Business News of Friday, 26 October 2012
A new World Bank report says that Africa’s farmers can potentially grow enough food to feed the continent and avert future food crises if countries remove cross-border restrictions on the food trade within the region.
According to the Bank, the continent would also generate an extra US$20 billion in yearly earnings if African leaders can agree to dismantle trade barriers that blunt more regional dynamism.
The report was released on the eve of an African Union (AU) ministerial summit in Addis Ababa on agriculture and trade.
With as many as 19 million people living with the threat of hunger and malnutrition in West Africa’s Sahel region, the Bank report urges African leaders to improve trade so that food can move more freely between countries and from fertile areas to those where communities are suffering food shortages.
The World Bank expects demand for food in Africa to double by the year 2020 as people increasingly leave the countryside and move to the continent’s cities.
According to the new report?Africa Can Help Feed Africa: Removing barriers to regional trade in food staples ? rapid urbanization will challenge the ability of farmers to ship their cereals and other foods to consumers when the nearest trade market is just across a national border.
Countries south of the Sahara, for example, could significantly boost their food trade over the next several years to manage the deadly impact of worsening drought, rising food prices, rapid population growth, and volatile weather patterns.
With many African farmers effectively cut off from the high-yield seeds, and the affordable fertilizers and pesticides needed to expand their crop production, the continent has turned to foreign imports to meet its growing needs in staple foods.
“Africa has the ability to grow and deliver good quality food to put on the dinner tables of the continent’s families,” said Makhtar Diop, World Bank Vice President for Africa.
“However, this potential is not being realized because farmers face more trade barriers in getting their food to market than anywhere else in the world. Too often borders get in the way of getting food to homes and communities which are struggling with too little to eat.”
The new report suggests that if the continent’s leaders can embrace more dynamic inter-regional trade, Africa’s farmers, the majority of whom are women, could potentially meet the continent’s rising demand and benefit from a major growth opportunity. It would also create more jobs in services such as distribution, while reducing poverty and cutting back on expensive food imports. Africa’s production of staple foods is worth at least US$50 billion a year.
Moreover, the new report notes that only five percent of all cereals imported by African countries come from other African countries while huge tracts of fertile land, around 400 million hectares, remain uncultivated and yields remain a fraction of those obtained by farmers elsewhere in the world.
Poor roads and high transport costs blunt progress
Transport cartels are still common across Africa, and the incentives to invest in modern trucks and logistics are weak. The World Bank report suggests that countries in West Africa in particular could halve their transport costs within 10 years if they adopted policy reforms that spurred more competition within the region.
Unpredictable trade policies a liability
Other obstacles to greater African trade in food staples include export and import bans, variable import tariffs and quotas, restrictive rules of origin, and price controls.
Often devised with little public scrutiny, these policies are then poorly communicated to traders and officials. This process in turn promotes confusion at border crossings, limits greater regional trade, creates uncertain market conditions, and contributes to food price volatility.
Establishing a competitive market will enhance food distribution networks
A competitive food market will help poor people most, the report notes. For example, poor people in the slums of Nairobi pay more for their maize, rice, and other staple food than wealthy people pay for the same products in local supermarkets. The report underlines the importance of food distribution networks which in many countries fail to benefit poor farmers and poor consumers.
“The key challenge for the continent is how to create a competitive environment in which governments embrace credible and stable policies that encourage private investors and businesses to boost food production across the region, so that farmers get the capital, the seeds, and the machinery they need to become more efficient, and families get enough good food at the right price.” said Paul Brenton, World Bank’s Lead Economist for Africa and principal author of the report.
World Bank Group support for trade and agriculture in sub-Saharan Africa
The World Bank is recognized as a key source of knowledge on trade policy issues, analysis and investments for trade-related infrastructure at the country level.
The institution’s agriculture support for Africa has grown significantly over the past decade. Concessional lending totaled US$1.07 billion in fiscal year 12 (July 11-June 12): a fourfold increase from FY03.
The share of trade-related lending in total Bank lending has also grown from an average of two percent in FY03 to five percent in FY12. New trade-related commitments in FY13 are expected to increase to US$3 billion, 70 percent of which will go to Africa.
Since 2008, World Bank Group lending for agriculture and related sectors in sub-Saharan Africa total approximately US$5.4 billion.