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I note various contributors, including James Biscoe,
Dick Tinsley and Vinay Chand discussing the use of
price policy to stimulate increased production. It is
an increasingly popular theme among some British
agricultural economists, and in this regard I note
Dirk Bessemer suggestion of ?some sort of Government
intervention?, temporary or permanent. Such views seem
to have been influential with the International
Development Committee?s enquiry on the Malawian food
crisis, as their report cast doubt on the private
sector?s potential role in food markets.
I can understand the frustration of some contributors
who find that their hard work in favour of African
producers is dashed by unattractive markets, some of
it due to brazen northern protectionism. However I
feel we should think twice before giving any
encouragement, explicit or tacit, to interventionist
policies involving African food markets. Whatever the
economic objective of intervention, powerful political
imperatives within the countries concerned will tend
to defeat the object, and donors are likely to find
themselves sucked into an interventionist vortex.
I myself suggested some a basic system of price
support for maize when advising a landlocked African
country in the late 90s ? it involved a single floor
price for delivery of grain to a few central
warehouses, high enough to cover production costs, but
low enough to leave the field to the private sector.
However, the Government concerned never wished to
discuss the report. I would attribute this to the
fact that I also recommended a drastic reduction in
all other forms of intervention. My proposal was
deeply unattractive to local politicians and officials
because I was asking politicians and officials to give
up what they most valued, the means to intervene in
markets at the drop of a hat.
Local policy-makers often argue that they must
intervene because the private sector is weak and
underdeveloped, unlike the successful case of South
Africa which they (mistakenly) consider to have little
relevance to their own situation. However, it is only
the ad hoc nature of public policy that causes private
sector response to remain weak. There are many local
players, and a number of international trading houses
who would like to do business north of the Limpopo,
but who back off because of the difficult working
environment.
Donors need more than good intentions while dealing
with such problems. The build-up of Malawi?s food
reserve was accompanied by donor efforts to endow it
with autonomy and distance its management from
political manipulation ? clearly to no avail.
Politicians can drive a horse and cart through such
safeguards.
I feel that there is a lesson for us here. Whatever
our qualms about ?the Washington Consensus?, we risk
making things worse if we propose a higher profile to
Government intervention. We may feel we are pursuing
strategic developmental objectives, but those hearing
our statements may simply take this as vindication of
ad hoc and questionable interventions that prevent
markets from developing.
This is one of the more intractable problems of
development, and there is no quick solution. However,
I believe that northern Governments could do much to
remedy the situation, if they recognise this problem
and apply themselves in a coordinated manner, working
closely with African stakeholders, over, say, a ten to
fifteen year time horizon. Experience tells me that
that many African stakeholders and informed opinion
will rally to such an initiative. The priority should
be to put in place ?basic building blocks? which cause
markets to perform better.
The first building block would be a set of highly
professional crop forecasting services, insulated as
far as possible from political spin. Trading houses
need good crop forecasts to help them decide whether
to take long or short positions. Significantly,
inaccurate information has caused some international
companies to burn their fingers when venturing north
from Johannesburg. Most notably, inaccurate crop
forecasts were one of the main causes of the Malawi
food crisis.
The development of sound transport and communications
systems, as mentioned by Jeff Turner, are important
building block which is already paying dividends in
many countries.
Another building block with which my own organisation,
NRI, has considerable practical experience is
warehouse receipt systems. This is a magnificent
instrument because it can allow countries and entire
regions to simultaneously address several shortcomings
of existing marketing systems, notably: lack of
product standardisation; low market transparency; lack
of means of enforcing contracts and; high cost and
inadequate trade finance. Governments can manage food
reserves with minimal staff, simply by buying and
selling warehouse receipts. Moreover, the provision
of market information can be linked to a warehousing
system, assisting people in arbitraging between stocks
in different locations.
However a word of warning is in order: One should
only embark on warehouse receipt systems if they can
be made trusted and ?copper-bottomed?. With this and
other attractive concepts, success can be compromised
by donor projects of the kind about which Brian
Cooksey warned us, involving good pickings for local
officialdom but failing to provide the trust needed to
engender the long-term support of banks and
depositors.
My main message therefore is that if donors wish to
make a positive impact on agriculture in Africa, and
particularly to enhance the driving force of
agricultural markets, they should commit to a ?long
game?. The problems are rooted in deep-seated
political realities identified by Brian Cooksey.
Making progress in face of these realities requires
strong leadership within the donor community.
I share Brian Cooksey?s concerns about the role of
aid, but can offer a glint of hope based on my
observations on the Mali?s agricultural market reform
programme between 1981 and 1995: a consortium of
Government and six donors working by consensus
transformed the country?s marketing system for the
good. Why has more not been more widely emulated?
Whatever the answer to this question, I believe that
local and international players seeking to build
better marketing systems will need to work together
closely for a long time - - - - and make a
masonic-style pact to end the disbursement culture!
Jonathan Coulter
P.S. the research and other findings behind these
conclusions are contained in two articles:
COULTER, J.P. and POULTON, C. (2001) Cereal market
liberalisation in Africa, Chapter 6 in: Commodity
Market Reform: Lessons of Two Decades, edited by T.
Akiyama, J. Baffes, D. Larson and P. Varangis.
Washington: World Bank.
COULTER, J.P. and ONUMAH, G.E. (2002) The role of
warehouse receipt systems in enhanced commodity
marketing and rural livelihoods in Africa. Food
Policy, Vol. 27, No. 4.
=====
Jonathan Coulter
Work address: Natural Resources Institute
Chatham Maritime, Chatham ME4 4TB
Tel (44)-1634-883070, fax 883706
Home address: 21 Stanstead Close, Bromley, Kent, BR2 9DS
Home tel UK(44)-20-8402-0217
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