Africa’s failing food markets must be fixed to fight hunger

Comment: A handful of big corporations are making big profits controlling Africa’s food trade, while doing nothing to increase its climate resilience

In 2011, more than a quarter of a million people starved to death in Somalia. Eleven years later, the United Nations warns that an even worse famine is on the horizon.

More than 300,000 people in Somalia will experience famine by December, despite promises made in 2011 that it will never happen again. The looming famine comes as food prices in Africa have hit record highs this year.

Around the world, food prices have risen. Yet consumers in many African countries, especially in East Africa, have had to deal with price increases far greater than the global increases.

Much of the blame for high food prices has been placed on the Russian-Ukrainian war. While this has undoubtedly exacerbated the scarcity resulting from the impacts of climate change, the primary reason is much closer to home.

The reality is that African food markets are broken, exacerbating the effects of climate change caused by emissions to which Africa has contributed little.

Drought in Somalia and parts of Kenya has led to record food prices, with commodities such as cornmeal reaching historic highs. As food prices soar, food security continues to deteriorate.

Yet African countries have enormous potential to sustainably increase production and reverse their dependence on imports, if they can circumvent faulty food markets. The so-called African Cop, Cop27, cannot shy away from tackling the issues of broken markets head-on to build resilient regional value chains.

Probing failing markets starts with taking a closer look at value chains and the hold of big business in African food markets.

Farmers are increasingly dependent on a small group of suppliers and buyers. For example, trade in agricultural products and key inputs such as fertilizers is controlled by a handful of transnational corporations. This was evident in Zambia in 2018, where four poultry hatcheries linked to these companies were fined for setting trading terms and setting production quotas in a long-standing cartel affair. Other competition cases against transnational corporations are ongoing.

Growing networks of global and regional corporate relationships, anchored by mergers and acquisitions, effectively undermine competition. Large transnational corporations effectively govern global and regional value chains, positioning them perfectly to exploit vulnerabilities in food systems.

Recent research indicates that farmers in countries such as promising Zambia receive low prices for their produce, while consumers in East Africa pay high prices for their food, and middlemen along the way capture most of the value.

Why higher prices?

Center for Competition, Regulation and Economic Development (CCRED) research shows July maize prices in East Africa were 30-40% higher than they should have been .

Currently, markets are working against, rather than towards, the necessary adaptations. Maize prices show huge margins between demand and supply areas, which are not justified by transport costs.

Market concentration among buyers means that farmers are often offered low prices for their produce, reducing their income. These farmers, who could easily produce more, choose to produce less because of unfairly low prices. Maize production in Zambia in 2022 is 25% lower than last year as farmers are caught between high fertilizer prices and low crop prices.

Yet, at the same time, consumers in urban East Africa are paying exceptionally high prices for food on the shelves.

CCRED analysis suggests that margins throughout the value chain translate into super profits for large traders and processors. This situation is particularly devastating for low-income households, who often use around 40% of their income to buy food.

Cross-border trade does not take place efficiently with limited infrastructure and a small group of logistics operators dominating the market. As climate change intensifies, production volatility can easily be exploited by companies with this significant market power.

Sustainable food systems

African food markets require systemic transformation, and three actions could make a big difference.

The first concerns investments in the infrastructure necessary for the expansion of irrigation. About 95% of cropland in Africa is rainfed, which creates a substantial risk in times of drought.

Second, markets need improved monitoring, with a focus on how climate change affects production systems. Large amounts of data are collected by private market players, who use it to increase their lobbying power and increase their profits. The same data, if publicly available, could ensure that farmers receive adequate prices for their products and that consumers are not overcharged.

Finally, there must be effective arbitration of the markets and a strengthening of the competition authorities. The burden of proof must be placed on the large corporate gatekeepers who are currently able to distort the markets in their favor and abuse their dominant position.

Malik Dasoo is a sustainable agriculture researcher at the African Climate Foundation. Simon Roberts is Professor of Economics and Senior Research Fellow at CCRED, University of Johannesburg. Ntombifuthi Tshabalala is an economist and lecturer at CCRED.

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