003 (around 6.5 percent of the region’s total population). This compares to an average of approximately 23 million over the prior three years (see Table 5). The growing frequency and severity of food emergencies is one of the reasons that African governments wish to revisit the issue of emergency food reserves.
15. FAO estimates that, for Africa as a whole, around 200 million people (33 percent) are chronically undernourished, with the proportion varying significantly from one sub-region to another. For many chronically undernourished people with food deficits of 100, 200 or 300 kilocalories per day, food deficits are more likely to represent lack of dietary diversity than shortages of starchy staples. For them, poverty reduction programmes, including inter alia, food aid for development, represent the more appropriate response.
16. Acute food emergencies, on the other hand, usually entail deficits in dietary energy supply (DES) in excess of 400 kilocalories per capita per day, and the diets of affected persons are likely to be short of cereals and other starchy staples well as other essential foods. For the purpose of targeting, all persons with DES deficits greater than 400 kcal per day should qualify for emergency food aid, due to the acuteness of the food shortage that they are facing, irrespective of the factors that brought it about.
17. In Africa, at present, many safety nets that come into play when natural disaster or civil conflict cause a food emergency to be declared are financed by donor food aid programmes. Managers of emergency food aid and other national safety net programmes operate as trading agents in national cereal markets. As such, they rely on reserve stocks to fill possible supply gaps caused by delayed arrival of commercial imports or food aid shipments, which is still a risk at the current stage of market development in much of Africa. This provides the principal justification for continuing to hold limited physical stocks within an overall policy framework that is encouraging the development of private markets as an instrument of economic growth, poverty reduction, and sustainable food security for all.
18. Although the share of food aid in total supply is insignificant in most African countries in most years, the high variability of local production in Eastern and Southern Africa, and the continuing needs of displaced persons and refugees in conflict zones, means that for some countries, food aid does remain important. The assistance provided usually includes both provision of food commodities and financial support for distribution of food rations to target beneficiaries.
19. Some food aid donors have the flexibility to provide the food assistance either in cash or in kind. These donors can use their resources to purchase food locally for direct distribution. They can also finance income transfer programmes such as cash-for-work or food coupons and use market mechanisms to supply the food needed to meet the additional demand generated by the transfers. In either case, the programmes can be managed so as to provide an incentive for local production.
20. Successful experiences with physical food reserves reported in Section III below show that aid-based food safety net programmes with flexibility to procure locally may operate more efficiently if small reserves are maintained to back them up. Such reserves can be built up through normal trading operations in the local market, if costs are reasonable and donor funding procedures permit.
21. Other donors are obligated to provide food aid from imported sources for various reasons, and this can create disincentives for local production if local supplies are available and the need for the assistance arises only because people lack purchasing power to gain access to them. Clearly, it would be in the interest of African producers that alternatives were found that enabled managers of safety net programmes, to rely to the maximum extent possible on local production before turning to imports.
22. Two obstacles stand in the way. First, the governments concerned often lack the financial resources to take over from the food aid donors the non-commodity costs of their safety net programmes, and therefore have no choice but to depend on external assistance for the provision of welfare transfers. Second, if the local supplies are far away from where they are needed, the cost of procuring and transporting them to distribution points may be many times higher than the cost of procuring and transporting imported food, due to lack of development of the domestic market in either the producing area or the affected area, or both.
23. Despite the above obstacles, large-scale, subsidised, public sector food reserves are unlikely to be an attractive alternative to food aid, under present circumstances. However, small physical reserves held within the context of larger programmes of policy incentives, investment and capacity-building to promote the development of African food production and markets could represent a new way forward.
24. In the past, African governments have maintained food reserves for two main purposes: (i) to protect producers and consumers of staple foods by maintaining supply and price stability in cereals markets, and (ii) to cope with food emergencies. Since the implementation of IMF/WB-sponsored Structural Adjustment Programmes (SAPs), the macro-economic environment has evolved considerably, and with it, the role of food reserves. Today, although maintaining market stability and providing safety nets for people affected by food emergencies remain the principal food security objectives of most African governments, the instruments used to achieve these objectives are undergoing significant change.
25. During the 1970s and early 1980s, most food markets in Sub-Saharan Africa were highly controlled. Marketing boards had monopoly power on domestic purchase and sale of specific cereals and controlled trade flows through import and export quotas and bans. Cereals were bought and sold at set official prices. In most cases, these prices were uniform throughout the country and throughout the year, regardless of the level of transport costs and seasonal fluctuations in commodity prices.
26. This approach provided price protection to both producers and consumers, and helped to smooth out inter-seasonal and inter-year supply fluctuations. However, the budgetary costs were high, and the heavy presence of marketing boards and parastatals in grain markets impeded the development of a competitive and vibrant private trading sector.
27. In the 1980s, most African governments began implementing structural adjustment programmes and market reforms. Despite agreeing in principle to liberalize grain markets as part of this process, many African countries have been reluctant to give up completely the price stabilization objectives of their earlier food reserve policies. Some, however, have succeeded to restructure their reserve systems so as to meet food security objectives in ways compatible with sustainable market development.
28. Several promising innovations have also been introduced in the recent period to promote the growth of regional and sub-regional financial markets and improve the quality of marketing services and infrastructure. Progress in these areas should improve prospects for increasing the volume of intra-regional trade handled by both commercial traders and food aid agencies, contribute to national and regional market integration, and help to maintain food prices at affordable levels, even in periods of local production shortfall.
29. In the early 1970s, a prolonged drought compounded by simultaneous global cereal shortage created a famine situation for many people in the Sahel. In response, governments of drought-prone countries, with substantial donor support, initially attempted to build up food security reserves within the framework of the market operations of already existing national cereal boards.
30. Following the introduction of structural reform programmes in the early 1980s, there has been a gradual shift from generalized food distribution carried out by national cereal boards, to integrated food security reserve systems consisting of three main components: food information and early warning, consultation and coordination with donors, and safety net interventions. In 1990, the Permanent Inter-State Committee for Drought Control in the Sahel (CILSS), comprised of Burkina Faso, Cape Verde, Chad, Gambia, Guinea-Bissau, Mali, Mauritania, Niger and Senegal, and its associated donor partners (Club du Sahel) adopted a food aid charter which recognized the need to integrate food aid into agricultural and rural development policies, to coordinate with other types of aid, trade and macro-economic policies, and to integrate food aid into long-term development plans.
31. Physical food reserves, where they are still maintained (e.g. Burkina Faso, Chad, Mali, Mauritania, Niger), are now at much reduced levels and are for emergency relief. The maximum physical stock has generally been set at levels representing no more than three months of anticipated import requirements in a poor year. Most national food reserves also include a financial component; however, in the absence of a serious food crisis in the Sahel in recent years, the financial component has been used for rural development activities.
32. Countries in Eastern Africa and the Horn have had rather dissimilar experiences. On the one hand, Kenya and Sudan have attempted to continue holding large price-stabilising buffer stocks, despite the disadvantages associated with this approach, as cited above. Uganda, on the other hand, has traditionally not held stocks, and has been quicker to adopt and implement measures to foster and encourage private sector trade in grain markets.
33. In Ethiopia, Eritrea and Somalia, recurring drought, conflict and war, and declining agricultural productivity have brought about growing chronic hunger and increase in the frequency and severity of food emergencies. All three are heavily reliant on food aid; in Ethiopia, a model emergency food security reserve system has evolved to facilitate the timely delivery of food for relief distribution. The Ethiopian Food Security Reserve (ESFR) has proved its utility on several occasions in the 1990s.
34. During the impending famine in 1994, it responded in timely fashion through a release of around 94,000 tons on loan to NGOs and 52,000 tons in free draw-downs to the government relief agency. This helped mitigate serious food shortages in the northern and southern parts of the country, discouraged people from migrating out of their areas in search of food, and prevented disintegration of their livelihoods. Again in 1997, the EFSR was the only stock on which the Government, WFP and many NGOs could rely for immediate emergency distributions following failure of the “belg” crop due to insufficient rains. The EFSR was also the only immediate source of relief food during the drought in 2000 and this experience was repeated again in 2003.
35. In Southern Africa, national buffer stocks provided adequate food security until the prolonged drought from 1982-1984 created a food emergency with which they could not cope. Thereafter, as had occurred in West Africa in the 1970s, the marketing boards were made responsible for maintaining food security reserves and managing the distribution of food relief and food aid in the event of an emergency. But there was less donor involvement, and the change in policy came at a time when overall economic conditions were creating other pressures for more fundamental reform.
36. Some governments chose to let the state marketing boards/parastatal agencies continue holding the reserve on their behalf while competing for business in open markets (e.g., Malawi), whereas others created specialized units to manage the reserves (e.g., Tanzania, Zambia). A few attempted to keep a combination of physical stocks and cash (e.g., Zimbabwe). However, to varying extent, governments continued to intervene in grain markets, and this discouraged full participation of the private sector in grain trade in most countries. At the same time, because of high costs of procuring, transporting, maintaining and operating grain reserves, governments have been unable to achieve set reserve targets. Reserves that did exist were not linked to safety net programmes, and releases were often made with a view to satisfying short-term political objectives without regard for their longer-term food security consequences.
37. To cope with recurrent food emergencies, WFP has been prepositioning food aid in Mozambique for the past several years. This has proven to be effective, and Mozambique does not currently maintain any other form of emergency food reserve. However, an important consideration for the future will be the impact of the prepositioned food on local markets. If local production begins to take off, the food aid reserve could have a dampening effect on producer prices unless deliberate measures are introduced that would give priority to local procurement in years of good harvests.
38. Three national models that have performed well are summarised below as indicative of possible ways forward in other African countries.
39. In 1981, as part of the structural reform process, a unique multi-partner structure was put in place in Mali to manage a counterpart fund created through monetization of food aid with the aim of financing a comprehensive programme for restructuring the cereal market. Now in its sixth phase, the PRMC represents a fully mature integrated food security reserve system, operating within the context of a liberalised marketing environment. The system is comprised of the following elements:
40. This system has functioned well over the years, and represents one of the models that could be considered for adaptation and replication elsewhere on the continent. Both in Mali and in the sub-region it is considered as a particularly effective model for coordination between government and development partners. Its efficacy has been due to the informality and flexibility with which the coordination functions within the Malian administration, among donors and between the two have been carried out.
41. Ethiopia established its Emergency Food Security Reserve (EFSR) in 1982; since then it has evolved an approach whereby strategically located stocks with a current maximum size of 407,000 tons are maintained by the national authorities. Since 1991, the reserve has been managed by an autonomous Emergency Food Security Reserve Administration (EFSRA). The manager of the reserve releases stocks to designated distribution agents for the operation of national and donor-funded safety net programme, and the borrowers replenish the reserve when their own supplies arrive.
42. Build-up of the reserve has been financed mainly by donor contributions, and donors have also financed warehouse construction, training in reserve stock management, and development of a food security information and early warning system with local antennae. However, management and maintenance costs are covered by the Government budget. Donor representatives participate in the technical deliberations but final decisions regarding management of the reserve are taken at ministerial level.
43. The operation of the Ethiopian Emergency Food Security Reserve has elicited considerable interest elsewhere on the continent. Besides Ethiopia, other countries that have so far adopted this model include Niger, Malawi and Mauritania.
44. As part of the national contingency planning process in Mozambique, WFP prepositions food stocks in strategic locations that allow distribution to remote areas where access may by closed in the event of heavy rains or floods. Normally, two months’ worth of rations is prepositioned in November, prior to the onset of the rainy season. In 2003 WFP increased storage capacity by placing ten temporary storage tents at strategic points throughout the southern and central regions of the country. It also acquired a fleet of 6x6 trucks to facilitate transport of food aid in remote areas.
45. Prepositioning food aid represents another possible instrument which could be used in some instances to help build up a regional food security reserve system for Africa, provided that the rules and procedures for building up and releasing such stocks are carefully spelled out, and that the food aid reserve functions so as to encourage, rather than discourage, development of private grain markets.
46. The experience to date with food reserve systems suggests that for the efficient management of emergency food reserves, the following issues must be carefully considered.
47. Stock size should be maintained at a relatively fixed level that is sufficient to cover food relief distributions following a poor harvest, up until the time food imports or other domestic supplies can be mobilised and delivered. Normally, this amounts to a stock size equivalent to one-to-three months of estimated annual import requirements of the major cereal consumed in the country
48. In general, it is more cost-effective to position stocks near their places of origin, and move them to markets and distribution centres on demand. However, if infrastructure is poorly developed, and timely delivery cannot be assured from a centrally-positioned stock, then the reserves must be decentralized in strategic locations that will allow timely delivery of food when it is needed.
49. Due to lack of proper food reserve management, several initiatives in the past have collapsed. The management must be transparent and free of political influences, with a clear mandate. Before the reserve can be considered operational, technical capacity to manage the stocks needs to be assured, funding for administration of the reserve needs to be clearly identified, and tracking systems for following physical acquisitions and releases of stocks, and for monitoring expenditures, receipts, loans and repayments must be put in place.
50. Stock replenishment and rotations designed to ensure that the reserve does not lose money, dictate that purchases should be made when prices are low and sales done when prices are high. However, this could have the effect of reducing inter-seasonal price spreads and make involvement in stockholding less attractive for the private sector, especially if the reserve stock is large.
51. Strict targeting of vulnerable groups for food relief, open tendering of releases and procurements, recycling of grain towards the end of the marketing season when market supplies are running low and prospects for the forthcoming harvest are clearer, and full transparency about procurement and release procedures would all help minimise possible adverse impacts on markets, and contribute to the efficient functioning of the reserve.
52. A number of risk management and trade facilitation instruments exist that could enable markets to provide a high degree of food supply stability for most African countries, if correctly and consistently implemented. Several promising innovations have been introduced in the recent period which merit more widespread consideration as a complement to emergency food security reserves in Africa. Their main features are summarised briefly below.
53. Credit constraints are a major obstacle to intra-regional and inter-regional grain trade. African traders face high interest rates, and have difficulty obtaining letters of credit that foreign suppliers will recognize. Some are able to obtain credit on the basis of their personal relationships with managers of lending institutions, but this is very much on an ad hoc basis, and experiences with credit sales concluded in this way have not been uniformly positive. The new World Bank-created African Trade Insurance Agency will help overcome credit constraints by making it easier for Africa’s financial markets to offer credit insurance.
54. Several sub-Sahara African countries (e.g. Côte d’Ivoire, Mali, Mauritania and Zambia), use warehouse-receipt finance to import wheat, maize, rice and sugar. This financing practice is generally used by international traders or bankers who have an office in the importing country. They cover the credit requirements of food processors from import of the raw product until sale of the final processed product by keeping control over the physical inventory. Main bottlenecks are linked to warehouse infrastructure, legal and regulatory environment, availability of appropriate insurance coverage and management skills.
55. Islamic finance has been used to import foods into some developing countries. In the most common practice, mudabaha, the bank buys food products at the request of an importer and immediately sells them to the importer on deferred payment terms. In 2002, the Islamic Development Bank used this method to finance imports of wheat into Egypt and grains into Tunisia.
56. Barter agreements involving the direct exchange of specified physical quantities of commodities or goods are occasionally used for food imports by developing countries. An example is the agreement signed in December 2002 between the Egyptian Food Industries Holding Company, and the Government of Syria, with Syria agreeing to export 100,000 tons of durum wheat to Egypt in exchange for specified amounts of Egyptian rice and potatoes.
57. Commodity exchanges come in many forms: cash markets where spot and forward contracts are traded, futures markets where futures contracts and options are traded and direct offerings by commodity trading houses and financial institutions. Many African Governments regard commodity exchanges as a good way to manage the risk of increased price volatility associated with market liberalization. But this is a complex institution which needs to be implemented with great care; if it is not implemented properly, the exchange is not likely to have a second chance for many years. The Agricultural Products Division of South Africa’s JSE Securities Exchange currently trades around 1 million futures and options contracts each year. But elsewhere in Africa efforts to establish agricultural commodity exchanges are still at an early stage.
58. A precondition for the development of well-integrated markets is the speedy and transparent circulation of information about market prices. A successful regional market information system that supports national market information systems in each of its member countries is the IGAD MIS. Due to lack of current information from some countries, and resource constraints in the IGAD secretariat, the regional bulletin has not been prepared and disseminated as planned. Nevertheless, a structure has been put in place to make this possible, and two of the seven national MIS (Sudan and Uganda) are fully operational.
59. Food aid donors can use cash contributions for purchase of food locally or in neighbouring countries, and do so when possible. But they must also use available resources efficiently, and this limits procurement of local and regional surpluses in locations where they cannot be supplied competitively. Often it is the cost of managing local procurement in surplus-producing regions where there is little or no market infrastructure that is prohibitive, and not the cost of the food itself. If feasible options for overcoming cost constraints could be identified, a more proactive local procurement policy could be pursued.
60. The growth of small-scale private processing, wholesaling and retailing activities in the staple food sector in Africa increases the capacity of markets to maintain inter-seasonal supply stability. Since the withdrawal of parastatals from the grain trade, private operators have begun to offer local milling services. They also buy and mill their own grain and repackage flour and meal in small quantities that meet the demand of retail consumers.
61. Warehouse receipts can be used by farmers to finance the costs of storing grain for sale later in the marketing year. The farmers deposit grain in approved warehouses. On the basis of the warehouse receipts they can then obtain bank finance at around 60 percent of the estimated value of the grain. In Ethiopia and Zambia this approach has met with some success, although problems regarding the mechanism for certification of the warehouses remain to be resolved.
62. Crop failure and livestock loss because of natural or manmade disasters is an ever-present possibility for small-scale African farmers, yet insurance schemes that could protect them from undue losses due to such disasters are not yet generally available. Donors do provide affected farmers with agricultural inputs needed for the next cropping season, but this does not compensate them for income losses, and many never fully recover from a devastating disaster. At present very high premiums would need to be charged to provide adequate insurance coverage for foreseeable risks to African farming, and the number of experienced financial managers who could run such insurance schemes is small. Nevertheless, as part of the move toward developing mature agricultural markets in Africa, affordable and reliable crop and livestock insurance schemes will eventually need to be devised.
63. The above review suggests the following principles and policy guidelines that are recommended for establishing national and regional food reserve systems in Africa.
64. Integrated food security reserve systems involve a combination of mutually re-enforcing physical reserves and market mechanisms, and are the approach towards food reserves recommended for Africa by this paper. With an integrated food security reserve system, physical food reserves, if any, are kept to a minimum size, depending on the region’s and country’s proximity to large and developed national or international markets. They are explicitly linked to emergency safety net programmes and the rules and procedures for release and replenishment are clearly spelled out. And they are integrated within the context of a policy environment that encourages participation of private traders in domestic and international grain markets.
65. In some instances in the past, the very existence of physical food security reserves has discouraged the participation of the private sector in grain trade, often as the result of an inconsistent policy environment. This, in turn, has exacerbated food crises when they have occurred. A precondition for the effective functioning of future food security reserve systems in Africa is that they be established in the context of government policies that are consistent in both their conception and their implementation. This will diminish risk and uncertainty in national and regional grain markets and provide incentives for private traders to play a greater role in achieving long-term food security objectives through development of normal market arbitrage functions.
66. National physical food reserves could constitute building blocks for a reinforced food security system for the continent. However, within the framework of regional food reserve systems in Africa, it is not recommended to establish physical reserves under regional or sub-regional management and control, due to the high management and transport costs that this would entail.
67. While the reserves themselves would not be held under regional ownership, a number of complementary actions to foster the growth of private trade and improved integration of regional food markets could be taken efficiently at regional and sub-regional level. Actions taken to develop regional information systems and improve the functioning of regional financial markets would allow the national reserve systems to rely on and support each other in times of need. Initiatives to develop private or community-based storage, processing and trading capacity for locally-produced grains would also contribute to the smooth functioning of the national food reserve systems.
68. There are a number of natural trading areas or market-sheds on the continent that cross political boundaries and within which informal, unrecorded cross-border trade is common. By freeing up existing controls on cross-border trade and ending the current practice of imposing quantitative restrictions and export bans to protect national food security in years of poor production, African governments can create incentives that will encourage private traders to operate more freely in such areas, thus reducing the need for, and cost of holding decentralized national reserves.
69. An important element in any future programme to implement the integrated food security reserve system approach in Africa could be a market development component that would allow African countries to take greater advantage of the natural cross-border trading potential that exists in many parts of the continent. FAO would be in a position to map these marketsheds, showing, among other things, their per capita agricultural production potential and current production performance, their access to markets and transport infrastructure, and the natural supply/demand complementaries that could be exploited to promote local production and trade. For each such marketshed, sub-regional market development programmes could then be formulated, having as their foundation a firm commitment by the concerned governments to free up restrictions on cross-border trade, and implement this free trade policy consistently and without interference through time. Such a project would include a number of other measures to aid in developing the market potential of the target area, including an appropriate infrastructure investment programme, support for warehouse credit schemes for farmer storage, piloting of crop and livestock insurance schemes, introduction of agricultural input fairs, and so forth. Within this context, temporary subsidies covering the management costs for local procurement for government-run or food-aided safety net programmes could be considered for a certain period as a type of infant industry subsidy.
70. Local production can and should play an important role in the food security strategies of African countries, both as a source of rural income and as a source of supply. Local production already does represent the main source of supply for most African food markets, but not all small farmers benefit to the same extent from local market opportunities.
71. If African economies are to achieve the high rates of growth needed to lift their peoples out of poverty and malnutrition, an important element will be the conversion of numerous impoverished small farmers from their current livelihood strategy of producing staple food crops for their own consumption, and either working as low-paid day laborers, or selling small amounts of cash crops, to earn the cash needed to pay for other necessities, to other more remunerative livelihood strategies. For some, this may mean a shift away from production of staple food crops to other high value crop and livestock products. For others, it may mean a shift out of farming altogether. But for many, the shift must be from mainly subsistence production to viable commercial production of the main agricultural products consumed in the country or exported.
72. There are a variety of production, trade, and marketing related policies to promote the increased commercialization of small African farmers. Food reserve systems can facilitate this process by not distorting incentives of farmers to produce and sell commercially. It is through greater integration of small farmers into national and regional grain markets through a variety of mechanisms outlined below, that hold out the greatest promise for African farmers to become the suppliers of choice for domestic safety net programmes and emergency food reserves.
General Notes: Countries included in sub-regions are as-shown in The State of Food Insecurity in the World, 2003, and do not necessarily correspond to the membership of Regional Economic Communities associated with these sub-regions. Data for South Africa are not included.
Table 1: INDICATORS OF DEGREE OF ACCESS
TO MARKETS IN AFRICA, BY SUB-REGION
Sub-regions |
Degree of poverty and undernourishment |
Degree of market development, based on access of rural people to infrastructure |
|||
Share food insecure, 2000 |
GNP per capita, 2002 |
Share of population living in rural areas, 2002 |
Rural population with poor access to roads and markets, 2002 |
Number of telephone mainlines per 1000 persons, 2000 |
|
(percent) |
(US$000) |
(percent) |
(percent) |
(number) |
|
Central Africa |
58 |
257 |
63 |
43 |
2 |
Eastern Africa |
39 |
227 |
74 |
35 |
5 |
North Africa |
4 |
1501 |
47 |
7 |
74 |
Southern Africa |
41 |
402 |
67 |
35 |
13 |
West Africa |
15 |
309 |
59 |
19 |
7 |
Notes: Poor access to markets is defined as distance of more than 5 km from primary or secondary roads, or distance of more than 40 km from a built-up area observable from the air, with an estimated population of at least 2000 persons. Rural population data is based on Landscan 2002, adjusted to conform to UN rural and urban shares in population data for 2002. Primary and secondary roads are from UN National Imagery and Mapping Agency vector database. Built-up areas are as published in ESRI Digital Chart of the World, 1993. Libya is not included in the data shown in Col. 2 and Sierra Leone and Sudan are not included in the data shown in Col. 5. Sources: Col. 1, The State of Food Insecurity in the World, 2003. Rome: FAO, 2003. Cols. 3 and 4, Ataman, E., GIS-based analysis of population distribution and access to marketing infrastructure, by pixel. Rome: FAO, work in progress; Cols. 2 and 5, World Bank World Development Indicators Online Database, 2002. |
Table 2: PREVALENCE OF UNDERNOURISHMENT IN AFRICA,
1999-2001 AVERAGE
Sub-region |
Total population |
Number under-nourished |
Proportion under-nourished |
Average daily per capita dietary energy supply |
Minimum daily energy require-ment |
Daily per capita energy deficit of under-nourished |
Starchy staples as share of total |
(million) |
(million) |
(percent) |
(kilocalories) |
(median value, percent) |
|||
Central Africa |
81.7 |
47.6 |
58 |
1806 |
1800-1850 |
160-380 |
58 |
Eastern Africa |
209.5 |
81.3 |
39 |
2026 |
1750-1840 |
240-410 |
54 |
Southern Africa |
89.2 |
36.8 |
41 |
2058 |
1730-1900 |
180-420 |
63 |
West Africa |
222.6 |
32.7 |
15 |
2594 |
1790-1850 |
210-390 |
66 |
SUB-SAHARA AFRICA, TOTAL |
603.0 |
198.4 |
33 |
2217 |
60 |
||
North Africa |
142.8 |
6.1 |
4 |
3204 |
1830-1900 |
130-210 |
60 |
AFRICA, TOTAL |
745.8 |
204.5 |
27 |
2354 |
60 |
||
Notes and Sources: Data for minimum energy requirement and daily per capita energy deficit is for 1996-98. Source: The State of Food Insecurity in the World 2000. Rome: FAO, 2002. All other data is for 1999-2001. The State of Food Insecurity in the World 2003. Rome: FAO, 2003 |
Table 3: NET AGRICULTURAL PRODUCTION GROWTH RATES
IN SUB-SAHARAN AFRICA, 1992-2001
Year |
Agriculture |
Crops |
Cereals |
Roots and tubers |
Livestock |
Food |
(percent) |
||||||
1992-96 |
3.9 |
4.4 |
5.8 |
2.4 |
2.6 |
3.7 |
1997 |
0.5 |
0.2 |
-4.2 |
2.0 |
1.4 |
0.3 |
1998 |
3.7 |
4.1 |
4.1 |
5.5 |
2.6 |
3.9 |
1999 |
1.9 |
1.8 |
-0.6 |
4.2 |
2.5 |
2.5 |
2000 |
-0.3 |
-1.0 |
-3.2 |
0.5 |
1.4 |
-0.3 |
2001 |
0.8 |
0.9 |
2.4 |
0.7 |
0.5 |
0.6 |
Notes: Excluding South Africa; 2001 data preliminary. |
Table 4: UTILISATION OF CEREALS AND CONTRIBUTION OF FOOD AID,
SUB-SAHARAN AFRICA BY SUB-REGION, 1990/91-2002/03
1990/91-01/02 |
1990/91-92/93 |
1993/94-95/96 |
1996/97-98/99 |
2000/01-01/02 |
2002/03 |
|
Central Africa |
(percent) |
(thousand tons) |
||||
Non-food use |
24 |
963 |
944 |
1001 |
1010 |
1007 |
Food use (excl. food aid) |
74 |
2641 |
2703 |
3151 |
3366 |
3362 |
Food aid |
2 |
84 |
80 |
27 |
77 |
113 |
TOTAL UTILISATION |
3688 |
3727 |
4179 |
4453 |
4482 |
|
(kg per year) |
||||||
Per capita food use |
46 |
45 |
47 |
49 |
48 |
|
Eastern Africa |
(percent) |
(thousand tons) |
||||
Non-food use |
27 |
6813 |
6965 |
9849 |
9390 |
7616 |
Food use (excl. food aid) |
68 |
16563 |
17440 |
21311 |
22688 |
23048 |
Food aid |
5 |
1490 |
1344 |
1050 |
1614 |
2400 |
TOTAL UTILISATION |
24866 |
15749 |
32210 |
32691 |
33064 |
|
(kg per year) |
||||||
Per capita food use |
109 |
104 |
115 |
115 |
115 |
|
Southern Africa |
(percent) |
(thousand tons) |
||||
Non-food use |
24 |
3973 |
3395 |
2792 |
2878 |
2620 |
Food use (excl. food aid) |
70 |
7280 |
8593 |
10058 |
10721 |
10321 |
Food aid |
6 |
1545 |
899 |
445 |
399 |
886 |
TOTAL UTILISATION |
12799 |
12887 |
13295 |
13998 |
13827 |
|
(kg per year) |
||||||
Per capita food use |
125 |
123 |
122 |
125 |
124 |
|
West Africa |
(percent) |
(thousand tons) |
||||
Non-food use |
26 |
10026 |
10894 |
11389 |
13877 |
14870 |
Food use (excl. food aid) |
73 |
27472 |
31444 |
33680 |
37461 |
40339 |
Food aid |
1 |
766 |
533 |
437 |
423 |
350 |
TOTAL UTILISATION |
38264 |
42871 |
45505 |
51761 |
55559 |
|
(kg per year) |
||||||
Per capita food use |
152 |
160 |
158 |
164 |
168 |
|
Notes: In this table, the West Africa sub-region includes all Sahelian countries, including Chad, which is normally grouped with Central Africa. Although per capita food use of cereals in Central Africa is significantly lower than in other sub-regions, per capita food use of other starchy staples, mainly roots and tubers (not shown here), is significantly higher. |
Table 5: AFRICAN COUNTRIES FACING SEVERE FOOD SHORTAGES
AND APPROXIMATE NUMBER OF AFFECTED PERSONS, 1999-2003
Central Africa |
Reasons, 1999 |
Reasons, 2000 |
Reasons, 2001 |
Reasons, 2002 |
Reasons, 2003 |
|
Cameroon |
Crop failure |
Crop failure |
||||
Central African Rep. |
Civil strife |
Civil strife |
||||
Chad |
na |
na |
na |
|||
Congo, Dem. Rep. |
Civil strife |
Civil strife |
Civil strife |
Civil strife |
Civil strife |
|
Congo, Rep. of |
Civil strife |
Civil strife |
Civil strife |
Civil strife |
Civil strife |
|
Gabon |
Refugees |
|||||
Approximate number of affected persons |
||||||
2 075 |
2 300 |
2 450 |
2 750 |
2 850 |
||
Eastern Africa |
Reasons, 1999 |
Reasons, 2000 |
Reasons, 2001 |
Reasons, 2002 |
Reasons, 2003 |
|
Burundi |
Civil strife |
Civil strife |
Civil strife |
Civil strife |
Civil strife |
|
Djibouti |
Drought |
Drought |
Drought |
Drought |
||
Eritrea |
War |
War, drought |
War, drought |
War, drought |
War, drought |
|
Ethiopia |
Drought, war |
Drought, war |
Drought, war |
Drought, war |
Drought, war |
|
Kenya |
Drought, refugees |
Drought, refugees |
Drought, refugees |
Drought, refugees |
Drought, refugees |
|
Rwanda |
IDPs, returnees |
IDPs, returnees |
IDPs, refugees |
IDPs, refugees |
||
Somalia |
Drought, civil strife |
Drought, civil strife |
Drought, civil strife |
Drought, civil strife |
Drought, civil strife |
|
Sudan |
Civil strife |
Civil strife |
Civil strife |
Civil strife; drought |
Civil strife, drought |
|
Tanzania |
Drought in parts |
Drought in parts |
Drought in parts, refugees |
Drought in parts, refugees |
Drought in parts, refugees |
|
Uganda |
Civil strife |
Civil strife |
Civil strife |
Civil strife |
Civil strife |
|
Approximate number of affected persons |
||||||
12 200 |
20 650 |
13 525 |
19 200 |
24 600 |
||
Southern Africa |
||||||
Angola |
Civil strife |
Civil strife |
Civil strife |
Civil strife |
Civil strife |
|
Lesotho |
Adverse weather |
Drought, frost |
||||
Madagascar |
Floods, cyclones |
Drought, economic problems |
Drought, economic problems |
|||
Malawi |
Adverse weather |
|||||
Mozambique |
Drought in parts |
Floods, cyclones |
Drought in parts |
Drought in parts |
Adverse weather |
|
Swaziland |
Drought |
Drought |
||||
Zambia |
Adverse weather |
Adverse weather |
||||
Zimbabwe |
Drought, economic disruption |
Drought, economic disruption |
||||
Approximate number of affected persons |
||||||
Southern Africa |
1 825 |
2 350 |
4 425 |
16 700 |
9 500 |
|
West Africa |
||||||
Cape Verde |
Drought |
Drought |
||||
Côte d’Ivoire |
Refugees |
Refugees |
Refugees |
Civil strife |
Civil strife |
|
Gambia |
Drought |
Drought |
Drought |
|||
Guinea |
Refugees |
Refugees |
Refugees |
Refugees |
Refugees |
|
Guinea-Bissau |
Civil strife |
|||||
Liberia |
Civil strife |
Civil strife |
Civil strife |
Civil strife |
Civil strife |
|
Mauritania |
Drought |
Drought |
Drought |
|||
Sierra Leone |
Civil strife |
Civil strife |
Civil strife |
Civil strife |
Civil strife |
|
Approximate number of affected persons |
||||||
West Africa |
2 600 |
2 500 |
2 600 |
2 150 |
1 950 |
|
Sub-Saharan Africa, total |
Approximate number of affected persons |
|||||
18 700 |
27 800 |
23 000 |
40 800 |
38 900 |
||
Notes: This table shows the number of people requiring external food assistance in countries classified as those facing food emergencies, and not having sufficient capacity to deal with the emergency effectively on their own. Food emergencies may be declared in the event of natural disasters, conflict, or economic problems. Natural disasters caused by hazards such as drought, floods, frost, pest attacks and adverse weather involving poor and/or excessive rains can all lead to sharp declines in agricultural productivity and losses of stored crops, and create temporary food shortages for both farmers and urban consumers. War and civil strife create temporary food insecurity for internally displaced persons (IDPs) and refugees while the conflicts are in progress; in the aftermath of conflict, IDPs and returnees require temporary assistance until their livelihood systems can be restored. Economic problems and disruptions cause loss of productive capacity and consequent loss of purchasing power for affected persons. |
Graphs 1-4 COMPOSITION OF CEREAL SUPPLY IN SUB-SAHARAN AFRICA,
BY SUB-REGION, 1990/91 – 2003/04 (forecast)
1 Cited in A. Abdulai, Spatial integration and price transmission in agricultural commodity markets in Africa. Paper prepared for FAO Symposium on State of Research and Future Directions in Agricultural Commodity Markets and Trade. Rome: FAO, December 2003.