Wednesday, June 29, 2011
This time last year I was on holiday in Southern Ontario, marvelling at the orderliness of large scale Canadian agriculture. This year, I was closer to my childhood home, deep in the Hampshire countryside. In his wonderful book, The Ages of Gaia, James Lovelock deplores the destruction of the English countryside - its meadows and hedgerows teeming with biodiversity - and its replacement with mechanised monoculture. And yet, while it may no longer be the thing of beauty celebrated in words by Housman and Hardy, in music by Vaughan Williams, and in painting by Constable, to my eyes at least, in the long, still, sunlit June evenings, it retains a tranquility and gentleness which is hard to find elsewhere.
In recent weeks, the international media has been reporting a new food emergency in the Horn of Africa, affecting Somalia, northern Kenya and south east Ethiopia. The rains have once again failed in this most marginal area for agriculture and many communities are at risk from the loss of meagre livelihoods, displacement and, possibly, famine. Coming at a time when regional food prices are already running at all-time highs, food aid is urgently required. Among other reasons, the media is once again trotting out comments from aid organisations attributing Africa's agricultural woes to, among other things, farming subsidies in the West. The hypothesis as generally expressed as follows: "agricultural subsidies are damaging to developing countries because they undermine the viability of local farmers". The argument follows that subsidies create over-production, over-production results in lower prices on the international market, and farmers in developing countries have no incentive to invest in agriculture because of the low price of competing imports.
But (with apologies to William Wordsworth), as I wandered lonely as a cloud that floats on high o'er vales and hills on the downs between Winchester and Petersfield, it was hard to escape the conclusion that the policy makers had probably got it about right. After all, farmers need to make a profit. Enough of a profit to encourage investment, but not so much of a profit that every tree is uprooted and every square inch of land ploughed up for agriculture. Indeed, farmers are also be rewarded for reforestation, for hedgerow conservation, and for the adoption of other environmentally friendly activities. If farming is unprofitable, what happens? Farmers no longer have any incentive to farm and the countryside - and the rural economy - suffers. There is risk to the wider economy: the risk of greater exposure to short term commodity price fluctuations; and the political risk (with unthinkable consequences) to any government of a failure in the food supply chain. Preservation of the countryside, too, is a public good
So my simplistic analysis suggests to me that African governments would do much better to erect and enforce import tariff barriers on food supplies, thereby creating an environment which encourages investment in agricultural productivity so that farmers can make profits and reduce their exposure to short term price fluctuations, rather than muttering about the injustice of agricultural subsidies elsewhere in the world. Tanzania does this with its rice industry, charging a 75% tariff on imported rice and it is no coincidence that investors are eying large scale rice production with considerable interest. The sugar industry in the region also has some protection from low cost imports. True, import barriers create opportunities for smuggling, tax evasion and corruption, but the risk of malfeasance should not drive sensible economic policy.
Wednesday, June 8, 2011
East Africa is just coming to the end of its annual budget frenzy. A number of years ago, someone cooked up the idea that all member states of the East African Community should present their annual budgets on the same day. This year, of course, the stakes are high: East Africa as a whole has been experiencing rapid inflation (driven by price rises in basic needs - in particular food and energy prices), currency depreciation, and the resulting political instability elsewhere in North Africa and the Middle East.
According to the East African, the Finance Ministers didn't do a great job this year: I quote: "they sacrificed free market policies in the political horse-trading that has largely restored the numerous import exemption schemes blamed for slowing intra-regional trade.... [leading] to a slow return of entrenched nationalism that will slowly undermine the remaining stages of the region's integration process - the Monetary Union and Political Federation." A fairly disappointing analysis in the context of the real economic risks that present themselves.
Many moons ago, when I worked in Coopers & Lybrand Kenya's management consultancy practice, I co-ordinated the production of pre- and post-budget newspaper articles by partners and senior managers as part of Coopers' marketing programme in the region. Since then, the stakes have risen. The big 4 accounting firms and local accounting institutes splash out on budget breakfasts, lunches and cocktails - if you are able to get on two or three invitation lists, you can spend a full day criss-crossing the city in search of the next freebie in the opulence of Kampala's leading hotels.
The truth is that the budgets are usually a damp squib, full of self-congratulations and airy promises based on dubious assumptions and murky public sector accounts. Quite why public sector governance is so weak, when calls for ever-stronger private sector governance from public sector regilators continue to be so loud, seems strange. Quis custodiet ipsos custodes? Juvenal's 2,000 year-old question remains as relevant as ever.