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Kenya: Our Leaders Should Tackle Food Crisis
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Business Daily (Nairobi)
OPINION
22 April 2008
Posted to the web 23 April 2008
M. J. Gitau
Nairobi
A farmer plants maize. According to the Kenya National Bureau of Statistics, food related inflation stood at 29 per cent in March , far much higher than the overall inflation of 21 per cent.
April 23, 2008: According to the World Bank, recent increases in prices of food have been building up for some time. Over the last three years, global prices for wheat have increased by 181 percent. In markets where wheat and rice are key exports, prices have risen sharply in the last couple of months.
In the US for example, wheat export prices increased from $375 per tonne in January to $440 per tonne in March this year.
Prices for export rice from Thailand have jumped form $365 to $ 562 per tonne over the same period.
On overall, global food prices have increased by 83 per cent since 2005, according to a recent World Bank policy memo. Causes for this upsurge are varied. Grain consumption is said to have been high. In North America, the use of maize as an alternative source for fuel has put pressure on prices, while major food exporters like Australia have experienced droughts.
The World Bank notes that only a small part of the rise in prices (about 15 per cent) can be attributed to high energy and fertiliser prices, but is a factor nevertheless. The effect of this rise in food prices is serious, and could be detrimental to the global outlook.
During the World Bank and IMF spring meetings this month, the two institutions called for urgent action from governments to tackle rising food costs, with the bank president Robert Zoellick noting that "based on a rough analysis, we estimate that a doubling of food prices over the last three years could potentially push 100 million people in low-income countries deeper into poverty."
This international situation will definitely affect food-poor and food-importing nations in Africa, including Kenya, a net food importer of selected commodities.
According to the Kenya National Bureau of Statistics, food related inflation in March stood at 29 per cent, far much higher than the overall inflation of 21 per cent.
The bureau reported that the price of a kilogramme of tomatoes increased by 12.7 per cent, sukuma wiki by 6.8 per cent, and beans and maize flour by 6.6 and 2.3 percent respectively. All these are commodities consumed in large measures by the poor.
Pressure on food prices in Kenya has a number of twists to it. Hiccups in planting, harvesting and transporting food that was caused by the post-election crisis has definitely put upward pressure on prices.
Some of these factors are transitory, as the Governor of the Central Bank noted recently while giving his comment on inflation. Others are structural and will need to be address seriously.
Take the issue of rising purchase prices of farm produce. William Ruto's first policy statement as Minister for Agriculture was to order for an increase of prices at which the Government buys maize from farmers.
While the minister, and many other farming lobbies that have for years called for high producer prices, is partly right, the final effect of this policy is quite counterproductive to the goal of reducing poverty of those very farmers and the country in general. How is this so?
Simply, the eventual impact of paying farmers high producer prices will be to raise consumer prices of goods such as sugar, maize and wheat flour and so on. This balance between the producer's desire for high prices and consumer needs for low food prices is quite tough.
However, in the case of Kenya, the Government has always put producer interests first with little consideration of what happens down stream. As early as 2000, research from Tegemeo Institute, an agricultural policy body, had started to show that nearly half of small maize farmers are net buyers of maize.
Hence paying high prices to a few large scale farmers would end up hurting the majority small scale farmers who buy the maize for consumption. From a welfare perspective, the net effect of rising producing prices has been counter productive to the very goals of poverty reduction that the Government has pursued for years. In the final analysis, we all hurt - producers and farmers alike.
But this is not all. As workers demand more wages, this will make the country uncompetitive if food and wage bills persist in the long-term and if this structural anomaly in our policy orientation is not corrected soon.
High food prices - and in Kenya we are talking of high fuel prices too - have been known to trigger riots and social unrest as was the case in Haiti recently. While hard to quantify, the inability to buy food would definitely affect people's nutrition and productivity levels.
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Dealing with this issue in Kenya will require both short and long term intervention. In the short term, the Government should immediately sort transitory constraints in the food supply chain: transportation, information asymmetry and high taxes.
In the long-term, protection and propping up farmers through monopolies and price protection are things that will have to be revisited, as is the issue of farm land consolidation, farming technology and allow cheap food imports.
That should be food for thought for the 40 cabinet ministers and their 52 assistants.
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