By Charles Dhewa
In the absence of evidence-based agricultural policy formulation and implementation, most developing countries always rush to import food without sufficiently understanding their national contexts. During gluts, farmers in areas where fruits are produced in abundance do not benefit from selling nationally compared to when there are shortages. On the other hand, when the price of a commodity goes up due to shortages, we cannot conclude that farmers are getting good prices because such supply shortages may result from the seasonality of the commodity.
As long as policy makers are not able to spread the supply of a particular commodity around the country, decisions to import that particular commodity will be uniformed. That is why market-oriented budgeting is critical in showing the best price for a farmer to break-even, indicating excess or shortages of different commodities. Unless we know the best price for an orange or tomato, it is difficult to see if farmers are incurring losses or earning profits. Equitable distribution of horticultural commodities across the country can show volumes during gluts and how much could be preserved to cover shortage periods.
Supply side considerations
On the supply side, there is definite need for evidence before deciding to import commodities. Important questions include: What volumes of commodities are being produced and consumed at household and community level and what surpluses are finding their way to the market? To answer this question, farmers and value chain actors should keep basic records to show supply trends from different production corridors.
Most African countries are famous for producing a diverse range of commodities, mostly during different seasons. The commodities range from different types of livestock, crops such as small grains, legumes (beans, groundnuts, cowpeas, etc.,), fruits (exotic and indigenous), vegetables (exotic and indigenous), maize, wheat and non-consumables like cotton and tobacco. These commodities are produced on different land sizes from communal, resettlement, large scale to large estates. A critical question is what role does each type of land play in producing food before a country decides to import or export food? Unfortunately, it seems African countries have not invested in clearly aligning production systems to land sizes. A large estate can be seen producing cabbages that should be produced in the backyards of peri-urban dwellers or gardens run by rural grandmothers.
In addition, each country has different agro-ecological regions that support the production capacity of various commodities. For instance, some regions are associated with horticulture while other are known for fruits and yet others famous for livestock. This categorisation provides a broader picture showing the way supplies of different commodities can be organized. Some regions have high production capacity for specific commodities. Regions with lower production capacity for particular commodities are the demand targets, ensuring better returns locally. Once a commodity is in abundance, it does not have a market where it is produced abundantly. For instance, in Zimbabwe bananas do not have a market in Honde Valley.
Since most African agricultural production patterns are seasonal due to the natural characteristics of different commodities, no matter, the amount of research exerted, commodities like small grains cannot be grown during winter in East and Southern Africa. Wild fruits, due to their natural characteristics, are always in and out of season. The availability of irrigation can see some commodities like green mealies being grown all-year round. The potential of irrigation to address seasonal availability of food is now well known but not fully exploited as countries feel more comfortable to import food at the slightest sign of food shortages.
Demand side imperatives
The majority of African countries are witnessing a growth in different socio-economic classes and this is driving changes in consumption patterns, tastes and preferences. These tastes and preferences can be further broken down according to age, gender, health consciousness literacy and location. High mobility within the local population is also creating and expanding markets for different commodities. For instance, people who come from Chipinge district of Zimbabwe where they grew up eating yams called Madhumbe but now stay in Harare have created demand for Madhumbe in Harare. Those from Muzarabani district where they grew up eating Masawu and now live in Bulawayo have promoted the consumption of Masawu in Bulawayo, cultivating a new market for the commodity.
Another telling trend is rural urbanisation. With urbanisation spreading to rural areas across Africa, most facilities that used to be a preserve of cities are now found in most rural areas. Such facilities include electricity, transport networks, food processing enterprises, retail businesses and other services that are creating wage employment in rural areas. Financial institutions like banks and micro finance institutions are also picking their spot in rural areas. All these trends are influencing consumption patterns in rural areas. Given this shifting landscape, there is need for decision makers to answer these questions:
- What are the price trends in different markets? This should inform a comparative analysis between prices in different markets, for instance the price of banana in Mutare and Bulawayo versus sources like Honde Valley. Tracking prices and sources will show the highest and normal price of a commodity.
- What are the break-even prices for different commodities? If there was an alternative market, which commodities would fetch better prices or economically reasonable prices, assuming there are markets where prices tend to be high? What is the benchmark that can be used to compare prices in different markets? After removing all marketing-related costs, it is possible that a box of banana that costs $3 in Mutare, fetches $15 in Bulawayo. Unless we know bench mark prices that can enable farmers to earn profit, sustain or grow their business, it is difficult to tell which price is good or bad.
- What is the effective demand for different commodities? This refers to consumers’ willingness versus ability to buy a commodity. Demand is not just general but related to consumers’ ability to afford a commodity because they have income that enables them to obtain commodities in line with their tastes and preferences.
- Who are the customers for different commodities? We cannot say everyone is willing and able to afford an orange. That is why consumers are defined by class, gender, location, age, ethnicity, religion, income class and other factors. Not everyone wants to consume small grains, even if they may have income to afford small grains. That is why consumers have to be carefully categorised in order to create a food basket for different classes of consumers. It is not just about importing food without understanding consumers. If you are going to import wheat or grapes, which consumer group are you targeting? Otherwise, you can spend foreign currency importing commodities for a small class of consumers who can even afford to import their own food. In a poor country like Zimbabwe how many consumers are interested in the importation of wheat?
The power of understanding all year round distribution and consumption patterns
In the event of a commodity’s price going beyond the reach of specific consumers like poor people or a commodity being out of season, what are the close substitutes? If orange prices go up, what fruits do consumers buy in order to get the same satisfaction for the same budget? The right questions can see consumers mentioning alternative substitutes and reasons for their choices. Unless we understand all year round distribution and consumption patterns of different commodities, we cannot make informed decisions regarding exporting or importing food. Would consumers consider processed or preserved products of the same commodities and get similar satisfaction? Since there are times when mangoes are in a glut, if we dry or produce juice during those periods, would consumers get the same satisfaction if the processed products are availed during shortages? Would biltong give consumers the same satisfaction they get from fresh beef?
Have we exhausted all distribution channels for particular commodities to a point of at least getting break-even prices that enable farmers to continue farming? Without such evidence, the country can import for one region or city when other cities and regions have gluts of the same commodity. Are imports coming in as a way of outcompeting relatively high local prices due to shortages or high local cost of production? Imports from South African may simply be attracted into Zimbabwe by higher prices being offered for the same commodity in Zimbabwe compared to South Africa. It could be a cost push factor. Shortages can be an advantage to farmers who produce consistently because there are times when they incur losses due to gluts and should be allowed to recoup their costs during shortages.
The cost-benefit analysis of exporting
If a poor country has surplus and considering to export, it is important to assess the cost benefit analysis of export different food commodities. Without this action, the excitement of earning forex can create local shortages, triggering increases in the price of local commodities. We can unknowingly export potatoes but compromise the quality of local food (people eating junk low quality food when the best food is being exported). This can also compromise nutrition as necessities become luxuries. What gaps are we creating as we export? Is the foreign currency earned being directly channeled back into agriculture in order to improve agricultural competitiveness? How do farmers benefit from their proceeds if foreign currency goes to the national pool? Why are tobacco farmers earning export returns in local currency when forex should be used as a store of value for their enterprises? If farmers want to import chemicals, fertilizer and other inputs, they should be able to do it directly through their farmers’ associations than the forex being given to companies to import inputs on farmers’ behalf. When such inputs lend, they are more expensive as the importing companies want to earn more by charging exorbitant prices, way beyond the capacity of farmers to buy.
An important second action is determining steps being taken to ensure commodities move from high production areas to low production areas before we rush to import. Managing the national distribution of food can translate to best return on investment (ROI) and ensure we tackle issues like nutrition and food security that ultimately affect the national budget if not handled properly. As we distribute food, we need to rationalise food availability through equitable wealth and nutrition distribution in the form of food. It is not ideal to leave communities in Binga consuming fish, those in Honde Valley consuming bananas and those in Chivi just surviving on small grains.
Food can really be a smart way of distributing wealth through commodities. There are limits to which development interventions and models from outside can solve local challenges. In as much as development agencies can pour money into district or provincial resilience projects, natural and external factors like climate change may set boundaries and limits of what can be achieved. Setting up agribusiness hubs in high production areas and close to food insecure regions can be a better solution than forcing dry regions to produce small grains, rehabilitate boreholes and keep livestock. What are the processing and preservation measures in place to cater for times of shortage and import substitution? Have we exhausted all processing avenues before rushing to import? What infrastructure development plans are in place to ensure production and supply is consistent? To what extent have we reached the maximum capacity of our dams and irrigation schemes to the point of importing onions, oranges and apples?