As often happens to Africa, external factors have crucial implications for the lives of many Africans. This is particularly the case with the steep rises in international food prices in the last two years, and the particularly abrupt spike in international prices of a number of basic foodstuffs that has taken place since February/March 2008. The volatility in these prices has also left many people uncertain as to how best to react. The circumstances are changing from day to day, and vary substantially between different economies. Some observers considered that these prices had peaked in late May, but they continued to grow in early June, and the likelihood remains that they will stay high, but also stay volatile, leaving many operators in the food supply chains uncertain.
The factors contributing to these price rises are complex. They range from supply/demand imbalances with slow demand response in certain circumstances, run‐down stocks, under‐investment in agriculture and pertinent infrastructure, decreasing land availability, agricultural productivity growth slowing down, export oriented agriculture over local demand needs, decreasing water resources, structural adjustment policy‐orientation resulting in food import increases in many poorer countries, index traders and hedge and risk fund traders diversifying swiftly into commodities, over‐hasty support and incentives to bio‐fuel feedstock production, climatic instabilities (some of which are influenced by climate change), increased inter‐linkages between commodity prices (particularly of agricultural inputs and agricultural products with oil‐product prices), knee‐jerk reactions with trading restrictions by different governments and operators. The weighting of the comparative importance of each contributing factor has only taken place in a fairly haphazard way to date, and often bias1 has occurred in the importance attributed to different factors (see Von Braun, 11 & 22 April 2008 for some simple attempted weighting).
The crux of the matter is, however, that despite the denials, a major contributor to the food prices spike has been international capital holders, responding to the weakened US dollar, shake‐out of the US sub‐prime loans chaos and credit squeeze, and high‐energy prices, by speculative investment through the ‘swaps loophole’ in agricultural commodities, with the inherent instabilities of this liberalised capitalist exchange system. Such traders (particularly index traders) have been buying up commodities and holding their positions, creating artificial premiums. The current profit domination of much food production contributes to this distortion.
In the first three months of 2008, the volume of globally traded grain futures and options increased by 32% on the comparable volume in the same period in 2007. There would also appear to have been considerable direct investment in commodities by what are referred to as ‘deep pool’ investors (private investors using banks, but by‐passing commodity exchanges), but the difficulty is that such investments are not transparent, and not easily measurable in present circumstances. A second key factor, which US representatives have tried to play down, is the rapid increase in bio‐fuel feedstock production from food crops that has been artificially supported and subsidised. Even IFPRI (International Food Policy Research Institute, Washington, DC) has advocated changing bio‐fuels policies (Von Braun, May, 2008)
At the receiving end of this crisis are many Africans and African countries. A specific World Bank study on likely impacts (Ivanec & Martin, 2008) concluded that ‘the recent large increases in food prices appear likely to raise overall poverty in low income countries substantially’, although it also says that ‘little hard information appears to be available on actual impacts on poor people’. They also indicate that the impacts are likely to ‘differ considerably by commodity and by country’ (e.g. greater impact in Madagascar in relation to rice prices than in Zambia or Malawi that are more oriented to maize). There is considerable diversity in circumstances and responses of African countries to date, and many aspects are still changing, and likely to change. Nevertheless, many African households (the majority) are likely to suffer as a consequence, and resort to diets with an even poorer nutritional content, particularly:
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Poorer urban households with limited income‐generating possibilities, and limited incomes already;
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Landless rural populations, or smallholders that are deficit in their household food balances (both groups often having limited food security at present);
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Smallholders in more isolated zones, who have increased input supply costs (prices of fertiliser have increased even more than those of food prices), as well as increased marketing costs (because of weak transport infrastructure and increased fuel prices), who cannot easily increase supply in a viable, economic way;
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Small‐scale food supply intermediaries, primarily in the system with limited capital to get some sort of a living, because alternative employment is also limited.
Many African governments are also squeezed by all this, regardless as to whether their orientation to their people is altruistic or self‐seeking. They cannot sit idle, waiting for the negative impacts to happen or to be analysed in detailed socio‐economic studies. They need to react, both with short‐term initiatives and putting in place longer‐term policies and investments. Many are trying to take short‐term action in a number of ways, particularly in the following:
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Securing adequate national supplies of food for the immediate future, at sometimes considerable cost now, with limited budgetary resources to do so, while this is simultaneously limiting their efforts to develop their economies;
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Reducing import tariffs on basic food products (e.g. Nigeria, Morocco – both of which had poorer harvests in 2007, as well as Egypt, Ghana and Senegal) to encourage swift food imports, despite resultant decreases in government revenue;
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Establishing appropriate safety‐net mechanisms for food supply, when sometimes the appropriate institutions are not in place, not functioning well, or have limited coverage, even if this is only done crudely by consumer subsidies (e.g. South African government has been considering introducing food vouchers and extending tax relief on basic foodstuffs; the Egyptian government has expanded food aid recipients). The cost of such programmes has to be met, however;
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Sometimes trying to control prices (Benin, Senegal) by price‐fixing or anti‐hoarding measures, which rarely succeed for long, and often cause tensions, corruptions, and by‐passing of the ‘controlled’ distribution system;
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Efforts (often too late!) to establish suitable food stocks or food stock release measures that would cushion such price volatility and fluctuating food supplies (a practice discouraged in many countries by external forces in recent years);
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For countries that periodically export basic food crops, limiting their exports (e.g. Egypt, Ethiopia, Tanzania, Zambia) to ensure local availability, with resultant losses in foreign exchange for the economy, leaving aside trade ‘distortion’ issues;
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Endeavouring to manage the resultant growth in crime, dissention and rioting that inevitably occurs amongst desperate populations determined to survive, particularly urban ones (food‐related protests in late 2007/early 2008 have taken place in Burkina Faso, Cameroon, Egypt, Ethiopia, Guinea, Ivory Coast, Madagascar, Mauretania, Morocco, Mozambique, Senegal, Somalia and South Africa);
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Managing the balance between food crop production, feed production and bio‐fuel feedstock production In 2007, 16,000 tonnes of maize were exported from Mozambique to Mexico by the Argentine trader who has a near monopoly of bulk trade in the north of the country, in order to supply deficits of maize for local food consumption in Mexico due to excessive exports of maize from there to the USA for bio‐fuel production. Now the Mozambican government is struggling between trying to prevent such exports aggravating local food needs, while simultaneously trying to promote production for these ends on more marginal land.
Africa accounts for about 22% of the global share of cereal imports, while its share in exports is roughly 3%. Africa's total cereal import bill in 2007/08 is forecast at US$2.7 billion, 23% higher than in 2006/07. In some poorer countries, increased food import bills could easily lead to substantial widening of the current account deficits, further impacting on other macroeconomic variables: exchange rates, monetary reserve positions or increased indebtedness. Global prices do not always transmit immediately to domestic prices in African countries for a number of reasons, but local markets cannot remain disconnected from world markets over the longer term. In the short term, national trade policies, public procurement and distribution of cereals, roots & tubers, and poor infrastructure, seem to play an important role in determining African domestic prices. Countries in southern Africa with large cereals imports relative to their domestic requirements, such as Lesotho, Swaziland, Botswana and Zimbabwe, have experienced much stronger price transmission from South African prices, the region's main exporter.
Which are the most vulnerable African countries? The FAO, in preparation for the June 2008 High‐Level Food Security Conference in Rome with other international organisations, indicated the following African countries (although using slightly dated figures) (see Table 1); that because of the already low levels of nutrition in the country, their food supply weaknesses, their energy fuel vulnerability, and their limited purchasing power, are particularly at risk.
| Countries | Major grains % imported | % under‐nourishment |
|---|---|---|
| Eritrea | 88 | 75 |
| Burundi | 12 | 66 |
| Comoros | 80 | 60 |
| Sierra Leone | 53 | 51 |
| Liberia * | 62 | 50 |
| Zimbabwe * | 2 | 47 |
| Ethiopia | 22 | 46 |
| Zambia | 4 | 46 |
| Central African Republic | 25 | 44 |
| Mozambique | 20 | 44 |
| Tanzania | 14 | 44 |
| Guinea‐Bissau | 55 | 39 |
| Madagascar | 14 | 38 |
| Malawi | 7 | 35 |
| Rwanda | 29 | 33 |
| Botswana | 76 | 32 |
| Niger * | 82 | 32 |
| Kenya | 20 | 31 |
| Sources: FAO 2008 Table 4, using data from FAOSTAT, Archives Commodity Balance Sheets. Average 2001–03 for wheat, rice and maize and FAOSTAT, Food Security Statistics, Prevalence of undernourishment in total population (2002–2004 preliminary). *Those countries that already have large current account deficits. The World Bank , FAO and WFP have pinpointed other vulnerable African countries as well, including Benin, Chad, Republic of Congo, Democratic Republic of Congo, Djibouti, The Gambia, Guinea, Ivory Coast, Lesotho, Mauritania, Sudan, Swaziland, Togo and Uganda (see Evans, 2008; Wiggins & Levy, 2008). |
Commodity Price Indices (CPIs), although often having an urban bias, can give some indications in the rates of price increase in basic foods. Recent data for a number of African countries have been supplied by FAO (see Table 2):
| Country | Jan. 2007 to Jan. 2008 % change | Feb. 2007 to Feb. 2008 % change | ||
|---|---|---|---|---|
| Total CPI | Food | Total CPI | Food | |
| Kenya | 4.6 | 12.6 | 15.4 | 24.6 |
| Botswana | 10.6 | 18.2 | 7.7 | 18.3 |
| South Africa | 5.8 | 10.9 | 8.6 | 13.6 |
| Egypt | 15.4 | 24.6 | 9.5 | 13.5 |
| Senegal | 3.6 | 7.3 | 5.8 | 10.9 |
| Malawi | 6.8 | 11.4 | n.a. | n.a. |
| UEMO* | 6.9 | 14.6 | 3.6 | 7.3 |
| Source: FAO 2008 Table 11 *Includes: Benin, Burkina Faso, Ivory Coast, Guinea-Bissau, Mali, Niger, Senegal, Togo. |
The World Food Programme (WFP) has recently been monitoring developments in 30 ‘at risk’ countries, including Angola, Benin, Burundi, Chad, Democratic Republic of Congo, Eritrea, Ethiopia, the Gambia, Guinea, Guinea‐Bissau, Kenya, Madagascar, Malawi, Mauretania, Mozambique, Niger, Sao Tomé and Principe, Senegal, Sierra Leone, Somalia, Zambia and Zimbabwe. To date the results of this monitoring have not been widely publicized.
How have African governments been responding to the problems presented to them? The response has so far been very varied. Interestingly, the FAO found (2008:42), having surveyed 77 countries, that up to now the responses of a number of African countries have been much less than in other parts of the world. A number of actions have been taken by North African countries, but amongst sub‐Saharan countries, the actions taken have been much less. This may be because such governments are waiting to see how their main food crop harvests for 2008, due to commence in May/June, are likely to turn out. The more common responses in sub‐Saharan African countries have been the reduction of taxes on food grains and different forms of price controls and/or consumer subsidies. About 20% of these countries had been releasing supplies from food stocks and another 20% had been involved in introducing export restrictions on food grains, but about 21% of sub‐Saharan African governments had not undertaken any responsive measures, according to their survey.
A range of institutions from the US Commodity Futures Trading Commission (CFTC) to the International Food Policy Research Institute (IFPRI), ECOSOC, UNCTAD, the Food and Agriculture Organisation of the UN (FAO), World Food Programme (WFP), OECD, to a range of donors and NGOs, are seeking, or presenting, their ‘solutions’ for short‐term responses, and for more medium‐term and longer‐term responses. Few of these envisage radical reform of the international agricultural commodity trading system, nor any types of trade restriction.
The free‐traders are a bit dubious about the hypocrisy of bio‐fuel supports (including subsidies) in developed countries, when those same countries simultaneously advocate liberalized trade options, but surreptitiously keep their own trade restrictions. Greater investments are needed in agriculture and infrastructure to facilitate crop marketing in African countries, but investments for whom in those countries?
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Already we see the pro‐GM crops lobby positioning their case;
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Outsiders (including the Chinese and agribusiness firms) wanting to get hold of land in Africa and develop more‐efficient agriculture on it;
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the developed economy philanthropic tycoons with their ‘private equity approaches';
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The population‐restriction lobby wanting to restrict population growth of ‘certain’ populations;
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The international food aid lobby shouting for immediate increased food aid, administered and supplied by them in their way, even with more local supply provision, and with token responses to social welfare system development and monetary transfers instead of in‐kind transfers.2
Short‐term responses are needed, as well as longer‐term ones. Unfortunately, at the moment these seem to be dominated primarily by increasing food and humanitarian aid in the short‐term, followed by research into improving crop productivity and high‐tech fast‐impact food production approaches (including subsidization of such development) in the more medium term. A wider range of responses is needed. IFPRI advocates ‘calming the markets’ by monitoring, and setting of maximum limits on futures trading positions and increasing margin deposits to discourage speculative trading, but eschews more radical solutions. Interestingly, they are also advocating ‘modest grain reserves’ with IMF‐supported import‐financing facilities, but make no mention of the increased profits of international grain trading companies, fertilizer companies and seed companies during the recent period. Besides these, some of the more communal responses that have been developed in countries such as Cuba, Venezuela and Brazil, need to be considered in a number of African contexts, with efforts to achieve productivity increases amongst smallholder producers, as well as a range of more permanent social welfare support systems. One fear is that electoral and other political pressures in ‘developed’ countries, combined with the usual vested interests, will limit consideration by governments in those countries primarily to their own inhabitants, leaving only a food aid option (delivered on their terms) to help out the worst cases (probably mainly where it looks like causing political instability where ‘developed’ country interests are involved). African local policy‐makers are facing a difficult balancing act between an urgency to respond, on the one hand, and taking enough time to understand the consequences of what they are doing in a complex situation, on the other. Countries and governments are being exhorted to determine their own policies, but then are being discouraged to do so if they challenge liberalized trade approaches, or do not adopt comprehensive approaches, despite the diversity of circumstances.
In the meantime traditional capitalist labour markets continue driving down real incomes, and only certain types of African producers will be in a position to respond to the price increases.
The UN/FAO Regional Conference for Africa held from 16–20 June 2008 in Nairobi hardly touched on these pressing issues in its background papers, even though the Director‐General, Jacques Diouf made passing reference to them. We will see where things are by the time of the G8 Summit in July and the UN Secretary‐General's summit meeting on the Millennium Development Goals in New York in September 2008.