Business Daily (Nairobi)
Washington Gikunju
24 April 2008
An almost simultaneous wave of mass protests against rising food prices has been witnessed lately across the world; from Mexico City to Yemen, and closer home in Senegal, Mauritania and other parts of Africa.
The spiralling food inflation rate has not spared Kenya but a quiet debate is ranging in social and policy circles on how Kenyan farmers can benefit from the increase in agricultural commodity prices.
Terry Ryan, a professor in economics and a consultant at the Finance ministry, says that Kenya is not likely to benefit from the rise in prices of grains, owing to low productivity that makes the country a net importer of rice, wheat and sometimes maize.
A combination of unfavourable agronomic conditions, inferior farming methods and shortage of arable land makes Kenya a net food importer and therefore sustained high world prices are likely to erode people's real incomes rather than benefit farmers who form the bulk of the population.
The latest Kenya National Bureau of Statistics shows that the month-on-month overall inflation rate increased from 19.1 per cent in February 2008 to 21.8 per cent in March 2008, a new decade high, in response to rising food prices.
Prof Ryan, however, sees an indirect benefit in sustained high global agricultural commodity prices, which are likely to push the case for an increase in domestic production as importing food becomes more expensive.
The pressure to increase domestic productivity could in turn lead to adoption of long term strategies such as increase in land under irrigation and the development of high yield seeds to meet our domestic needs.
The economist also says that a rise in prices of tea, coffee and horticultural produce could benefit the economy in terms of increased foreign exchange earnings and is likely to trickle down as real benefits for farmers.
"Tea, coffee and horticulture are however not viewed as basic food commodities," he says.
Mr Robert Bunyi, the head of research at international investment bank Renaissance Capital (East Africa), says that sustained high global prices of agricultural commodities are likely to attract investments into agriculture in Kenya.
A rise in world food prices was not likely to negatively affect a majority of Kenyans who lead rural subsistence lives and are often untouched by economic progress in urban areas, he says and argues that rising farm income could help redress the balance, presuming that the rural poor would gain more in income from selling food than they lose in paying for their subsistence.
About 80 per cent of Kenya's total population of about 36 million people lives in the countryside, the majority practising a subsistence livelihood.
Mr Bunyi says the trend could finally benefit farmers after years of falling prices and increased costs for inputs such as fertilizer (which depends on the price of oil).
"I think high food prices are good for Kenya as the owners of capital in this country would notice the higher promised returns in agriculture and start to invest in the sector," he says, and adds that agricultural yields in Kenya are poor compared to other agricultural producers, and hence the need to invest in better seeds, better land husbandry methods, increased mechanisation, efficiency of supply chains and adoption of modern irrigation technologies.
Elsewhere, world economists, including the World Bank president, argue that the current increase in prices of agricultural commodities, minerals and fuel could be tapped through the creation of a special fund to support economically productive and poverty alleviation programmes.
World Bank President Robert Zoellick announced a new initiative last week to help developing countries manage and transform their natural resource wealth into long-term economic growth that spreads the benefits more fairly among their people.
He said the "Extractive Industries Transparency Initiative Plus (EITI++)" could transform the current boom in commodity prices into revenue streams and use them in fighting poverty, hunger, malnutrition, illiteracy, and disease.
The bank estimates that wheat prices have increased by 200 per cent in US dollar terms and overall food costs have risen by 75 per cent over the last eight years.
Though exchange rate and domestic inflation adjustments reduces the effect of the prices in developing countries, millions of poor consumers are suffering. World food prices are in most cases measured in terms of changes in the cost of the three most commonly consumed grains - rice, wheat and maize. The World Bank estimates that of the world's three billion people who do not live in cities, some 2.5 billion are involved in farming.
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