Ethiopia: A model of African food aid is now in trouble By Nicholas Benequista Tue May 6, 4:00 AM ET

Farmers in Ethiopia are better off now than they were four years ago, in part due to better-than-average rains and rising grain prices globally. But there's another reason: Africa's largest beneficiary of foreign aid has shifted from food aid to cash assistance.

Ethiopia is seen by aid organizations as a model of how to best help hungry nations. But in an effort to prevent food riots in cities, the government here is again relying on foreign food aid and now prohibits foreign aid groups from buying grains from local farmers. In effect, it may be undermining its own success story.

At a gathering of farmers about 40 miles outside Addis Ababa, one young man bemoans how rising food prices have yet to alleviate his hardship. Rent, fertilizer, transport, tools: Costs rise as fast as grain prices and whittle down his profits, he says.

The head of the cooperatives union, Demere Demissie, replies with a comment that would have been unimaginable just a year ago.

"Think of all the poor people in the towns," he says with a fatherly tone. "At least you can feed your family, even if only with some toasted barley. In the cities, there are people that only eat once every two days."

The perception is spreading in Ethiopia that the global spike in food prices may help once destitute farmers, while scores of city dwellers may be pushed into poverty.

Prime Minister Meles Zenawi recently made the exact case to parliament. But analysts here say the assumption ignores that one-third of the farmers are net consumers of food, selling their entire crop right after harvest. Current measures, critics say, threaten to reverse recent progress in the countryside, and with a drought looming, could even set the stage for a humanitarian crisis.

Ethiopian farmers as well as livestock herders may be put at risk by the government's determination to curtail rising food prices in the cities; the farmers by a renewed government reliance on foreign food aid and the pastoralists by the use of grain reserves that may be desperately needed if conditions in the south worsen.

Ethiopia has long been the beneficiary of global goodwill, but in the past the free food from abroad has forced local farmers to sell their crops at lower prices or to abandon their fields as unprofitable.

How Ethiopia became an aid modelIn the past four years, Ethiopia has been working to undo that damage, pioneering a program in Africa that has now become part of the World Bank's prescribed recipe for coping with a food crisis.

Through the country's main food assistance program, the Productive Safety Net Program, Ethiopia has been giving rural residents who are chronically short of food, those who survive just below the basic nutritional threshold, a chance to work for food or cash.

Those needy individuals unable to work, such as the handicapped or single mothers, receive the same benefits.

About half of the more than 7 million people enrolled in the program choose cash, people that may have once received rations, often in bags or cans labeled "from the American people."

Instead, those people now buy their food from neighboring farmers.

In addition, foreign aid organizations like the World Food Program have been able to buy food locally from surplus areas to distribute in areas where food, and not cash, is desired.

In a country where 80 percent of residents live in rural areas, the benefits of these policies have been remarkable.

In the past four years, GDP growth has averaged over 11 percent, led by rising agricultural output.

Meanwhile, the percentage of Ethiopians living in poverty dropped to 39 percent in 2006 from 44 percent in 2001, according to the World Bank.

Why Ethiopia is rolling back reformsThis year, in the face of the urban demands, Ethiopia is deviating from the course. Though the safety net program is still operating, the government has banned local purchase of basic grains by foreign aid organizations and is likely to accept the largest amount of foreign aid in five years.

Against the advice of the World Bank, it has also banned the export of cereals in a bid to keep prices down. All this is bad news for producers, though the government denies any ill effects.

"The government is pursing a free-market approach while on the other hand making selective interventions to solve some problems," said Bereket Simon, a government spokesperson. "On balance I think we're getting it right."

Still, some say the strategy may be more informed by political expediency than by sound technical advice.

"There is no big malnutrition problem in the urban areas here," says one senior aid official on condition of anonymity. "In cities, it's more of a political issue."

Urban rood riots seen elsewhereIndeed, rising food prices have already led to protests and riots in countries like Mexico and Cameroon; in Haiti, the discontent led to the resignation of the prime minister. In Mogadishu – the capital of neighboring Somalia – troops opened fire Monday and killed at least two people as tens of thousands of people rioted over high food prices.

In Ethiopia, nothing of that nature has occurred, and policies seem determined to prevent it.

So far, the Ethiopian government has distributed subsidized wheat to more than 800,000 urban households, though in doing so has had to borrow 190,000 metric tons from the grain reserves, pushing them to the critical 100,000 metric ton marker.

The move is a risky gamble if conditions worsen in the south; getting food from South Africa, the nearest port with available supplies, would take 10 to 12 weeks. Even borrowing from reserves in nearby Sudan could take more than a month.

Still, the grain distribution is popular with people like Simegn Belete, a 60-year-old mother of seven living in a one-room mud hut in central Addis Ababa with no running water or electricity.

Every year at Easter, which is celebrated here in late April, Ms. Belete has prepared a traditional chicken stew and slaughtered a lamb. This Easter, she was only able to buy two kilos of ground beef for the event.

"The prices are burning us like fire," she says. "I don't know who to blame: God for not bringing the rains, the government, or the merchants."

The Ethiopian government seems determined to remove itself from that list of who's to blame.