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Liberalized and Neglected? Food Marketing Policies in Eastern Africa, Fills an Important Gap in Our Knowledge

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Liberalized and Neglected? Food Marketing Policies in Eastern Africa, Fills an Important Gap in Our Knowledge UNU World Institute for Development Economics Research (UNU/WIDER) World Development Studies 12 Liberalized and Neglected? Food Marketing Policies in Eastern Africa Edited by Pekka Seppala This study has been prepared within the UNU/WIDER project on the Impact of Liberalization on Key Markets in Sub-Saharan Africa, which is co-directed by Professor Giovanni Andrea Cornia and Professor Nguyuru H. I. Lipumba. UNU/WIDER gratefully acknowledges the financial contribution to the project by the Ministry for Foreign Affairs of Finland. UNU World Institute for Development Economics Research (UNU/WIDER) A research and training centre of the United Nations University The Board of UNU/WIDER Nora Lustig Harris Mutio Mule Sylvia Ostry Jukka Pekkarinen Maria de Lourdes Pintasilgo, Chairperson George Vassiliou, Vice Chairperson Ruben Yevstigneyev Masaru Yoshitomi Ex Officio Hans J. A. van Ginkel, Rector of UNU Giovanni Andrea Cornia, Director of UNU/WIDER UNU World Institute for Development Economics Research (UNU/WIDER) was established by the United Nations University as its first research and training centre and started work in Helsinki, Finland in 1985. The purpose of the Institute is to undertake applied research and policy analysis on structural changes affecting the developing and transitional economies, to provide a forum for the advocacy of policies leading to robust, equitable and environmentally sustainable growth, and to promote capacity strengthening and training in the field of economic and social policy making. Its work is carried out by staff researchers and visiting scholars in Helsinki and through networks of collaborating scholars and institutions around the world. UNU World Institute for Development Economics Research (UNU/WIDER) Katajanokanlaituri 6 B 00160 Helsinki, Finland Copyright © UNU/WIDER 1998 Cover photograph by the editor, Pekka Seppala Camera-ready typescript prepared by Liisa Roponen at UNU/WIDER Printed at Hakapaino Oy, Helsinki, The views expressed in this publication are those of the author(s). Publication does not imply endorsement by the Institute or the United Nations University of any of the views expressed. ISSN 1238-1896 ISBN 952-9520-72-7 CONTENTS LIST OF CONTRIBUTORS v LIST OF TABLES vi LIST OF FIGURES vii FOREWORD ix ACKNOWLEDGEMENTS xi LIST OF ACRONYMS xii ABSTRACT iii 1. INTRODUCTION 1 Pekka Seppala 1.1 The food marketing liberalization saga 3 1.2 The methods for analysing food marketing reform 8 1.3 The case studies on private food marketing 10 1.4 The topics of analysis 11 1.5 References 14 2. TANZANIA - DECISIVE LIBERALIZATION PATH 15 Pekka Seppala 2.1 Introduction 15 2.2 Food security in Tanzania 17 2.3 The implementation of food marketing liberalization 23 2.4 Socio-economic profiles of the private traders 27 2.5 The performance of private marketing system 33 2.6 Conclusions 54 2.7 Annexes 55 2.8 References 60 3. FOSTERING PRIVATE FOOD MARKETING AND FOOD POLICIES AFTER LIBERALIZATION - THE CASE OF MALAWI 63 Ephraim Wadonda Chirwa 3.1 Introduction 63 3.2 Agricultural produce marketing and structural adjustment programmes (SAPs) 64 3.3 The private marketing system 79 3.4 Performance of the private marketing system 82 3.5 Conclusions 90 3.6 References 92 iii RISING TO THE CHALLENGE: THE PRIVATE SECTOR RESPONSE IN KENYA 94 Gerrishon K. Ikiara 4.1 Introduction 94 4.2 Production and consumption of staple foods 95 4.3 Food marketing before reform period 98 4.4 The process of marketing liberalization 104 4.5 Impact of liberalization of food marketing 106 4.6 Some policy concerns 113 4.7 Summary and conclusions 115 4.8 References 117 CONCLUSIONS 119 Pekka Seppala 5.1 The commitment to reform: evidence from the case studies 119 5.2 The reform process: evidence from the case studies 123 5.3 Unresolved questions and future policy options 129 5.4 References 138 IV LIST OF CONTRIBUTORS Professor Ephraim Wadonda Chirwa Professor Chirwa is a Lecturer in Economics at Chancellor College, University of Malawi. His primary research interests are in industrial economics, privatization of state-owned enterprises and rural finance institutions. He has researched and done consultancies in industrial and competition policy in Malawi, structural adjustment programmes and the poor, food security and nutrition, rural finance institutions, financial sector reforms and privatization of state-owned enterprises. He holds an M.Phil in Economics from the University of Cambridge. Professor Gerrishon K. Ikiara An economist by training, Professor Ikiara is currently a Senior Lecturer at the University of Nairobi, where he has taught in the Department of Economics and in the Institute of Diplomacy and International Studies. He has published widely on the Kenyan and African economies, especially on industry, labour, trade economic development, cooperative sectors, economic reforms, impact of liberalization on Kenya's cereal sectors, entrepreneurship, Kenya and Africa in global economic relations. Dr Pekka Seppala Dr Seppala is a Senior Research Fellow in the Institute of Development Studies, University of Helsinki. His main research interests relate to food marketing, entrepreneurship, rural economic processes and local administration in Tanzania and Kenya. Seppala has previously worked as a visiting research fellow in UNU/WIDER and as a research fellow in Nordic Africa Institute. He has recently published a comprehensive review article on the theme Food Marketing Reconsidered; An Assessment of the Liberalization of Food Marketing in Sub-Saharan Africa. Dr Seppala holds a D.Phil from the University of Sussex. Comments can be sent to pekka. seppala@helsinki. fi. v LIST OF TABLES Table 1.1 The implementation of food marketing reform 6 Table 1.2 How different policies affect different groups 7 Table 1.3 Basic indicators for the economy of the case study countries 11 Table 2.1 Production of staple food crops, 1991-97 19 Table 2.2 Food production by region 22 Table 2.3 Liberalization measures affecting food marketing 25 Table 2.4 Micro-enterprises in trading and related services 31 Table 2.5 Seasonal variability of nominal consumer prices in five localities 41 Table 3.1 ADM ARC net profit/loss on crop trading, 1970-95 69 Table 3.2 ADMARC maize transactions, 1967-96 70 Table 3.3 Structural adjustment loans and sequencing of agriculture sector reforms in Malawi 73 Table 3.4 Number of licensed private traders by agriculture development division, 1989-96 81 Table 3.5 Annual changes and three-year moving averages in production of key food crops, 1990-96 83 Table 3.6 Average nominal and real prices of selected food crops, 1988-95 86 Table 3.7 Relative spatial variation of prices for selected food crops, 1988-95 88 Table 3.8 Quarterly average consumer prices for selected key food crops, 1989-96 89 Table 4.1 Share of purchased to total consumption of selected food items 96 Table 4.2 Phases of food marketing liberalization 105 Table 4.3 Proportion of wheat farmers using various marketing channels, 1992 and 1993 108 Table 4.4 Trends in real dry maize prices (quarterly) in various towns, 1992-97 109 Table 5.1 Implementation and impact of marketing reform in Kenya, Malawi and Tanzania 121 Annex tables Annex 2.1 Correlations of consumer prices among localities, 1990-96 56 Annex 2.2 Annual coefficient of variation for nominal consumer price of maize 57 Annex 2.3 Mean annual real consumer price of maize 58 Annex 2.4 Maize consumer/producer price ratios 59 VI LIST OF FIGURES Figure 2.1 Production of maize, rice and wheat 18 Figure 2.2 Net imports of maize, wheat and rice 20 Figure 2.3 Maize production, area cultivated and yield 21 Figure 2.4 The real consumer price of maize 34 Figure 2.5 High maize consumer price correlations 37 Figure 2.6 Variation of nominal consumer prices among 21 locations, by month 39 Figure 2.7 Seasonality of real consumer prices in Dar es Salaam and its major suppliers 42 Figure 2.8 Price ratio between consumer price in Dar es Salaam and producer price in selected towns, with 6-month lag 44 Figure 2.9 Maize deliveries to Tandale, Dar es Salaam 46 Figure 2.10 Nominal wholesale, consumer and flour price for maize in Dar es Salaam 48 Figure 2.11 Nominal producer, retail and flour prices for maize in Iringa 49 Figure 2.12 Total fertilizer consumption 50 Figure 3.1 Map of Malawi 66 Figure 3.2 Private trader and ADMARC real prices, 1970-96 71 Figure 3.3 Estimates of maize production, 1980-96 82 Figure 3.4 Domestic food supply, 1989-96 84 Figure 3.5 Relative prices of maize, 1970-96 87 Figure 4.1 Main maize producing areas in Kenya 96 Figure 4.2 Main wheat producing areas in Kenya 97 Figure 4.3 Comparison of maize and wheat production 98 Figure 4.4 Sales of major cereals to the marketing boards, mainly NCPB, 1980-95 109 vii FOREWORD Analysis of structural adjustment and its impact on the economies of Sub-Saharan Africa has made considerable progress over the last few years. The debate has been vigorous and, although many disagreements remain, there has been some convergence of views. It is now recognized that liberalization alone is not sufficient to restore sustained growth to the region. An important issue in the wider debate on structural adjustment is the liberalization of food marketing. During the 1980s SSA countries came under considerable pressure to liberalize food marketing, which had traditionally been subject to much government control in Africa and elsewhere in the developing world. This intervention reflects the importance of food as a consumption item and as a source of income for smallholder farmers. Considerable amounts of research were conducted into issues such as the respective merits of cooperatives and private traders, food price subsidies and urban food consumption, as well as overall strategies for food security.
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