Shifting development cooperation strategies to target regional agricultural trade for economic development in Sub-Saharan Africa: by Christoph Pannhausen and Bianca Untied
In times of high food prices, shortages in natural resources and a stagnant multilateral trade regimes regional approaches to economic development and food security are increasingly determining the agendas of both developing countries and multi- and bilateral development cooperation.
Rising food prices in 2008 highlighted the following problems: first, increases in food prices have caused the number of undernourished people to rise from the already high level of 923 million (2007) to 1.02 billion (2009); second, price rises on input markets and protectionist policies have meant that farmers in developing countries were not really in a position to respond to the high food prices by stepping up their production. To take matters worse, 42 of the 58 low-income countries are now net importers of food, which increases their dependency on the price fluctuations caused by developments on the world market. Landlocked countries are particularly affected since they have to pay higher transport costs.
On top of these issues, inadequately functioning agricultural markets have hampered the regional exchange of agricultural products between areas of surplus and areas of deficit more difficult. On strategically important food staple markets significant government influence leads to unilateral and politically motivated decisions (like export bans). However, the food price crisis has clearly shown that protectionist policies reduce regional food availability, thus fuelling the price spiral. Furthermore, uncertain regional sales markets discourage farmers from expanding their production. This untapped potential for production increase means that in a protectionist environment it is not economical for private investors to invest in the agricultural sector. Beside these political factors, non-tariff trade barriers encourage informal cross-border trade - involving higher costs and risks for traders (bribes) and consumers (food safety is not guaranteed).
Regional integration as solution strategy
Regional integration is considered to be a solution strategy for strengthening regional agricultural markets. It is increasingly defining the political agenda in many developing countries (CAADP process) and in international development cooperation (Aid for Trade Initiative, EU-Africa Strategy). First, intraregional trade in food has great potential for improving food availability and contributes to food security. Second, strengthening regional trade structures and involving producers in regional markets also has a positive effect on sustainable economic development in predominantly agricultural societies. Third, by cooperating at the regional level, the bargaining power of regional institutions in international negotiations can be improved on agricultural issues, which are of special interest to most developing countries.
Fields of action for development cooperation
Development cooperation can support initiatives for promoting regional agricultural trade and for transforming regional trade flows from informal to formal on the macro and meso level: Following the broad categories of the WTO definition on Aid for Trade, fields of intervention focus on the categories a) trade policy and regulations and b) trade development.
Figure: Regional approaches to stimulate agricultural development
a) Trade policy and regulation
Capacity development of public and private stakeholders at regional and national level
Many partner countries view human, institutional and productive capacity development as key regional needs and starting point for regional assistance. Capacity development, e.g. in the EAC and SADC, includes: forming a customs union, negotiating trade agreements, developing regional strategies, or harmonising national legal frameworks. Furthermore, building trust and mutual understanding through dialogue fora is decisive for any integration process.
Support of regional harmonisation of standards and quality assurance systems
Standards are a decisive factor in market access. Although harmonised sanitary, phytosanitary and zoosanitary regulations and quality standards exist in some regional economic communities for selected products (e.g. for maize in the EAC), enforcing them is a major problem. This is due to the lack of knowledge of the regulations on the part of customs officials, producers and traders and highlights the challenge of achieving harmonised standards and building shared and regionally recognised quality assurance systems.
Support of the reduction of regional trade barriers
Removing regional trade barriers is necessary to ease and simplify cross-border agricultural and food trade and consequently to change informal trade into formal trade. Therefore, trade barriers and their impacts have to be analysed and discussed among stakeholders involved, which is crucial to develop strategies to overcome those barriers. In West Africa, the USAID funded West African Trade Hub supports the reduction of transportation costs along major regional corridors.
Support of regional initiatives for risk management and price stabilisation
Short-term supply bottlenecks can be overcome by creating buffer stocks and by regional exchange of strategic reserves, hence improving food supply and availability. In addition, price escalations for consumers can be avoided by channelling additional supplies from neighbouring markets.
b) Trade development
Promotion of market information systems for regional markets
Inadequate information about markets and prices is a significant barrier to trade. Monopolistic distribution structures push down the prices paid to producers for agricultural products. The resulting price distortions then erode any incentives for market-oriented production and regional trade. Information systems that have already been developed, such as the Regional Agricultural Trade Intelligence Network (RATIN) in East Africa, in which market prices are recorded, processed and disseminated, should be supported.
Promotion of access to agricultural services and inputs at regional level
The provision of certified services (e.g. the inspection body AfriCert in Kenya, see box 1) and inputs at regional level, which are not affordable or viable at national levels, can ease production and therewith trade. There is strong need, e.g., to recognise university degrees in agriculture and food technology.
Box 1 : Promotion of access to agricultural services and inputs at regional level -the example of AfriCert in Eastern Africa
Certification has become an indispensible marketing instrument, whether this is visible to the consumer, such as the Flower Label, or required on principle by western retail chains for imported fruit and vegetables (GLOBALGAP). Nairobi-based AfriCert, the first certification company
in eastern Africa, has now gained accreditation according to the international ISO 65 standard.
AfriCert‘s seal of approval confirms that producers subscribe to good agricultural practices. Previously, certification was offered exclusively by international companies - a costly process that only major growers could afford.
GTZ supported the local certification body AfriCert in providing services especially for small and medium-sized fruit and vegetable growers. Instead of depending on international certification bodies, growers are now able to receive the same service at much lower cost from a local company. AfriCert agents were trained on audits, inspections were conducted and a systematic quality documentation, included a quality manual which was required in order for the company to receive ISO 65 accreditation from the German Accreditation System for Testing) were developed. AfriCert is therefore a good example of how donors can help growers in African regions access affordable certification in line with internationally recognised standards, thereby potentially helping to close a considerable gap in the value chain of agricultural products.
Support of regional biotrade initiatives
The establishment of an internationally recognised frame for bio-patented products and the set up of regional trading structures, for example Geographical Indication and Labelling (GI and GL) could increase regional agricultural trade and open up new market opportunities, for example the non-profit trade association Phytotrade in Southern Africa.
Practical trade promotion measures
Practical trade promotion measures can enhance the exchange of agricultural and food products and open up new market opportunities when, e.g., setting-up joint regional marketing structures and initiatives.
The implementation of certain activities addressing trade policy and regulation as well as trade development can either be implemented following a sectoral approach by promoting regional value chains or following a spatial approach by promoting cross-border trade corridors.
Christoph Pannhausen and Bianca Untied are working as agricultural trade advisors at GTZ (Deutsche Gesellschaft für Technische Zusammenarbeit mbH). This article summarises main findings of a study conducted by the GTZ sector project "Agricultural Trade" on behalf of the German Ministry for Economic Cooperation and Development (BMZ), and available at: http://www.gtz.de/en/dokumente/gtz2010-en-regional-agricultural-trade-sub-saharan-africa.pdf