April 5, 2004

1. Markets and Policies for
Improving the Food Security and
Incomes of Poor African Farmers
Joachim von Braun
April 5, 2004

2. Overview
I. Conceptual Framework: On
Markets, Institutions, and Policies
II. Poor African Farmer Within and
Without Markets: Developments,
Opportunities, Constraints
III. Implications for Policy and
Research

3. On Markets and the State
• Market: “the organization that coordinates
the production of goods and services through
voluntary transactions”
• State: “an organization for monopolizing
legitimate coercive power. … coordinates
peoples activities according to set rules and
regulations” (Hayami 1997)
Markets do not work without State, and
States do not without Markets
African Market and Government Failures are linked

4. Role for Institutions in Markets
Reducing Transactions Costs
Managing Risk
Building Social Capital
Enabling Collective Action
Redressing Missing Markets
(Orden, Gulati, Torero 2004)
Broad Concept of Agricultural Markets
Beyond the Supply Chain

5. State Roles for (not in) Markets
Rule of Law and Enforcement of
Contracts
Taxation, Fiscal, Exchange Rate
Policies
Human Capital and Science Policy
Investment
Infrastructure and Information
Insurance and Risk management and
Safety Nets

6. Roles for Other „Informal”
Institutions
Africa is rich in institutional diversity
Social capital and trust-building to
circumvent market failures
Offer opportunities to participate in
markets (e.g. overcoming small scale)
Cooperation without cooperatives
Optimizing market institutions must take
these other institutions into account

7. Poor African Farmers Operate in
Agricultural and Many Other Markets
Land Markets +
Off-farm Labor Markets ++++
Credit Markets ++
Crop and Livestock Output and Input
Markets +++++
Risk and Insurance Markets +
Failures in one market affect all

8. Agricultural Markets Through a Poor
Farmers Supply-Chain Lens
Resources „Markets‟
Input Markets
Output Markets
Processing Markets
Retail Markets
Financial Markets -- Insurance Markets --Labor Markets
Problem of weak elements and disconnected chain

9. Overview
I. Conceptual Framework: on Markets
and Related Policies
II. The Poor African Farmer Within
and Without Markets:
Developments, Opportunities,
Constraints
III. Implications for Policy and Research

10. The Food and Nutrition Security
Situation
1. Bad trends
2. Worse than expected
3. Regional diversity
4. Increased vulnerability to Market
shocks (HIV/AIDS,…)
5. Scope for hope due to less wars

11. Increasing Food Insecurity (FAO 2003)
West Africa 1999-2001
1990-1992
Southern Africa
East Africa
Central Africa
0 10 20 30 40 50 60 70 80 90
Millions

12. Percent of people
Ug food energy deficient
an
0
10
20
30
40
50
60
70
80
90
da
(1
99
Ke 9)
ny
a
(1
Ta 99
nz 7)
an
ia
(Source: Smith, forthcoming)
(2
00
G 0)
ui
ne
a
(1
99
G 4)
ha
na
M (1
oz 99
am 8)
bi
qu
e
(1
99
Rw 6)
an
Country Food Availability Based Estimate
da
(2
00
Za 0)
m
Household Consumption Survey Based Estimate
bi
a
(1
99
Bu 6)
ru
nd
i(
19
Et 98
hi )
op
ia
(1
99
M 9)
al
aw
i(
19
97
)
Food Insecurity Worse than Expected

13. Local Risk Factors:
Child Malnutrition in Africa, 1990s

14. Farm Size Holdings, SSA (FAO, various years, 1990s
70%
59%
60%
% of Total Holdings
50%
40%
30%
21%
20%
13%
10% 7%
0%
< 1 ha 1- 2 ha 2- 5 ha 5 ha and
above

15. In Agriculture and Other Markets:
Income Sources of Farmers
(Sources: von Braun and Pandya-Lorch 1991; Reardon 1997)
1980s 1990s
Country % Off-Farm Country % Off-Farm
Income Income
The Gambia 15 Namibia 56
Burkina Faso: 72 Malawi 34
Sahelian Zone
Burkina Faso: 25 Zimbabwe 31
Sudanian Zone
Rwanda 62.9 Rwanda 30
Kenya 48 Mozambique 15

16. African Markets in a Global
Context
 Old Global Risks Coming Back?
 Africa in International Trade
 Regional African Trade

17. World Grain Production, 1960-2003
1900
1700
1500
million tons
1300
1100
900
700
500
1960 1965 1970 1975 1980 1985 1990 1995 2000

18. Land Productivity: Stagnant Cereal Yields
(Source: WDI, 2003)
2500
Sub-Saharan Africa
World
2000
1500
kg/ha
1000
500
0
70
72
74
76
78
80
82
84
86
88
90
92
94
96
98
00
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
20

19. World Grain Stocks, 1960-2003
700
600
500
million tons
400
300
200
100
0
1960 1965 1970 1975 1980 1985 1990 1995 2000

20. Wheat International Price
(US No.2, Soft Red Winter Wheat , Delivered US Gulf ports (Tuesday))
160
150
140
U$S/Ton
130
120
110
100
90
1998 1999 2000 2001 2002 2003 2004

21. SSA‟s Share of World Agricultural
Exports (Source: Diao et al 2003)
%
25.0
Total ag exports
20.0
6 traditional crops
15.0
10.0
5.0
0.0
1970 1975 1980 1985 1990 1995 2000

22. Africa Most Globalized:
Trade as % of GDP (Source: WDI 2003)
70
60
50
% of GDP
40
30
20 Sub-Saharan Africa
10 South Asia
Latin America & Caribbean
0
1990 1992 1994 1996 1998 2000

23. High Regional Tariff Rates in SSA (Source:
World Economic Prospects 2004)
Agriculture Trade:
 SSA to SSA: 33.6% Tariff
 SSA to Industrial Countries: 23.6 % Tariff
 Industrial to Industrial: 15.3% Tariff
Non-Agriculture:
 SSA to SSA- 20.6% Tariff
 SSA to Industrial Countries- 4.2% Tariff
 Industrial to Industrial Countries: 1%
Tariff

24. Benefits of Global Trade Liberalization for
IMPACT Commodities, 2025
6
4.6 5
5
US$ billion
4
3
2
1
0.4
0
SSA North Africa All Africa

25. Size of Africa‟s Agricultural Markets
(US$Billions) (Source: Diao 2003)
Traditional 8.6
Exports to Non-
Africa
Non-Traditional 6.1
to Non-Africa
Other to Non- 1.9
Africa
Intra-African 1.9
Trade
Domestic 50.0

26. On Infrastructure and Institutions
 Infrastructure and the Basic Geographical
Dilemma: High per capita Costs
 Institutions with Infrastructure:
(De-) Regulation, Decentralization
 The High “Transactions Costs”
confronting small farmers

27. Infrastructure: Total Roads Network
(100,000 km) (Source: WDI 2003)
45
40 Sub-Saharan Africa
South Asia
35
Latin America & Caribbean
100,000 Km
30
25
20
15
10
1990 1995 1999

28. Infrastructure: Mobile Phones per
1,000 people, 1996-2001 (Source: WDI, 2003)
30
Sub-Saharan Africa
25 South Asia
telephones per 1,000 people
20
15
10
5
0
1996 1997 1998 1999 2000 2001

29. Transactions Costs and Physical Marketing Costs:
Micro-Level Data (Ethiopia: Gabre-Madhin 2001)
percentage of total costs
Markets search labor cost capital holding cost marketing cost
Surplus 9 6 86
Deficit 14 7 79
Central 17 11 72
Issues in TAC: all transactions? Profit margins?
Research issues: e.g. institutional efficiency,
local monopolies

30. Overview
I. Conceptual Framework: on Markets
and Related Policies
II. Poor African Farmer within and
without Markets: New Developments,
Opportunities, Constraints
III. Implications for Policy and
Research

31. I. Crucial Areas for Pro-Poor
Market Development
 Infrastructure Development in
Rural Areas
 Ag. Science, Research and
Technology for Small Farmers
 Domestic Trade Banking
 Market Risk Management

32. II. More research for building …
a deep micro-level understanding of the
dynamics and structures of market
and non- market institutions, and
their relationship to poverty and food
insecurity of the small holders.

33. Optimizing across Market and
Non-Market Institutions
Institutions Markets across the Agricultural Supply Chain
Factor Markets: Land, Intermediate Outputs: Retail
Labor, and Capital Factor: Crops
Land Labor Capital Fertilizer, and
Seeds Livestock
Market Institutions ? X X X X X
Non- Informal X ? X X X ?
Market Institutions:
Institutions i.e.,
collective
action
Government X X ? ? ? ?
Intervention

34. III. Africa‟s Four Big
Market Policy Issues
1. State failure leads to Market
Failure: governance, contracts,
corruption
2. Realistic Policy Road Maps Toward
Market Strengthening Missing
3. Reduction of International and
Intra-Regional Trade Barriers – the
policy forums missing or weak

35. Big Market Policy Issues (cont.)
4. The Market Response - to - Geography –
Time - Bomb:
High unit cost of market access in an
environment of small and geographically
dispersed actors
Address with infrastructure, institutional
innovation and migration
Needed: Centers of rural growth off-coast,
connected with infrastructure to coast
small holder market development is an
investment in peace and security

36. In Sum
Recognize: Markets do not work
without State (and States do not work
without Markets)
Identify: Synergy in Market and
Non-market Organizations Serving
transactions Relevant for the Poor
Develop: Realistic „Roadmaps‟ for
Institutional Innovation for and in
Markets Serving Africa‟s Poor
Farmers