According to press reports at the end of August 2014, the government of Tanzania is planning to export part of its maize surplus to markets in the Middle East and Far East. According to Godfrey Zambi, the country’s Deputy Minister of Agriculture, Food Security and Cooperatives, “Far East countries are in dire need of maize.”

Tanzania is estimated to have produced “over 7.0 million tonnes of maize this season”, with the National Food Reserve Agency (NFRA) having been instructed to “purchase only 200,000 tonnes of maize from farmers during this maize purchasing season”. Mr Zambi “cautioned farmers… that NFRA was not doing business” and only purchased maize to store “as security during time of calamities”.

The global maize market situation is far from favourable for Tanzania to enter into overseas sales of maize to markets in the Middle East or Far East. At the end of August 2014, “the International Grains Council raised to a 27-year high its forecast for world corn [maize] inventories,” to 190 million tonnes, an increase of 17 million tonnes from the previous year. This has seen maize prices fall to a 4-year low. According to the commodities website Indexmundi.com, average monthly maize price prices fell by 21% between April 2014 and August 2014 (some 25% lower than the prices prevailing in August 2013, and 47% lower than August 2012 prices).

It is against this background that at the very end of August, an editorial in Tanzania’s Daily News asked what scope there is for UN agencies such as the World Food Programme (WFP) to purchase surplus Tanzanian maize for use in war-affected South Sudan and other food-deficit areas. The editorial suggested that such purchases by WFP in Tanzania could be done through purchasing practices “just as WFP has done previously with local farmers’ cooperatives in Ethiopia”.

Internally within Tanzania, maize is being moved from surplus production areas to deficit areas (from the southern Highlands to central and northern parts of the country), with this helping to stabilise prices of staple foods. In most parts of the country prices are undergoing normal seasonal declines, although in inland border areas higher prices are being sustained because of official and unofficial cross-border movements of maize (for details of structural problems facing regional exports of Tanzanian maize see Agritrade article ‘ Challenge in Tanzania is to link surplus areas to markets’, 3 November 2014).

Production of Irish potato is on the rise in Ethiopia. According to a recent report in the Irish Times, “it is estimated there are one million potato farmers in Ethiopia, planting approximately 160,000 hectares annually.” Production mainly takes place on small plots in the highlands, without the application of fertilisers. According to the International Potato Institute, “Ethiopia may have the highest potential for potato production of any country in Africa, with 70 per cent of its 13.5 million hectares of arable land suitable” for potato cultivation.

Pilot initiatives in Ethiopia are targeting 100,000 potato farmers, since Irish potatoes are seen as having the potential to make an important contribution to household food security. The potential contribution that Irish potato can make to household food security hinges on the nutritional properties of potatoes, their adaptability to climate change and their limited vulnerability to international price changes. However, across Africa poor quality seed is holding back productivity.

It is against this background that “an Irish-led collaboration, the Potato Centre of Excellence, which involves partners from science, business and development sectors and Irish Aid”, with the support of potato sector stakeholders and research establishments, is seeking to share knowledge on potato production across six countries – Ethiopia, Kenya, Malawi, Mozambique, Tanzania and Uganda – where there are thought to be four million potato farmers. Experts consider that the introduction of improved seed varieties could potentially double yields.

Considerable developments in the sector are already taking place in Kenya. A Kenyan research station, working with the International Potato Center (CIP), is working to improve local potato seed, including the development of early-maturing, disease-resistant varieties. Mechanisation is also being introduced to potato harvesting, with the aim of reducing harvesting costs (by up to 29%), reducing losses and preventing the spread of disease. Nyandarua County recently announced that machines had been imported and were available at the Agricultural Machinery Service Station, and local government representatives “urged farmers to join cooperatives” in order to benefit from the use of the new machines.

While considerable benefits are seen to arise from regional cooperation in potato research, the scope for regional trade is more limited, since the bulky nature of potato production makes them ill-suited to intra-regional trade. 

Press reports indicate that the government of Guyana is seeking to conclude a deal for the delivery of 120,000 tonnes of rice to Ghana over the coming year. Samples have already been despatched, and the challenge now is to work out a competitive price for supplying the West African market. It is hoped that this could be the first of a number of deals with West African countries. Oryza.com, a rice sector website, reported in September FAO’s estimate that Guyana’s rice exports for its marketing year 2014–15 would increase to approximately 460,000 tonnes, “up about 15% from about 400,000 tons exported in the previous year”, and that rice production in 2014 was expected to be up a further 6.5%, “mainly due to increase in plantings, higher yields, favourable weather conditions and improvements in agricultural infrastructure, such as drainage and irrigation systems”.

Demand for rice in West Africa continues to grow. In the first 6 months of 2014, Thai rice exports to the whole of Africa were up 118% “from about 2.8 million tonnes exported during the same time in 2013”, to approximately 3.29 million tonnes. The main destination markets in West and Central Africa were Benin Republic, Côte d’Ivoire, Cameroon and Nigeria; other important sub-Saharan Africa destinations were Mozambique and South Africa.

Shipping challenges are now faced in exporting rice to West Africa, given the Ebola outbreak in the region. According to reports on Oryza.com, “shipping companies are hesitant to send their shipping vessels to Africa, with the fear of their crews catching the virus.” According to representatives of the Thai Rice Exporters Association, “operators of dry bulk vessels cannot find crews to man their ships because of fears of possibly contracting the deadly Ebola virus.”

Indian exporters have sought to put the issue in perspective, arguing that rice will be shipped to alternative ports, where it will then be forwarded by road. This, however, will increase the landed cost of rice for consumers. Nigeria’s newspaper Shipping Position Daily has reported that “European ship owners have increased freight rates for cargo and imposed surcharges on crews coming into the West African countries battling Ebola.”

Between February and June 2014, the prices of Thai rice destined for African markets fell by between 6.8 and 9.1%, before recovering in July and August by between 5.6 and 14.6%. Thai rice prices, however, remained substantially below the price levels prevailing in August 2013. 

The World Bank has published a policy research paper assessing the “impediments to market integration in Central and Eastern Africa” for maize, rice and sorghum. The paper analyses consumer price data for 150 towns in 13 countries. Distance and the extent of paved roads (taken as an indicator of road quality) were found to have a substantial effect on market integration, with distance being by far the most important determining factor.

In addition, the paper found “significant border effects for the majority of contiguous countries” and that “markets are more integrated within than between countries.” The causes of significant border effects included the impact of a range of trade policy tools, including:

• export and import bans;
• tariffs, licences and permits;
• restrictive application of sanitary and phytosanitary (SPS) measures and other non-tariff measures;
• customs inefficiencies.

The report noted that many countries in Eastern and Central Africa have “programs and policy regulations seeking to limit exports of … staple goods”.

It was noted that while the aim of these policy measures was often “to tackle problems of food insecurity, these policies reduce the market integration between countries” and can serve to increase food price levels, thereby reducing the affordability of food. This effect, however, is reduced by the scale of informal trade. The paper noted:

• the findings of a USAID study published in 2013 arguing that “official statistics in West Africa may underestimate flows of trade in food by as much as 60%”;
• an OECD report noting that “in 2006 Uganda’s informal exports of agricultural goods to its five neighbouring countries represented 75% of official agricultural export flows”;
• research in 2005 finding that unofficial cross-border exports of staple foods in the Horn of Africa at times “exceeded… official trade by a factor of 30 or more…, constituting over 95% of total trade in these commodities”.

Regional trade agreements were found to contribute “substantially thinner borders”. The depth of the trade integration process was also a factor – the countries in the EAC with the deepest level of integration registered “very low border effects (sometimes insignificant)”.

The analysis confirmed the “negative association between barriers to market integration and food security”. Significantly, it was found that “countries with less integrated domestic markets and thicker borders… have a higher prevalence of food insufficiency.” Countries “with more integrated markets, both domestically and internationally, have lower problems of food insecurity,” with a lack of market integration impeding “the provision of sufficient amounts of food”. The report acknowledged that other factors, such as conflict, may come into play.

The paper also noted that “countries with poorer logistics performance also have thicker borders.” In this context, dismantling transport cartels could help to improve market integration and food availability.

The research also found that dealing with barriers at the border can be as important as infrastructure spending in improving food availability. This is particularly the case for fragile states, where the benefits could be considerable.

Overall, the analysis confirms the view that “removing barriers related to distance, decreasing transport costs and implementing regional trade agreements are appropriate instruments to improve market integration and food security.”

At the beginning of September 2014, Nigerian cassava chip producers expressed frustration at the prices on offer for cassava chip exports to China. Chinese importers were reportedly “offering Nigerian exporters $250 per tonne”. This stands in sharp contrast to prices offered elsewhere – 37.5% lower than the price offered for sales to the EU market (US$400/tonne) and 30% lower than that on the Israeli market (US$350/tonne), for example. Processors have complained that if a price of “less than $400 per tonne” is obtained then cassava chip processing for export “will not be viable”.

These price disappointments come on top of the high financing costs faced in Nigeria and the high internal logistical and shipping costs. The low prices on offer from Chinese importers mean that no exports have yet taken place under the agreement reached between the Nigerian government and the Chinese authorities “to export 3.2 million… tonnes of cassava chips annually”.

The Chinese market for cassava chips will not have been helped by a second year of extremely high global cereals production, which by August 2014 saw prices 11.7% below what they were in August 2013. A second excellent year for cereals production was also enjoyed in China. This will result in an increase in the use of domestically produced Chinese maize in animal feed and a sharp reduction in demand for imported animal feed. China’s cereal stocks – with maize playing the largest role – are now at a 15-year high, at 24.7% of consumption for 2014/15, compared to a low of 18.4% in 2007/08.

The Nigerian government, meanwhile, is continuing with efforts to boost cassava milling to expand local demand for high-quality cassava flour (HQCS). This includes the importation of “six high-quality cassava flour mills”, and forms part of wider government efforts to promote the blending of HQCF with wheat flour, with a view to reducing wheat import requirements.

Press reports suggest that wider efforts to reduce Nigeria’s wheat import requirements are facing problems, suggesting that farmers are abandoning wheat cultivation in favour of other crops, following a failure to find ready outlets for the wheat production stimulated by earlier government exhortation. Farmers expected direct government intervention in support of the marketing of expanded wheat production and, when this did not occur, shifted away from wheat production. Press analysis has suggested that weaknesses in the wheat value chain contributed to this disappointing outcome. Other stakeholders, however, blamed the poor quality of the local wheat produced, compared to the quality of imported wheat, for the failure to sustain the expansion of wheat production. 

According to press reports, the government of Tanzania is proposing the creation of a horticulture board to help farmers defend their own interests, including avoiding low prices for their produce. According to Uledi Musa, Permanent Secretary in the Ministry of Industry and Trade, “horticulture products are high value crops whose demand has been growing,” but little has been done to date to protect the farmers themselves through the government’s efforts to promote the sector. It is in this context that the proposal for the establishment of a horticulture board is seen as important, if the expansion of the sector is to be sustained and supported.

The Permanent Secretary argued that such a board could focus on value addition as the key to expanding the sector and strengthening the functioning of cold storage chains. Horticulture sector stakeholders have welcomed the move.

This initiative taken by the Tanzanian government needs to be seen against the background of renewed investment interest in the Tanzanian horticulture sector as a consequence of the delays in finalising the EAC–EU EPA, which could adversely impact on the exports of the EAC region’s largest horticultural producer, Kenya. 

The 2014 African Economic Outlook (AEO) report has been published, covering both North Africa and Sub-Saharan Africa. The report, published by the African Development Bank (AfDB), OECD and UNDP, maintains that “there is significant scope for growth in intra-African trade in agricultural goods.”

The report notes that in 2012, African agricultural exports were valued at US$57 billion, some 9.1% of African merchandise exports. Between 2005 and 2011 African agricultural trade grew at 14% per annum in value terms. By 2012, “intra-African agricultural trade amounted to US$13 billion, or 23.5% of the total, up 4% from 2005”. Asia received 21.7% of Africa’s agricultural exports (some US$12 billion), up from 16.7% in 2005. However, nearly half of African agricultural exports (US$26 billion) were destined for European markets, where they accounted for 3.9% of Europe’s agricultural imports (up from 2.7% in 2005). The AEO report maintains that a “strategic leap in South–South and intra-African trade” is now under way.

To consolidate the growth in intra-regional trade in agro-food products, the AEO report considers that regional groups in Africa require “strengthened capacity to support the negotiation and implementation of regional agreements”. It maintains that “the elimination of non-tariff barriers, simplification of border procedures – supported by improved regional transport infrastructure – will improve trade efficiency.” It points out, however, that there are also “legislative and institutional gaps in some regional communities” in respect of competition policies and, in particular, mechanisms for dispute settlement (see Agritrade article ‘ Submission on the need to activate the dispute settlement provisions of...’, 8 December 2014).

More broadly the report maintains that “multinationals are investing more in African agriculture,” but “booming commodity investments are not yet creating the industries and services the continent needs.” Multinationals are nevertheless “enhancing Africa’s local agricultural production and involvement in global value chains through local sourcing that gives them an edge in global markets”.

Despite the multinational investment in African agriculture-based value chains, Africa’s “contribution to the global value chains is a mere 1.5%”. This is attributed to the “lack of a reliable planning of value chain activities”, with “no clear link with innovative policies and regulatory development to allow the continent to scale up value chains”.

The report suggests Africa’s “national and regional comparative advantages can be found in low labour costs and low-tech activities” in “cocoa, rice, cassava, pineapples, peanuts and cotton”, with this having the potential to stimulate value chain development in the continent. However, for this comparative advantage to be exploited, it is implied that the current “overreliance on external investors, foreign technology and capacity” will need to be addressed.

There is a growing trend towards contract farming of cassava and other inputs to the brewing industry across Africa, where seven governments have established special tax regimes to stimulate the use of local crops in beer production.

In Uganda, contract farming of sorghum for brewing purposes was first pioneered in 2008 by SABMiller. According to press reports, contracts negotiated with beverage producers are yielding farmers far better returns than traditional marketing channels. It is reported that “contract farming has helped increase acreage under cultivation, improved farmers’ bargaining power and also widened access to credit for farmers organised in groups.” Total annual sorghum purchases in Uganda are estimated at US$11.3 million, with some big farmers registering incomes of up to US$18,914 per season and small farmers around US$1,891 per season. Some 16,000 farmers are now involved in contract farming of sorghum for the brewing industry. However, land and input constraints are reportedly holding back smallholder participation in the supply of sorghum to brewers. Sorghum-based beer now accounts for half of SABMiller’s 55% share of the Ugandan beer market.

In Mozambique, Cervejas de Moçambique now produces its Impala beer largely based on cassava (60%). According to the company CEO, “using locally produced cassava reduces the costs of importing malt, hops and other ingredients in beer production, by avoiding costs related to import and bureaucratic processes”. The number of farmers contracted to supply cassava have increased from 2,000 in 2011 to 10,000 in 2014, with some 10,000 tonnes of cassava purchased annually for use in the production of 30 million small bottles of beer, valued at 14 million meticais (€356,000).

While using sorghum and cassava in Africa reduces the import bill for barley by up to 40%, the special tax concessions negotiated have proved critical to the launch of these new beers, which are priced at around 70% of the cost of mainstream beers. According to the industry market research company Canadean Ltd, the beer market in western Europe is flat, estimated at –0.6% a year, while “the volume of beer sold in Africa is expected to grow 4.6% per year on average from 2012 to 2016, faster than any other continent and nearly double the global rate.” Accessing this growing market potential in Africa, through the production of lower-priced beer capable of attracting consumers away from traditionally brewed alcoholic beverages, is a critical part of the corporate strategies of companies such as SABMiller and Diageo.

In Mozambique and countries such as Uganda, Zambia and Zimbabwe, SABMiller has secured a 75% rebate on the standard excise tax charged on beer. Diageo has secured a similar deal in West Africa for its Ruut beer, which is produced from yams. These tax concessions have been granted on the basis of two arguments:

• their impact on local agricultural production; and
• the less damaging impact of commercially produced beer on public health, compared to traditionally brewed beer.

It is noteworthy that where less favourable tax concessions have been granted (e.g. Tanzania), the growth in consumption of sorghum- or cassava-based beers has been less pronounced. 

In the run-up to the SADC Summit in August 2014, Tralac – the South Africa-based Trade Law Centre – prepared a submission on the need for an effective dispute settlement mechanism for the SADC free trade area (FTA). The submission was prepared following a regional workshop on dispute settlement involving officials from SADC member states, the SADC Secretariat, academics and private sector representatives.

The submission noted that “a special arrangement for the settlement of trade disputes (Annex VI to the SADC Protocol on Trade) was developed as part of the process of concluding the SADC Protocol on Trade,” but that these provisions have never been implemented. The non-application of these trade dispute provisions arose as a result of the suspension of SADC’s wider dispute settlement mechanism (the SADC Tribunal) following appeals to the regional mechanism over Zimbabwe’s land reform programme. The analysis describes the non-application of Annex VI “points to a serious systemic flaw in the structure of the SADC FTA”. While efforts to revive the broader SADC dispute settlement mechanism are underway, current proposals do not take account of “the specific needs of trade governance”.

This is seen as unfortunate, since effective trade dispute settlement arrangements could provide “predictability and certainty for traders and firms”, by ensuring better implementation of agreed commitments. Currently Article 3 of the SADC Protocol on Trade provides for relatively easy unilateral derogations from agreed trade policy commitments, with no scope for appeals by regional trade partners to these unilateral decisions.

The Tralac submission proposed a distinct arrangement for the settlement of trade disputes that is separate from the more politicised work of the SADC Tribunal. It calls for the establishment of a regional trade dispute settlement mechanism along the lines of current WTO practice. This would consist of an initial “panel procedure”, with an “ad hoc appeals tribunal”, quite separate and distinct from the broader, revised SADC Tribunal. This, it is maintained, would provide a low-cost trade remedy mechanism, since “no permanent judges need to be appointed,” and trade experts are identified to act as members of the ad hoc appeals tribunal.

In August 2014 the SADC Summit took a decision on the revitalisation of the SADC Tribunal. However, this saw a narrowing of the scope of the Tribunal. According to further Tralac analysis published in late August, the revitalised SADC Tribunal did not address the specific needs of a regional trade dispute mechanism and is thus unlikely to provide the “certainty and predictability” required to support “the region’s expanding trans-boundary commerce” and the development of cross-border supply chains.

The Tralac analysis reports that “the right of individual standing will be abolished and, unless a special arrangement is adopted, private parties will not be able to bring claims against governments which infringe their rights.” Since the Trade Protocol and annexes “deal with many individual rights”, this development potentially poses serious challenges for the establishment of effective dispute settlement arrangements within the SADC FTA.