Southern Africa shifts food strategies

Grain markets liberalized, but with contradictory effects

By Mercedes Sayagues, Harare

A half-decade after the devastating drought of 1991-92 in Southern Africa, meteorologists tracking another appearance of the El Niño weather phenomenon -- a strong predictor of scarce rains in the region -- are warning that a new drought is likely toward the end of this year. But in facing such a threat, Southern Africa today is a changed region, with greater agricultural capacities and different strategies for staving off famine.

To begin with, the Southern African Development Community (SADC) is a larger and more diverse regional grouping than during the previous drought. It now includes post-apartheid South Africa -- a large grain producer and sophisticated trader -- as well as tiny Mauritius, a relatively affluent net food importer.

Peace in Mozambique and the absence of war in Angola mean better harvests and reduced food aid, at least in years of good rainfall. For the first time since independence, Mozambique in 1996/97 grew enough maize -- 1,043 mn tonnes -- for its own needs. Angola, however, still faces a cereal deficit of more than 530 mn tonnes, according to estimates by the UN Food and Agriculture Organization (FAO).

But the greatest change in Southern Africa is market liberalization. The region is in transition from a highly regulated grain marketing system. Consequently, the concepts and strategies for food security are under review, while liberalization itself has had contradictory effects on Southern Africa's millions of food producers.

Ups and downs of change

Previously, governments in Southern Africa, through their grain parastatals, controlled maize prices, imports and exports, duties, licences and foreign exchange. Consumer prices generally were kept artificially low. Efforts to stimulate production came in the form of subsidies to producers (cheap fertilizer, pesticides, seeds) and to parastatals (transport and storage).

These policies proved too expensive to be sustainable in the long-term. In the 1990s, with the increasing prevalence of structural adjustment programmes, to which liberalization is central, governments have been allowing the private sector and market forces into this highly sensitive area. However, the pace of change has differed from country to country, and so have the effects.

In South Africa, where the Maize Board no longer fixes domestic prices nor controls either imports or exports, a large and sophisticated private marketing system took over smoothly.

At the other end of the spectrum, Zambia moved earlier and further than any other SADC country in its grain marketing reforms -- but with catastrophic effect. In 1992, the parastatal maize marketing agency was abolished, prices left to the market and government subsidies removed. Change was unavoidable for the nearly bankrupt government, but the shock was too great. A vacuum was created that the private sector could not fill, due to a variety of reasons (tight credit, high interest rates, high debt levels, low liquidity, a poor transport network, lack of information and unclear government policies). The result was market collapse.

Zambian food losses were minimized only because 1992 was a drought year, with a much smaller crop to market and with external food aid helping to bridge the gap. After the initial shock, a private grain trade is slowly maturing but still faces many hurdles.

Zimbabwe has liberalized the domestic marketing of maize, but the Grain Marketing Board (GMB) still controls exports and imports of white maize, except for food aid contracts. Saddled with a large government debt, conflicting mandates and political pressures, the GMB lacks direction. A recent editorial in the government-owned Zimbabwe Herald said: "The government wants to keep the GMB as a parastatal because of its strategic importance, [but] maize marketing is crying out for large independent buyers prepared to compete with each other on price and service."

Although prices to farmers remained static, consumer prices went down. Following the removal of marketing regulations, small-scale mills mushroomed. People bought whole grain, took it to be milled, and got cheaper mealie-meal, Zimbabwe's staple food.

Malawi is at a much earlier stage of change. The parastatal Agricultural Development and Marketing Corporation (ADMARC) now only buys residual amounts, reselling them when needed to keep prices low. But ADMARC's financial constraints are hurting its storage and transport services, thus opening the door to private trade. In 1995, for the first time, Malawi filled its strategic grain reserve through a tender, which was won by ADMARC but in competition with other bidders.

In Mozambique, the Cereal Marketing Board previously tried setting a floor price, but for this year's crop it has liberalized prices. However, its lack of cash, coupled with a marketing system ruined by civil war, means that farmers in the remote maize-surplus northern provinces have sold at lower prices -- if and when a buyer appears.

Shifts in production

One common argument for liberalization has been that freeing prices and providing greater market incentives will encourage farmers to grow more. So has liberalization boosted food production? "There is not enough evidence, not enough time to say," answers Mr. Caesar Chidawanyika, senior programme officer with the World Bank.

Liberalization will likely change crop patterns, as farmers shift their production in response to market signals. The SADC food security unit sees cereal production moving northwards towards better rainfed areas in Zambia, Mozambique and northern Zimbabwe. However, transport infrastructure there is poor and will require substantial investment and improvements. Zambia's northern farmers, whose low-value maize often rots for lack of transport, may switch to high-value crops like tobacco, sunflower and groundnuts, which are more profitable for traders and truckers.

In Zimbabwe, many smallholders are switching from food crops to cotton and tobacco. Paprika, for example, fetches Z$2,500 a tonne, while maize brings only Z$1,200 a tonne.

Beyond the impact of market forces, variable rainfall also means that rainfed maize production is becoming unviable in parts of Southern Africa. One answer is crop diversification. Drier regions would be better suited for growing drought-resistant crops like sorghum and millet. But change is not easy. "You talk to many officials at ministries of agriculture about food," says Mr. Roger Buckland of the SADC food security unit, "and the first thing they think of is a corn cob."

Small-scale farmers hurt

Has liberalization helped smallholders, who grow the bulk of the region's food? "It has widened choices of markets, but has disadvantaged small-scale farmers," says Mr. Chidawanyika. He adds, however, that this is "a transitory phase."

Larger-scale commercial farmers can play the new game well. They have access to markets, information and credit, while smallholders do not. Moreover, relatively few small farmers are surplus producers, and only those able to market surpluses have benefitted from improved producer prices. Meanwhile, as they adjust to the loss of state subsidies, poorer farming households remain vulnerable to the higher costs of agricultural inputs and increased user charges for social services.

Even for those who can market small surpluses, prices are not always favourable. "Sometimes, when private traders are monopsonists [sole buyers], they push prices down," says Mr. Chris Eldridge of the Save the Children Fund (SCF), a non-governmental organization (NGO) active in the region. According to Mr. Eldridge, "The net result [of liberalization] has been, for many rural producers in Southern Africa, a combination of both state failure and market failure."

Even for proponents of market liberalization, the state has a continuing role to play. In the initial stages of market liberalization, they argue, governments should act as facilitators, providing coherent policies and messages and a stable economic environment.

For Mr. Chidawanyika, the state should monitor food stocks; create an environment that motivates producers; abolish regulations that discourage private trading, such as price controls; discourage monopolies, since market success depends on bringing in as many players as possible; and enforce rules on plant and animal health. In addition, and not least important, governments should service those areas where it is not profitable for the private sector to operate.

According to Mr. Mark Smulders, FAO food security expert, government agricultural extension agencies also can provide clear and updated messages "to help smallholders cope with transition" to the new realities of agricultural markets.

Government effectiveness

An effective government role is especially important in remote regions and for the poorest sectors of society. Successive droughts in the 1990s, combined with structural adjustment and the AIDS pandemic, have eroded the capacity of many rural households to recover. "Poverty exists; drought accelerates it," says Mr. Reginald Mugwara, SADC food security sector coordinator.

Since private companies operate for profit, the provision of safety nets is left to the state. Governments, squeezed by tight budgets, in turn often bounce the ball back to NGOs. A regional study on food security by the Save the Children Fund stresses that 80 per cent of any successful effort in preventing a drought from turning into famine lies with villagers themselves. But their efforts are invisible compared to those of aid agencies.

To be more effective, any intervention by governments and donor organizations "must understand rural people's response and efforts," says Mr. Eldridge, who coordinated the SCF study.

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