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FOOD CRISIS IN AFRICA

 

All over Africa people have been protesting against the rising cost of living and against the blind and foolish international economic policies that are at the roots of it: the subsidised production of wheat for biofuel production, the high price of petrol and fertilisers, and the financial speculations. Some experts explain how Africa is coping in the global economy.

 

Agroinflation

The primary goods treated as financial assets, the fear of speculations, the weak dollar, the heavy trade unbalance, the rising cost of food aid, are the factors that undermine the African economy.
By Alessandro Volpi

The scenarios of the African economy are undergoing profound modifications. The abrupt rise in prices of raw materials, of food stuff and of energy, combined with the deteriorating balance of payment of the producing countries, has modified the typical structures of the eighties and nineties. The root causes are to be found in the increase in number of the world consumers, with big countries like China and India making their entrance in the world markets, competing for these goods.
In this context, speculation and low interest rates (practiced to safeguard the financial system from collapse), have already altered many characters of the economy. In the meantime, even the commodity exchange has become a place of financial transactions, more than of exchange of goods. A bushel of wheat (the equivalent, in the USA, of 27,216 Kegs) priced at almost 12 dollars, is the result of a speculative run at futures (goods that will be supplied or exchanged in the future at a time and price that has already been agreed) rather than of the increase in the demand. There has been an increase, for sure, but not in such a measure to justify the doubling of the quotations in few months.
When the stock titles and securities, facing difficulties, turn the commodities (raw material and agricultural products) into safe assets, very likely the prices of essential goods run wild.
At times the volatile state of the market is emphasised by the acquisition of the appetizing titles of commodities by big speculative investors who easily turn them into liquid assets. This is possible for wheat, corn and soy beans. In 2007, the cereals recorded an increase of 80% around the world, a phenomenon qualified as “agro-inflation”. Only China and Russia were spared. They kept the price stable, but had to purchase expensive supplies.

Soft currencies
The weak dollar too contributes to destabilize the African economies. The sub-Saharan countries have invested their reserves in dollars – something like 137 billion. The rapid depreciation of this currency affects negatively the African economies, rendering the situation worse by increasing the competition of the American products, made cheaper by the weak American dollar. On the other hand the growing strength of the Euro further complicates the monetary situation of Africa by artificially strengthening various African currencies.
In areas where the banking system is very fragile and monopolized by few institutes, the management of the effects of the monetary difficulties is a complex one, both on the very important remittance by the emigrants, (who after paying heavy commissions, risk losing a lot on the exchange), and on the steady flow towards the informal sectors, stimulated by the excessive strengthening of the national currencies. According to the data of the International Fund for Agricultural Development (Ifad), today almost half remittances are done through underground channels. It would be extremely worrying if, in a similar context, financial transactions were made in a deregulated ways. The first signs have already been detected.
There is a real danger that the speculation on the raw materials is moved to the African Exchanges, creating a further dependence on the international interest rates, soon destined to rise again to keep inflation under control. In this case, also the national rates of exchange of the states involved in the financial transactions would rise to avoid the flight of the foreign capitals, with devastating consequences, as it has already been experienced. In September 2007, Ghana issued a ten year government bond for 750 million of dollars; other countries, starting with Gabon, have shown their intention to follow a similar road.

China opts for price-fixing (price control)
Price rise seems destined to continue. Only the risks of a recession in the great markets could slow it down. However the autonomy of China and India from the fluctuations of the American economy seems to be able to avert the danger of the relapse of the USA crisis on other zones, by now firmly tied up to the emerging countries. In 2007 the foreign direct investments of China alone in Africa represented the 29% of the total. Therefore, American difficulties are destined to produce more circumscribed effects. However, many are the factors that could push up inflation, undermining the prospected annual growth rate fixed around 7%. For instance, the surplus of manpower on the world market has almost disappeared. The environmental conditions impose restrains. In the sub-Saharan zones the percentage of the workers with a pay of less than two dollars a day exceeded the 85% in 2007, according to the estimates of the International Labour Organisation (ILO). Also the macroeconomic politics of some countries, that have reduced the “official” inflation from the 16% of the year 2000, to the 7,5% of 2006, have introduced stiff measures. In such contexts, even excluding possible processes of democratization, it is very difficult to further contract at the level of the salaries, at least, of the “formal” ones.
The diffusion of the bio-fuels, subtracting lands from food production, contributes to create the agro-inflation already spoken about. There is no more a clear distinction between the inflation of the “volatile” goods, such as energy and food, and the consumer price inflation. It is no more possible even to distinguish the inflation between the agricultural products and the food consumption, for the difference between their prices is decreasing. After all, the distinction of the two types of inflation has little sense in the African areas, where food takes more than 50% of the family budget.
The strong rise in the price of energy, then, makes almost obsolete the idea of the international market and of international sharing of production as the panacea for every evil, since the costs of transport greatly reduce the profit margins. Since 2004 the oil bill of 13 African countries (from the poor Ethiopia to the rich South Africa) that depend completely on import, has almost reached the 11 billions dollars mark. Likewise, the agro-inflation has been particularly hard for the countries importing agricultural goods. In 2007, food imported by the 82 most disadvantaged countries of the planet cost 25% more than in the previous year, to the value of 107 billion dollars.

Exported inflation
The international market, instead of reducing the inflation, tends to export it. New controlling groups come into being, but always tied up with the balance of payments. Since 2004, only in Africa, the countries with raw materials, energy and food stuffs to export, have recorded a 30% annual growth in the value of their exports, reaching the 361 billion dollars peak in 2006. On the contrary, the importing countries have to pay exorbitant prices for these goods; furthermore, not even the 13 oil exporting countries have enough oil for the local market, since they are short of refineries.
Not even the hypothesis emerged in the last Word Economic Forum of Davos of making some African states, deprived of raw materials, jump the industrial phase and pass directly to the one of the information technology, turn out to be credible, if energy supplies become too onerous. Consequently, it is necessary to face with great attention the problems of the “Economic Partnership Agreements” and of the commercial negotiations, because the liberalization of the exchanges in a context of growing inflation could cause very serious damages. It would not just be a question of the loss of revenues in custom duties, but also of compelling the importing countries to open their markets to goods whose prices are in abrupt rise.
Already in 2007 the European Union decided to cancel the bond to keep fallow the 10% of the cultivable land to keep inflation under control. The surplus of food production will be increasingly smaller, limiting the possibilities of offering food stuff at a low price to poor countries and of granting them food aid. Only in 2007 the cost of food aid registered an increase of 20%. It is fundamental, then, to opt for local distribution networks and for a true national food independence, based on self-sufficient regional markets, able to overcome the excessive fragmentation of the states, often too small, historically rivals, deprived of good communication infrastructures and often distant from the sea. One African out of three lives in a country with no access to the sea, compared to one out of thirty in Latin America and one out of fifty in Asia. In the light of these facts, the formation of wide and coherent economic blocs of regions should be considered as one of the safe roads to overcome the old dependence on the volatility of the international prices nowadays constantly on the increase.

IMF African policies

While the globalised free market is in crisis, the sub-Saharan African Countries are the only ones still to adhere to the norms prescribed by the IMF of Washington whose loans are the most expensive in the world.
Antonio Tricarico

Discussing the efficacy of aid on the development of Africa, very few pay attention to the role of the International Monetary Fund (IMF), not as the prompter of liberal economic policies, which often end in failure, but as the long term moneylender, on a par with other development agencies.
The IMF, accused of being responsible of the economic crisis that devastated Asia during the nineties for the obtuse liberal policies of its management, during the last two decades has assumed a new role, the one of the long term moneylender to the poorest countries on earth. It was a move to regain international credibility, disguised in the form of massive aid to low income countries and of expert advice on their macroeconomic policies to make the loan work. In fact, it was directed to prevent them to follow the path of Latin America and Asian countries that paid back the IMF loans and reclaimed their freedom from the political and economic interference of the G7 countries that control it.
While the liberal globalisation is in crisis and undergoing changes, the sub-Sahara African countries are almost the only ones to follow the liberal dictates of the IMF attached to the new loans for their development. Africa faces structural and long term economic problems. It is really surprising that the rich countries, thoughtlessly, allowed the IMF, whose original role was to intervene with short term loans when the balance of payments needed to be regulated, to act as another development institution, whose loans are of doubtful efficacy.
The IMF justifies its new policy of offering long term loans, on a par with the World Bank, with the persistence of the uneven balance of payments in the low income countries.
How ironic! It was just the IMF that, during the eighties and nineties induced the African countries to adopt drastic structural adjustments of their economy, and to concentrate all their efforts on the export of few commodities and agricultural products. The fall of prices and their unreliable fluctuation were the source of a systematic negative balance of payment, which required further international loans in addition to the already unbearable existing debt.
Furthermore, the collaboration of the IMF with the other investment banks was problematic and the overlapping of their roles had a negative impact. The Fund is determined not to discuss the social impact of the monetary, fiscal and macroeconomic policies imposed on the low income countries. In several instances, the Fund was the cause of a clear increase of poverty: in Malawi, in 2003, against the strong opposition of the national parliament, the IMF forced the government to cancel subsidies to the farmers and the small agricultural producers, contributing to a famine that caused hundred of deaths. In 2005, facing the tragedy, the government found the strength to disobey the IMF and restored the subsidies. In two years the country not only reached food self sufficiency, but had also surplus to export to the neighbouring countries.
The rigid prescriptions of the IMF to check inflation force the governments to drastically reduce their intervention. In the case of HIV emergency, various countries receive medical supplies to combat the disease, but, as result of the budget cuts to the Health System, they have no enough medical doctors to administer them to the most seriously sick persons. It is to be added that the loans of the IMF are more expensive than the ones offered by donor countries and by other international institutions; they are even more limited in their amount. Yet the IMF has managed to appropriate the role of the certifier of possible loans to the low income countries for the whole international community. Without the letter of intent undersigned by the IMF officers in Washington, the rating of the poorest countries does not qualifies for access to international funding. This is the reason why the loans by the Popular Republic of China have been so eagerly sought by African countries. Despite their higher, almost commercial, rate, these loans are granted with no economic conditions attached, and with requirements to implement policies dictated by the IMF, by donors or any international financial institution. It is an unexpected slap on the face of the IMF managers who try to dampen China’s independence as foreign creditor and a new source of money reserves for the eventual rescue in case of crisis. They try to do it by offering China more power of vote and extra shares in the IMF.
It is exactly the monopoly of IMF on giving rating and macroeconomic advice that is questioned by many to day. Without breaking this monopoly, the legality of the IMF is increasingly questioned, with the risk of losing the only role for which it was created and left unfulfilled, obsessed as it is with the liberalisation of the financial markets: the role of preserving financial stability as a common global good. 

Sustainable agriculture

The key to long term development of the African countries is to stop producing for export only, to shorten the distance between producers and consumers, and to create internal domestic markets.
By Chiara Macchi and Paolo Martinelli

In Africa the gross domestic product (GDP) in 2007 rose to 5,5% with a general improvement of the balance of trade in many countries. In spite of that, in sub-Saharan Africa one person out of three still lives in a state of hunger and the social development index (SDI) remains among the lowest in the world. How to explain the contradiction?
African agriculture produces prevalently for export, catering for the foreign consumers more than for the local communities and it is burdened with long supply and distribution chains. Shifting arable lands from subsistence crops (rice, millet, manioc…) to cash crops for the international market (cocoa, cotton, fresh fruits…), African countries are forced to import, especially from China and EU, most of the food stuff needed for the local market at the expense of the local economy.
The system of the monoculture for export harms the economies of the African countries, burdened with the rising prices of imported food products. The growing of the Chinese demands, the use of maize for the production of bio diesel and animal fodder, the speculations on a bullish market by the financial institutions that look at the agricultural products as safe assets, have created a tremendous increase in prices of grain. The first result is the return to the cultivation of wheat and maize for export to the detriment of all other crops. The ones who work in the sector may gain from the price increase of their products; however, the long chain of distribution hardly allows the gains to reach the producer, but everybody loses for the erosion of the salaries, buying expensive imported food staff.
The economy based on export is weakened by the large increase of energy prices, due mainly to the Chinese demand and to the speculations in the stock-exchange. The increase affects the price of transport, of pesticides, and chemical fertilisers, causing the oil non producing countries of sub-Sahara a loss calculated to be superior to the benefits reaped with the cancellation of the international debt and the financial aid received during the last four years.
There is no way the sub-Saharan countries could gain security of food supply unless they eliminate their dependence from the international markets and escape the trap of monoculture. The initiatives to shorten the chain of distribution, and to have it managed by the producers, will acquire a relevant role for the local development. The work and the expertise of millions of small producers, the backbones of the African agriculture, are the main resources to invest in. Setting shorter distribution chains, reducing the distance between the producers and the consumers, together with the development of the local markets, could be the way to the long term development of the African countries.
Shortening the distribution chain reduces the dependence of these countries from the financial burden of the international market. It helps to stabilize the prices on a level which is convenient to the producers and to offer steady supplies to the local market. It leads to the model of economy which favours the consumer who can count on the increase in his salary made possible by the increase in production. 
The short chain of distribution favours the bio-agriculture, with the reduced dependence on expensive pesticides, and with the better conservation of the soil, securing food supplies and good soil management. Successful examples are the cases of the Tamil region (Burkina Faso) and of Tigray (Ethiopia) where the return to the traditional agriculture and the use of compost made of decomposed local organic substances substituting chemical fertilisers, guarantee a return even in periods of heavy drought.
However, the transition from the present export oriented system to the creation of a local market catering for local needs, can only be done gradually. It involves government initiatives to re-convert cultivations to subsistence crops in view of guaranteeing food self-sufficiency, setting transformation industries that favour the marketing of greater value added goods.
It demands the establishment and the expansion of village associations and of cooperatives among the farmers to make them more competitive in the market without losing their own specific traits. Finally, it would be of great help offering small farmers formation and assistance to improve on their techniques of production.
The resources needed for the transitional phase could come from the international financial market that sponsors projects of diversification of the cultivations, and from the local financial institutions. Better use could be made of the huge dollar reserves that in the sub-Saharan countries - said to be around 137 billion - which, if left untouched have their value eroded by the devaluation of the dollar. African oil exporting countries could take advantage of the present increase in the price of oil and establish special funds for the re-conversion of production for the home markets. A further way could be investing in political and economic regional programmes that, in the long run, may guarantee self-subsistence. A starting point could be the already existing economic and monetary forms of cooperation in West Africa with the West African Economic and Monetary Union (Uemoa) and in Central Africa with the Economic and Monetary Community of Central Africa (Cemac) to foster cooperation and integration among homogeneous countries, financing social and economic programmes on a large scale.

The great land grab
In October 2008, many people were shocked by a report in the international press: The government of Madagascar was about to sign a contract with the South Korean Company Daewoo to lease 1.3 million hectare of land. Their part of the deal was to create jobs and improve the local infrastructure. Under public pressure the deal had eventually to be cancelled. Mostly shrouded in secrecy, land deals are being negotiated in many African countries.
Fr. Wolfgang Schonecke

Uganda’s parliament reacted when it heard about some 840.000 ha of land being leased to Egypt. Sudan has offered huge chunks of land to Arab countries. An US hedge fond persuaded a former warlord in Southern Sudan to provide over 400.000 ha for agricultural development. The Director General of the Food and Agricultural Organisation (FAO), Jacques Diouf, called such land deals a type of “neo-colonialism.”
Why this latest “scramble” for land in Africa and elsewhere? Three factors play a role: the financial crisis, the food crisis and the energy crisis.
1. In the wake of the financial melt-down investors who burned their fingers in housing have discovered land as a safe investment with promising returns. Investment funds are scouting the world to snap up fertile lands to start large-scale agricultural projects.
2. Food-importing countries suffered greatly when in 2007-2008 the world market prices for basic commodities like maize, rice and wheat more than doubled. They realised how little they can rely on the world-market to feed their people. Countries like Saudi-Arabia, the Emirates, Libya and scores of others which depend on food imports are now planning to grow crops to feed their own population themselves and look everywhere for places with fertile soil and plenty of water.
3. Finally there is a worldwide rush towards “bio-fuels”. When the world-market price for crude oil reached almost 150 Dollars last year the search for renewable sources of energy became more intensive. The visible effects of climate change also forces humanity to look for alternatives to burning fossil fuels. Producing ethanol from sugarcane and maize, or bio-diesel from palm-oil or jatropha-seeds seemed the God-given answer. The industrial nations use much fuel, but do not have enough land to grow sufficient “agro-fuel”. The EU target is to get 20% of its energy needs from renewable sources by 2020. That means importing “bio-mass” from the developing world. Companies are looking for land to grow “energy-crops”.

Why are African governments keen to lease land?
It is hard to understand why politicians should want to give away land, the most precious resource of any nation, often free of charge. Bribery and corruption surely play a role. But more often it is the idea that investments are always good and will automatically stimulate development and create jobs. There is also the hope that companies will improve the infrastructure, build roads and habour facilities for their exports which will be for the benefit of the country as a whole.

What’s the problem?
Land is an extremely sensitive issue, especially in Africa. One has only to remember the land issue in Zimbabwe and other countries in Southern Africa. Much of the post-election violence in Kenya turned around old land conflicts. Even the peaceful Malagasies reacted violently when they saw their land been given away to foreigners and created a national crisis.
Politicians seem to give little thought to future generations. Even where there is still spare land today, it will be needed for future generations in countries that double their population every 25 years.
Whenever land is given in large quantities for commercial farming the people who lived on that land are driven away, most often without adequate compensation. They lose their livelihoods and have no choice but to move into the overcrowded slums of the mega-cities.
Large-scale agricultural investments aim mainly at export-markets. Food production for the local market goes down, food prices go up and more people go hungry. By handing over fertile lands to foreign investors governments endanger food security for their own population.
Land is such an important resource for the future of any country that giving away large chunks of it should be a question of public debate. In reality, big deals are negotiated secretly without the knowledge of parliament or the general public.
If the Church is serious about being “the voice of the poor” it must bring this hidden agenda out into public discussion and defend the land rights of traditional communities against corrupt leaders and greedy investors. Already the first African Synod reminded government of “the binding duty to protect the common patrimony against all forms of waste and embezzlement by citizens lacking public spirit or by unscrupulous foreigners.” (Ecclesia in Africa 113).

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