47769 DISTORTIONS TO AGRICULTURAL Public Disclosure Authorized INCENTIVES IN AFRICA Editors Kym Anderson • William A. Masters Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized DISTORTIONS TO AGRICULTURAL INCENTIVES IN AFRICA DISTORTIONS TO AGRICULTURAL INCENTIVES IN AFRICA Kym Anderson and William A. Masters, Editors Washington, D.C. © 2009 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: [email protected] All rights reserved. 1 2 3 4 12 11 10 09 This volume is a product of the staff of the International Bank for Reconstruction and Development / The World Bank. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgement on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without per- mission may be a violation of applicable law. The International Bank for Reconstruction and Development / The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: [email protected]. Cover design: Tomoko Hirata/World Bank. Cover photo: Arne Hoel/World Bank Photo Library. ISBN: 978-0-8213-7652-2 eISBN: 978-0-8213-7664-5 DOI: 10.1596/978-0-8213-7652-2 Library of Congress Cataloging-in-Publication Data Distortions to agricultural incentives in Africa / edited by Kym Anderson and William A. Masters. p. cm. Includes bibliographical references and index. ISBN 978-0-8213-7652-2 — ISBN 978-0-8213-7664-5 (electronic) 1. Agriculture—Economic aspects—Africa. 2. Agriculture and state—Africa 3. Agricultural subsidies— Africa. 4. Africa—Economic policy. I. Anderson, Kym. II. Masters, William A. HD2118.D57 2008 338.1'86—dc22 2008037334 Dedication To the authors of the country case studies, for their narratives and for generating the time series of distortion estimates that underpin the studies. CONTENTS Foreword xvii Acknowledgments xxi Contributors xxiii Abbreviations xxix Map: The Focus Economies of Africa xxxi PART I INTRODUCTION 1 1 Introduction and Summary 3 Kym Anderson and William A. Masters PART II NORTH AFRICA 69 2 Arab Republic of Egypt 71 James Cassing, Saad Nassar, Gamal Siam, and Hoda Moussa PART III SOUTHERN AFRICA 99 3 Madagascar 101 Fenohasina Maret 4 Mozambique 127 Andrea Alfieri, Channing Arndt, and Xavier Cirera 5 South Africa 147 Johann Kirsten, Lawrence Edwards, and Nick Vink 6 Zambia 175 Peter Robinson, Jones Govereh, and Daniel Ndlela 7 Zimbabwe 205 Daniel Ndlela and Peter Robinson vii viii Contents PART IV EASTERN AFRICA 229 8 Ethiopia 231 Shahidur Rashid, Meron Assefa, and Gezahegn Ayele 9 Kenya 253 Alex Winter-Nelson and Gem Argwings-Kodhek 10 Sudan 283 Hamid Faki and Abdelmoneim Taha 11 Tanzania 307 Oliver Morrissey and Vincent Leyaro 12 Uganda 329 Alan Matthews, Pierre Claquin, and Jacob Opolot PART V WESTERN AFRICA 359 13 Cameroon 361 Ernest Bamou and William A. Masters 14 Côte d’Ivoire 385 Philip Abbott 15 Ghana 413 Jonathan Brooks, Andre Croppenstedt, and Emmanuel Aggrey-Fynn 16 Nigeria 441 Peter Walkenhorst 17 Senegal 463 William A. Masters 18 Benin, Burkina Faso, Chad, Mali, and Togo 485 John Baffes Appendix A: Methodology for Measuring Distortions 507 to Agricultural Incentives Kym Anderson, Marianne Kurzweil, Will Martin, Damiano Sandri, and Ernesto Valenzuela Appendix B: Annual Estimates of Distortions to 539 Agricultural Incentives in Africa Ernesto Valenzuela, Marian Kurzweil, Johanna Croser, Signe Nelgen, and Kym Anderson Index 607 Contents ix Figures 1.1 NRAs in Agriculture, 16 African Countries, 1975–79 and 2000–04 23 1.2 NRAs, by Key Covered Product, 21 African Focus Countries, 1975–79 and 2000–04 25 1.3 NRAs for Exportable, Import-Competing, and All Farm Products, 16 African Countries, 1955–2004 28 1.4 Gross Subsidy Equivalents of Assistance to Farmers, 16 African Countries, 1975–79 and 2000–04 39 1.5 Gross Subsidy Equivalents of Assistance to Farmers in 21 African Focus Countries, by Product, 1975–79 and 2000–04 42 1.6 NRAs for Agricultural and Nonagricultural Tradables and the RRA, 16 African Countries, 1955–2004 44 1.7 RRAs in Agriculture, 16 African Countries, 1975–79 and 2000–04 48 1.8 NRAs and RRAs, Asia, Africa, and Latin America, 1965–2004 49 1.9 Real GDP Per Capita, Comparative Advantage, and NRAs and RRAs, 16 African Countries, 1955–2005 50 1.10 Relationship between the RRA and the Trade Bias Index for Agriculture, 16 African Focus Countries, 1975–79 and 2000–04 61 2.1 Product Shares of Agricultural Output, Egypt, 1955–2005 75 2.2 NRAs for Exportable, Import-Competing, and All Agricultural Products, Egypt, 1955–2005 81 2.3 NRAs for Nonagricultural and Agricultural Tradables and the RRA, Egypt, 1955–2005 84 3.1 NRAs for Exportable, Import-Competing, and All Covered Farm Products, Madagascar, 1955–2003 112 3.2 NRAs for All Agricultural and Nonagricultural Tradables and the RRA, Madagascar, 1955–2003 121 4.1 Real GDP, Mozambique, 1970–2004 130 4.2 Shares of the Value of Primary Agricultural Production at Distorted Prices, Covered Products, Mozambique, 1976–2003 135 4.3 NRAs for Exportable, Import-Competing, and All Covered Farm Products, Mozambique, 1976–2003 140 4.4 NRAs for Agricultural and Nonagricultural Tradables and the RRA, Mozambique, 1976–2003 140 5.1 NRAs for Exportable, Import-Competing, and All Covered Farm Products, South Africa, 1961–2005 163 5.2 NRAs for Agricultural and Nonagricultural Tradables and the RRA, South Africa, 1961–2005 167 x Contents 6.1 NRAs for Exportable, Import-Competing, and All Covered Farm Products, Zambia, 1961–2004 181 6.2 NRAs for Agricultural and Nonagricultural Tradables and the RRA, Zambia, 1961–2004 187 6.3 Maize and Maize Meal CTEs and Consumer Subsidy Payment, Zambia, 1955–2004 188 7.1 NRAs for Exportable, Import-Competing, and All Covered Farm Products, Zimbabwe, 1955–2004 214 7.2 NRAs for Agricultural and Nonagricultural Tradables and the RRA, Zimbabwe, 1955–2004 218 8.1 Food Availability and Food Gap by Political Regime, Ethiopia, 1961–2002 236 8.2 Farmers’ Share of Export Prices for Coffee, Oilseeds, and Pulses, Ethiopia, 1981–2005 241 8.3 NRAs for Exportable and All Farm Products, Ethiopia, 1981–2005 242 8.4 NRAs for Agricultural and Nonagricultural Tradables and the RRA, Ethiopia, 1981–2005 243 9.1 Agricultural Value Added, Marketed Production, and GDP Per Capita, Kenya, 1965–2004 256 9.2 Product Shares of Agricultural Production and Consumption, Kenya, 1960–2004 258 9.3 NRAs for Exportable, Import-Competing, and All Covered Farm Products, Kenya, 1956–2004 263 9.4 NRAs for Agricultural and Nonagricultural Tradables and the RRA, Kenya, 1956–2004 268 9.5 NRAs for Producers of Export Crops, Kenya, 1956–2004 269 10.1 Share of Agriculture in All Merchandise Exports, Sudan 1961–2004 286 10.2 Value of Agricultural Imports as a Share of Value of Agricultural Exports, Sudan, 1961–2004 286 10.3 Product Shares of Agricultural Exports, Sudan, 1961–2004 287 10.4 NRAs for Exportable, Import-Competing, and All Farm Products, Sudan, 1955–2004 298 10.5 NRAs for All Agricultural and Nonagricultural Tradables and the RRA, Sudan, 1955–2004 300 11.1 NRAs for Exportable, Import-Competing, and All Farm Products, Tanzania, 1976–2004 322 11.2 NRAs for All Agricultural and Nonagricultural Tradables and the RRA, Tanzania, 1976–2004 324 12.1 Parallel Market Exchange Rate Premium over the Official Exchange Rate, Uganda, 1961–2004 338 Contents xi 12.2 Coffee and Cotton NRAs, Uganda, 1961–2004 342 12.3 NRAs for Exportable, Import-Competing, and All Farm Products, Uganda, 1961–2004 349 12.4 NRAs for Agricultural and Nonagricultural Tradables and the RRAs, Uganda, 1961–2004 353 13.1 Per Capita Output of Food and Nonfood Farm Products, Cameroon and All Sub-Saharan Africa, 1961–2005 370 13.2 Composition of Farm Production at Distorted Prices, Cameroon, 1966–2003 371 13.3 Foreign Exchange Rates, Cameroon 373 13.4 NRAs for Exportable and All Covered Farm Products, Cameroon, 1961–2005 376 13.5 NRAs for Agricultural and Nonagricultural Tradables and the RRA, Cameroon, 1961–2004 378 14.1 Share of Agricultural Production at Undistorted Domestic Prices, Côte d’Ivoire, 1961–2005 391 14.2 NRAs for Exportable, Import-Competing, and All Farm Products, Côte d’Ivoire, 1961–2005 406 14.3 NRAs for Agricultural and Nonagricultural Tradables and the RRA, Côte d’Ivoire, 1961–2005 408 15.1 Cocoa Production and Producer Prices, Ghana, 1964–2002 427 15.2 Composition of Farm Production at Distorted Domestic Price, Covered Products, Ghana, 1966–2003 430 15.3 NRAs for Exportable,