Market Assessment: Shekhan District

August 3, 2016

Report author: Daniel Packwood, Programme Support Officer RAM team members: Hakim Osman, Cash Project Assistant; Arkan Salih, Assessor; Shukria Abdul Baqi Ali, Assessor

[email protected] www.tearfund.org

Table of contents

Executive Summary ...... 2

SECTION I: Needs analysis summary ...... 3

SECTION II: Market mapping ...... 4 2.1 Commodity market chain ...... 4

SECTION III: Trader analysis ...... 4 3.1 Physical access of affected population to the market ...... 4 3.2 Affected household’s purchasing power and change in consumer behaviour ... 4 3.3 Change in commodity supply chains ...... 5 3.4 Capacity of retailers to increase their supply to meet increased demand ...... 6 3.5 Change in commodities being demanded by traders and households ...... 8 3.6 Change in prices of food and non-food commodities ...... 8 3.7 Opportunities for market-based interventions ...... 8 3.8 Market related considerations requiring further analysis ...... 8 3.9 Assumptions, difficulties and challenges faced during the assessment that users should be aware of ...... 8 3.10 Implementation experience in the area and lessons learnt, activities planned or being implemented by other agencies ...... 9

ANNEX I: Price monitoring averages...... 10

Executive Summary

Tearfund conducted a market assessment in Shekhan city (Ain Sifne) to get a basic understanding of the key markets in the district to inform the decision making process on the most appropriate transfer modality. The assessment covered the 21 items in the Survival Minimum Economic Basket (SMEB) as the intent is to support people meet their basic needs. The assessment produced the following findings: . Purchasing power has decreased leading to a drop in demand: Despite the influx of IDPs into Shekhan traders have reported a net drop in demand citing unemployment and the non-payment of government workers as key reasons for the drop in demand. . Market access constraints exist for Sunni Arab IDPs: Assayish (Kurdish government security organization) permission was required for Sunni Arab IDPs only to access Shekhan city. These had been granted as there were only a small number of Sunni Arab IDPs in the city, this would be unlikely to happen should there be mass displacement of Sunni Arabs into Shekhan following the liberation of Mosul. It is therefore necessary to assess whether Sunni Arab IDPs are able to access SMEB commodities in camps and areas outside of Shekhan city should there be further displacement. . Market supply is vulnerable to Turkish border closures: There is increased dependence on trade routes from Turkey and Iran with trade from Baghdad via Mosul being cut off since 2014. This has increased vulnerability to risks such as Turkish border closures which increase prices when they occur for prolonged periods as reported by traders. . Traders are confident in their ability to increase supply: Traders have adapted to changing trade routes developing new supplier networks to compensate for the loss of trade from Mosul where necessary. Traders are able to meet current reduced demand and reported confidence in being able to increase supply through both current and different suppliers should demand increase. . Reduction in credit given to customers and received from suppliers: 11% less customers are receiving credit from before the IS Ninewa offensive and 6% less suppliers are giving credit. Debt is also significantly higher amongst food and hygiene item wholesalers, requiring further analysis as to whether they are able to sustainably increase supply with current debt levels. . Price changes in the assessment showed no clear trend: Traders reported both increases and decreases in prices for the same items with no clear trends, data for Ninewa however suggests prices for agricultural commodities have been declining.

MARKET ASSESSMENT: SHEKHAN - AUGUST 3, 2016 2 SECTION I: Needs analysis summary

Tearfund conducted a market assessment in Shekhan city (Ain Sifne) to get a basic understanding of the key markets in the district to inform the decision making process on the most appropriate transfer modality. The assessment covered 21 commodities (listed in the table below) taken from the Survival Minimum Expenditure Basket (SMEB) excluding shelter items such as rent1. The SMEB was chosen as the basis for the assessment as the intent is to support people meet their basic needs. The assessment focused on Shekhan city only as the primary market for Shekhan district and hosts a significant number of IDPS. It was assumed that if the market was functioning in Shekhan city it is likely that commodities would also be available in surrounding villages which are well connected with the city infrastructure. Furthermore, areas in the south of Shekhan district fall within 15km of the frontline so are not deemed safe for travel for the purposes of this assessment. Key events influencing the market:  June-August 2014, Islamic State (IS) Ninewa offensive leading to mass displacement of people into Shekhan  Economic crisis in Iraq and the Kurdistan Region of Iraq (KRI) due to the declining price of oil and non- payment of government worker salaries.  Turkish border closure in December 2015-January 2016 Date of market assessment: 20-25 July 2016 Affected areas assessed: Shekhan city (Ain Sifne) Total population in affected area: 5,856 households, 27,727 individuals Affected population within affected area: 2,530 households, 10,530 individuals Average household size: 4 (Mayor’s Office, Shekhan) Location of affected population: IDP camps, unfinished buildings, finished buildings Markets assessed: Shekhan city (Ain Sifne) Number of traders (wholesalers and 5 key informants (Mokhtars (IDP leaders)) (1 interview, retailers) and market representatives 1 focus group discussion); 6 wholesalers; 12 retailers (6 included in assessment: food and hygiene, 5 bakeries, 1 gas yard) Commodities included in the assessment:* Food: Bread, bulgur wheat, chickpeas, milk, eggs, lentils, poultry, rice, salt, sugar, vegetable oil, wheat *In this report analysis is structured in the flour, white beans. following three categories: bread/flour, Hygiene: All-purpose liquid cleaner, dish washing gas, food and hygiene items. This was sponge, laundry detergent, sanitary pads, shampoo, because commodities followed the main soap, toilet paper, toothpaste. supply chains as reported by traders. Gas: Butane cylinder.

1 The SMEB is the total income the average household requires to cover 100% of minimum food energy needs, costs associated with food preparation (including shelter costs, gas for cooking, hygiene items etc.) and expenditure on water. Items in the basket are culturally adjusted to those typically available to and used by the average Iraqi family required for survival.

MARKET ASSESSMENT: SHEKHAN - AUGUST 3, 2016 3 SECTION II: Market mapping

1.1 Commodity market chain Imported commodities such as hygiene items and some food items were reported by traders as coming from Turkey via Zakho and Dohuk and from Iran via Erbil – with Turkey being the main trading route. Prior to the IS advance in 2014 commodities had also come from Baghdad via Mosul, however this is no longer the case. An FAO market assessment of the agricultural market chain within Ninewa found significant disruption to the market with the IS advance in 2014 due to silos and fields being captured disrupting the sowing season. Ninewa had traditionally been known as the bread basket of Iraq (FAO, 2016).

The two gas yards in Shekhan were owned by the federal government, gas came from Baghdad and was put into cylinders at the gas factory in Shekhan. Previously one trader also used gas factories near Mosul which are now under IS control and are no longer used.

SECTION III: Trader analysis

3.1 Physical access of affected population to the market

Mokhtars interviewed all reported that business in Shekhan was continuing as normal and the majority of IDPs did not have issues relating to physical access. However, the Mayor’s Office in Shekhan reported that IDPs in Shekhan city were predominately Yazidi and only a small minority were Sunni Arab. Sunni Arab IDPs required Assayish (Kurdish government security organization) permission to access Shekhan which had been granted as only a small number had settled in Shekhan city. If there is further displacement of Sunni Arabs it is unlikely larger numbers will be granted access to Shekhan, instead they will settle in formal camps and will have difficulty accessing the market in Shekhan city. IDPs were not interviewed as part of the assessment to corroborate whether this is the case.

It will need to be monitored whether markets outside Shekhan city serving Sunni Arab IDP camps and areas are able to provide commodities in the SMEB in the event of further displacement.

Shekhan district is part of the disputed territories between the federal government of Iraq and Kurdistan Region of Iraq (KRI), historically it has been an important population centre for Yazidis but since the 2003 conflict the district has become more mixed with Sunni Arabs. Following the IS advance in 2014 the KRG de facto took over administration of Shekhan and determines where IDPs are able to settle or have access.

3.2 Affected household’s purchasing power and change in consumer behaviour

Traders reported demand for bread, food and hygiene items had decreased significantly with customers buying less than previous years indicating a drop in purchasing power: 83% of bakeries reported customers buying less bread (40% of bakers said customers were buying as much as 50% less bread); 83% of food and hygiene item wholesalers and 67% of food and hygiene item retailers reported customers buying less food and hygiene items (33% of food and hygiene retailers stating customers were buying as much as 50% less). Of the traders reporting a decrease in demand from customers 77% said it was because customers had less money due to unemployment.

MARKET ASSESSMENT: SHEKHAN - AUGUST 3, 2016 4 As a further indication of decreased purchasing power 100% of traders for bread, gas, food and hygiene items reported an increase in demand for credit from customers with 17% of traders reporting a more than 50% increase in demand for credit. Reasons given were: less money due to unemployment (82%), and insecurity (18%). However, despite this increase in demand for credit since 2014 traders are giving out less credit now.

3.3 Change in commodity supply chains

The IS advance in 2014 saw changes to the commodity supply chains for all commodities, however suppliers of flour and imported goods remained mostly the same with traders adapting to the situation. For the flour market chain 100% of bakers reported using the same suppliers as before 2014. For the food and hygiene items market chains 100% of wholesalers, and 67% of retailers reported using the same suppliers as before. However, upon clarification traders referred to suppliers in Dohuk, Zakho and Erbil whereas previously this had included Mosul. Gas yards were predominantly supplied by Shekhan gas factory before and after 2014. For the flour market chain 60% of bakeries stated they could find other reliable flour suppliers, whereas 40% said this would not be possible. For the food and hygiene items market chains 100% of wholesalers and retailers said they could find other reliable suppliers in Dohuk, Zakho, Erbil, Shekhan and Kalak.

Data collected from traders indicated a decrease in 12 supply across all items except gas since 2014, coinciding 10 8 with a drop in demand as a result of decreased 6 purchasing power. 40% of bakers reported having 30% 4 less flour in stock than before the crisis (bakers on the 2 whole reported selling less or the same amount of bread 0 as before). 2 Of the food and hygiene item traders Yes No Yes No reporting, all were restocking less than they were prior to Same supplier Different supplier 2014.3 One wholesaler reported stocking 20% less, and Food and hygiene item - retailer one estimated stocking 12% less hygiene items and 32% Food and hygiene item - wholesaler less food items. Similarly retailers reported stocking 50% Flour Gas from prior to 2014. The gas yard manager had not been there before 2014 but said the yard consistently had 150 Figure 1 Ability of traders to increase supply with suppliers cylinders in stock and restocking remain unchanged.

It would appear that despite the influx of IDPs overall less is being purchased than prior to the IS advance due to the drop in purchasing power amongst both the host and IDP communities. Further analysis would be required, however, to confirm if this is the case or if other factors are affecting demand.

2 40% of bakers reported selling less than before the crisis (one 46% less), one baker reported no change in sales and one baker reported selling 66% more. 3 Only 33% of food and hygiene item wholesalers responded for this question, and 17% of retailers.

MARKET ASSESSMENT: SHEKHAN - AUGUST 3, 2016 5 Storage was unaffected as most traders stored items in their shops or homes, very few had separate storage facilities. Mokhtars reported the number of wholesalers and retailers had remained unchanged from prior to the IS advance.

3.4 Capacity of retailers to increase their supply to meet increased demand 3.4.1 Supply Trader interviews suggested there were five large wholesalers in Shekhan and 10 medium-sized food and hygiene item retailers. This would indicate the market in Shekhan is relatively competitive with no one actor taking a market monopoly ensuring prices remain competitive.

All traders were confident in their ability to increase supply. When asked how long it would take to increase supply by 100%, traders gave the following answers: for gas the gas yard estimated it would take one day; for food and hygiene items 66% of wholesalers said it would take one day and 17% of retailers said it could be done within 24 hours; for flour 40% of bakeries said it could be done within hours. For gas the gas yard said supply could be increased with the same supplier. For food and hygiene items all wholesalers said supply could be increased with the same supplier and 66% said they could use a different supplier, 60% of retailers said they could use the same supplier and 100% said they could use a different supplier.

Whilst supply is meeting current demand, traders indicated a number of factors that have impacted supply such as Turkish border closures and the consequent increase in fuel costs of having items transported from Iran instead. Traders stated reduced consumer purchasing power due to unemployment was the main impediment to market growth rather than the availability of supply. The majority of traders said the government paying salaries would enable traders to increase supply.

Transportation costs Conflict ends

Economic crisis People have more money

No government support Border remains open

Turkish border closure Job opportunities

No money Government support

The crisis/insecurity Government pay salaries

0 2 4 6 8 10 0 2 4 6 8 10 Gas Gas Flour - bakery Flour - bakery Food and hygiene item - wholesaler Food and hygiene item - wholesaler Food and hygiene item - retailer Food and hygiene item - retailer

Figure 2 Main factors making it difficult for traders to increase Figure 3 Trader's recommendations for addressing difficulties supply in increasing supply

MARKET ASSESSMENT: SHEKHAN - AUGUST 3, 2016 6 Of the responses given, the majority of traders suggested there would be no change in prices to increase supply. Just 8% of retailers indicated prices would decrease and 33% of wholesalers indicated prices would increase.

3.4.2 Credit

Respondents reported a decrease in both 45000 credit given to customers and credit received 40000 from suppliers since the crisis, with wholesalers 35000 seeing the biggest reduction in credit received. 30000 25000 Only retailers reported an average increase in 20000 credit received, however 60% of retailers 15000 reported receiving no credit after the crisis and 10000 8% received 50% credit so the latter is likely to 5000 be an outlier. All respondents said credit was 0 paid back monthly. Gas Flour - Food and Food and bakery hygiene item hygiene item Typically retailers are owed by their customers - wholesaler - retailer more than they owed their suppliers. Owed Owes Wholesalers however owe their suppliers significantly more than they are owed by their Figure 4 Average total credit traders had given to customers and received from suppliers (USD) customers.

% customers given credit % suppliers giving credit Trader Before After Difference Before After Difference Gas 100% 100% 0% 0% 0% 0% Bakery 13% 12% -2% 55% 50% -5%

Wholesaler 63% 42% -21% 25% 0.3% -25% Retailer 40% 20% -20% 4% 10% 6%

Average 54% 43% -11% 21% 15% -6%

Table 1 Average percentage of customers given credit or suppliers traders received credit from

Decrease

No change

Increase

0 1 2 3 4

Food and hygiene item - retailer Food and hygiene item - wholesaler Flour - bakery Figure 5 Effect on commodity price from increasing supply

MARKET ASSESSMENT: SHEKHAN - AUGUST 3, 2016 7 3.5 Change in commodities being demanded by traders and households There were no specific reported changes in commodity preferences for households or traders in quality or frequency, only the volume of commodities being bought has declined.

3.6 Change in prices of food and non-food commodities According to WFP, the food basket in Ninewa fell in price by 5% in April 2016 from the previous month to 782 IQD, a drop of 15% from three months previous and 16% from six months previous. Despite lower prices, purchasing power in Ninewa fell to two food baskets as income from daily manual labour fell for the third consecutive month (WFP, May 2016).

Due to limitations in data gathering, with traders using different reference points when analysing price change trends, the data was inconclusive.

3.7 Opportunities for market-based interventions

Traders have expressed confidence in being able to increase supply quickly, the primary issue identified by traders was the lack of purchasing power amongst the IDP and host community. As such cash transfer programming (CTP) would be a suitable intervention in Shekhan to provide support to vulnerable IDP families. Other suitable interventions would be livelihood projects such as income generating activities to increase the purchasing power of IDP and host community families.

However, the situation regarding access to the market in Shekhan city for displaced Sunni Arabs will need to be monitored. Following new displacements of Sunni Arabs into Shekhan rapid assessments of shops local to IDP camps and areas where they settle will need to be conducted to ensure SMEB commodity items can be bought there if access to Shekhan city is not possible. Furthermore, there is a need to monitor prices going forward to ensure CTP remains suitable. 3.8 Market related considerations requiring further analysis

The data highlighted high levels of debt amongst wholesalers which requires further analysis to understand debt sustainability and the impact this will have on the market. For instance, if traders are already in debt will they increase supply by taking out more credit and is this possible if suppliers are less willing to provide credit.

Another concern highlighted by a number of traders was the Turkish border closure. With the trade route from Mosul now closed there is higher dependence on trade from Turkey. Turkish border closures therefore will have a significant impact on trade to Shekhan. The border was closed from December 2015 to January 2016 and has since remained open with only sporadic closures for a matter of days at a time, however the situation should be monitored and markets assessed should there be further border closures of significant duration.

3.9 Assumptions, difficulties and challenges faced in the assessment users should be aware of

Devoting more time to the orientation would have been beneficial for the market assessment, focusing particularly on gathering explanatory data as this was sometimes missing from the data collected. Furthermore the assessment did not cover interviews with IDP households instead focusing of IDP leaders,

MARKET ASSESSMENT: SHEKHAN - AUGUST 3, 2016 8 this would have given deeper insight into market access for IDPs and changes in IDP consumer behaviour or preferences.

3.10 Implementation experience in the area and lessons learnt, activities planned or being implemented by other agencies

Lessons learnt:  Orientation: Ensure sufficient time to prepare assessors for use of the data collection tools including contextualising how the data will be used. This is particularly the case if assessors are not used to interview styles focused on drawing out explanations for why respondents have given particular answers.  Key informant interviews: Include IDPs in key informant interviews to collect accurate data on market access, access to credit, and consumer preferences and behaviours for IDPs. Activities implemented by other agencies in Shekhan4:

Aid Agency Sector Modality Schedule UNHCR/Qandil Protection Cash – April – December Unconditional/Unrestricted 2016

4 Taken from the most recent Cash Working Group 4Ws, it is likely more actors are working in Shekhan than this.

MARKET ASSESSMENT: SHEKHAN - AUGUST 3, 2016 9 ANNEX I: Price monitoring averages

Retailer Wholesaler % price difference Commodity Specifications Average average from wholesaler Price (USD) Price (USD) to retailer All-purpose liquid cleaner Tek, 750ml 1167 1111 +5% Dish washing sponge per sponge 267 328 -19% Laundry Detergent ABC 2kg 2600 2225 +17% Sanitary Pads / Towels Giz lady (pack of 8) 1417 4167 -66% Shampoo Duru, 1 bottle 400ml 1792 1722 +4% Soap Duru, 1 bar 653 530 +23% Toilet Paper Papia, 4 pack 1400 1700 -18% Toothpaste Colgate 100ml 1833 1385 +32% Cooking fuel per cylinder 8000 No data N/A Bread (Khoboz) per piece 111 N/A N/A Bulgur Wheat per kilo 958 1742 -45% Chickpeas per kilo 1900 1605 +18% Dairy (Milk) per kilo 3438 3278 +5% Egg per 30 pack 2833 2817 +1% Lentils per kilo 1750 1808 -3% Poultry Whole chicken per kilo 3050 2704 +13% Rice 5kg, basmati packet 6600 5906 +12% Salt per kilo 1158 661 +75% Sugar per kilo 1000 995 0% Vegetable Oil Sunlight, 1.5 ltr bottle 1750 1926 -9% Wheat Flour per kilo 1000 833 +20% White Beans per kilo 2083 1725 +21%

MARKET ASSESSMENT: SHEKHAN - AUGUST 3, 2016 10