As food prices climb, African policymakers are considering short and long-term ways to make food prices affordable. The measures range from food subsidies for consumers to incentives for farmers to increase production. From Washington, William Eagle has the story.
Governments Take Action
African governments are under pressure from consumers – and in some cases protestors – to act now. Some, like Nigeria, are working to satisfy demand and lower prices by releasing emergency grain reserves. Others like Cameroon are giving pay raises to public servants, dropping tariffs on food imports, or enacting food subsidies. Ethiopia has banned the export of its cereals.
Burkina Faso, Ethiopia and Nigeria have released emergency grain reserves onto the market to try to keep food prices low. Burkina, Cameroon, Senegal and Ethiopia have suspended or lowered taxes on grains and other basic goods. Nigeria recently announced it will buy 500,000 metric tons of rice from Thailand.
Ethiopia has added a 10 percent surtax on luxury imports to help fund wheat subsidies for the poor. It has also restricted the money supply to help prevent inflation.
Many countries are working to improve domestic food production. Sierra Leone, Liberia, Ghana and others say they plan to grow more rice. Liberia, which imports 90 percent of its rice, will begin growing it in Lofa and Nimba counties. The opposition is asking the government to drop taxes on all rice purchases. Ghana hopes to join Uganda, Tanzania and other countries in increasing the use of high-yielding NERICA [New Rice for Africa], developed by the Africa Rice Center in Benin.
Senegal has created a new program, “The grand agricultural offensive for food security," which is aimed at making the country self-sufficient in grains within seven years. It’s also working to boost rice production from 100,000 to 600,000 metric tons annually.
Nigeria, Kenya and Cameroon are releasing subsidized fertilizer in an effort to increase food production.
Ghana is considering an idea that Nigeria has tried with mixed success, requiring flour mills to incorporate a percentage of inexpensive cassava flour into some of their wheat-based products, like bread.
Economists Urge Caution
Economists have varying opinions on some of these measures. Some support food subsidies for only a short period of time. They say unless subsidies are carefully targeted to the poor, the wealthy will also benefit.
Economists say subsidies are hard to dismantle, since some consumers come to depend on them. And, they are sometimes paid for by cutting funds from health and education programs in the national budget.
Raymond Gilpin is the director of the Center for Economies and Conflict at US Institute for Peace in Washington. He says subsidies distort the market.
"[Subsidies are a problem], he says, "when food price inflation is regional and borders are porous. If you subsidize grain in, say, Burkina Faso, but it is not subsidized in Mali, what is stopping business person “A” from buying subsidized grain in Burkina Faso and selling it for a killing in Mali, just across the border? Subsidies should be localized and temporary."
Other possible solutions also have drawbacks: dropping tariffs on imports may lead to cheaper food for consumers but less revenue for the government.
Meanwhile, bans on food exports bring about only temporary relief – domestic traders are compelled to sell food within the country often at a lower local price. Yet, some economists say, it means lower prices for farmers, who do not have the incentive of higher profits to produce more food.
Most economists agree that in the short run, urban consumers and the rural poor must be protected. One program that is working well is the Productive Safety Nets Program in Ethiopia.
John Hoddinott is a senior research fellow in the Food Consumption and Nutrition Division at the International Food Policy Research Institute in Washington. He describes the effort, which provides food and cash transfers in exchange for public works. It also provides rural farmers with other support for improving crop yields.
"We know in Ethiopia," he explains, "the use of chemical fertilizers is woefully low. The program helps farmers access fertilizers by putting cash in their pockets and by facilitating access to production credit, where they can borrow additional funds to buy fertilizers."
He says the program has been running for two years. "What we do know," he says, "is that in parts of the country where people have access to the (money) transfers and the packages of agricultural technologies, their food security is improved."
Economists say higher food prices often do not benefit small farmers, who do not have storage facilities and must sell their produce right away – even at lower prices.
But a program in Kenya called the “warehouse receipt system” may reverse that.
Bridgett Okumu is a market information manager for the Regional Agricultural Trade Intelligence Network in Nairobi. She says the system allows farmers to store their grains in a silo made available to them. They then receive a “receipt,” which allows them to borrow from the bank up to 80% of the value of their crop for fertilizers or for personal needs like medical care.
"They will hold on to the receipt," says Okumu,"and when prices rise, they sell off the maize to the miller, trader or food agency. So they benefit from the high price and they pay back the loan from the bank, pay off the storage charges for the warehouse, and they retain their margin."
Economists say Africa’s small farmers would benefit by engaging in regional and international markets. For example, China is seeking palm oil from Africa for use as a biofuel, and India would be a prime market for Tanzanian chickpeas or navy beans from Ethiopia. The Kenyan daily paper The Nation says farmers in the North Rift Valley are growing passion fruit, which is much cheaper to grow than maize. Juice from the fruit is in demand in hotels and supermarkets locally and abroad.
Josh Ruxin is an assistant clinical professor of public health at Columbia University and the director of The Millennium Village Project. One of the project’s goals is to curb poverty and improve health standards in the developing world by 2015.
Ruxin is currently working with 50,000 small farmers in Rwanda’s Bugesera District on an organic pomegranate cooperative.
"We are working with farmers on higher value crops like pomegranates, dried mango and other dried fruits with great demand globally," says Ruxin. "This poses a real challenge for Rwanda because the high cost of the fuel and transport -- by air or by ship -- has made it difficult for them to export competitively. The challenge is trying to figure out how to overcome the transport costs. Nonetheless, there are niche markets for exports like coffee and other things are in demand, and Rwanda is taking advantage of the situation."
"Rwanda recognizes the transport issue is working against it," he says, "and it has done a really amazing job in last several years building roads [towards Kenya], and [also] into [the DRC], Burundi, [Uganda] and Tanzania to start to provide some economic lubricant for lowering that cost."
Ruxin says the higher food prices have put pressure on governments to lower their tariffs and strengthen regional markets. Rising commodity prices, which he says have historically trended downward, may also offer farmers a chance to improve their operations. The cost of inputs such as fertilizer and improved seeds is far less than the market price for the final product, which allows farmers to see higher profits.
He says Rwanda’s leaders want the country to make the transition to a “knowledge-based” economy, based on improved technologies. Ruxin says that with appropriate access to capital and inputs the Rwanda can build on the price spikes to help reach that goal.
Development specialists like Ruxin say say subsidies, grain export bans, and reduced tariffs on imported food help in the short run. But they say the real solution to high prices and food shortages lies in a renewed commitment by Africa's leaders to agriculture, and to fully engaging the global economy.