Chapter 12. Trade and economic reforms in Africa^[192]

12.1 Introduction

One of the most contentious policy debates in Africa concerns how domestic, regional and international agricultural markets should be organized. Most African governments initiated programmes of agricultural market liberalization in the 1980s as part of economic structural adjustment programmes. Yet many remain unconvinced of the most fundamental elements of the process. Some governments openly contend that agricultural market liberalization has contributed to the crisis facing small farm households across the continent, that private sector response and international trade has been too slow and too weak to spur development, and that the state should get back into direct distribution of strategic inputs and/or commodities and restrict regional and international trade to achieve food security.

The academic literature on agricultural market reform in Africa also ranks among the most divided within the field of economic development. While some scholars find that market reform and trade liberalization has generally supported agricultural growth and food security, a growing literature has explained the poor record of reform in terms of inadequate attention to the institutional foundations of markets and poor infrastructure, all of which lead to impeding growth. This literature has reinforced the common lay perspective that policy reform and trade liberalization has been a false promise.

An alternative view examined in this chapter is that agricultural market and trade liberalization has not actually been implemented, and hence its effects cannot be measured. Although the UNCTAD 2002^[193] report shows that LDCs are moving in this direction, implementation is rather selective and not complete. It is the countries in which liberalization has been most severely criticized, such as the former settler maize economies of eastern and southern Africa, where reform has been largely de jure rather than de facto. While it is difficult to control for all relevant factors, some evidence indicates that countries currently implementing agricultural market and trade reforms are performing no worse in developing their agriculture sector and improving food security, and in some cases clearly better than those implementing only de jure liberalization. Perceptions that African countries with increasing export orientation have had a stagnant per capita GDP and have not experienced a reduction in the incidence of poverty are based on a false premise and suffer severe measurement problems.

It is unlikely that market reforms will have the same impact in a country with open trade as in one where trade is still restricted. Trade liberalization is associated with faster economic growth when accompanied by comprehensive domestic macroeconomic reforms. There is a perception among some countries that regional trade liberalization policies have failed. There is no doubt opening up Africa to global trade integration will present domestic challenges in the form of fiscal pressures and short term adjustment costs^[194]. Reversing these policies would be an act of bad faith and would take away the little confidence domestic and international private firms have in the policy environment. Instead, states need to continue with the process of regional economic liberalization to achieve the much needed economic integration of Africa. It is debatable whether African countries should continue with the process of multilateral economic liberalization in the face of continued agricultural support measures by OECD countries.

Trade liberalization in Africa has not been reciprocated in terms of better access to markets of African producers and manufacturers in industrial countries. Massive subsidies afforded to agricultural producers in some developed countries and other forms of protection have hindered Africa’s efforts to upgrade capacities and alleviate poverty. Increasing agricultural exports in the context of oversupply and correlative lower prices in world markets is not rewarding for African countries. African countries have drawn insignificant benefits from their participation in the international trading system. Agricultural support measures employed by developed countries need to be reviewed and simultaneously, provisions for preferential and differential treatment should be extended to African exports. For example, if tariff escalation is dismantled, there will be no duty or quantitative restrictions for imports of raw tropical products. Mobilizing the political support for constructive market reform will require seriously confronting the incentive dilemmas not only within African governments, but also within those of developed countries.

The first part of this section will discuss the extent to which domestic, regional and international reforms have been implemented. The following part discusses the preliminary or potential impacts of these reforms in Africa, and the final part identifies some of the challenges of reforming markets at domestic, regional and international levels.

12.2 Agricultural trade and market reforms in Africa

African countries are at different stages of reforming their domestic, intraregional and extra-regional agricultural markets. Governments have been successful at reforming less sensitive commodity markets but have been slow at reforming the more sensitive ones. Several regional Free Trade Areas (FTAs) have been established in Africa but extra-regional agricultural trade is still restricted. It is expected that building preferential conditions for expanded intraregional marketing will take place prior to the lowering of trade barriers between regional trade groups and with the rest of the world.

Domestic market reforms

In Africa, the conflicting goals of maintaining food prices that are profitable for producers but affordable to consumers have been pursued through controlled marketing systems. Subsidies have been used to raise prices artificially for producers and lower them for consumers. SSA farmers need to be helped to invest, especially when they are facing agricultural prices below their production costs, but agricultural subsidies became fiscally unsustainable and led to domestic cereal market reforms in several African countries in the 1980s and 1990s. Management of this fiscal problem is often construed as misplaced antagonism to agricultural subsidies in SSA, given their use at incommensurably higher levels in industrialized countries. Domestic reforms in SSA meant modifying state interventions and policies to reduce marketing costs and reduce government budget costs. The core policy changes that African countries have been implementing include:

• removal of barriers to private sector involvement (e.g. licensing; movement controls on inputs and outputs);

• deregulation of consumer and producer prices;

• elimination of taxes and subsidies (implicit and explicit);

• privatization of state marketing or processing enterprises;

• abolition of official monopolies (and agents of the state) and the opening of trade to competition.

A broad assessment of the agricultural reform in Africa shows three basic patterns.

• First, some governments have implemented a committed programme of market reform. Examples in eastern and southern Africa would arguably include maize and fertilizer marketing in Mozambique and Uganda. Mali and Ghana are two other countries commonly cited for their relatively steady adherence to cereal market reforms^[195]. This category would also include countries where reforms may have been temporarily reversed but over time have moved to a fundamentally market-oriented system (e.g. the United Republic of Tanzania’s food markets). It is important to note that these cases are neither success stories nor failures when measures such as growth in GDP per capita and incidence of poverty are employed. On the other hand, the adherence to market reforms, for example, in cereal markets, has improved household food security.

• A second path includes countries that have openly resisted reform or reimposed controls after some experimentation with reform. This category is characterized by transparent resistance to liberalization (e.g. maize in Zimbabwe after 1998).

• The third form involves de jure liberalization and de facto state control of marketing, where the state maintains control while ostensibly implementing liberalization. The fertilizer markets in Zambia and Ethiopia and coffee market in Malawi also exemplify this category^[196]. It is difficult to argue that countries which have followed this path have succeeded or failed to reduce the incidence of poverty but it is clear that private sector-led agricultural development has been severely stifled.

A close examination of countries in southern Africa reveals that many of the most fundamental elements of the reform process either remain unimplemented or were reversed within several years.

Zimbabwe

Price controls on maize meal were reimposed in 1998, five years after the Government eliminated them under a 1993 World Bank/IMF structural adjustment loan programme. The Grain Marketing Board (GMB) has remained the dominant buyer of grain throughout the reform process^[197]. This Board has reverted back to a two-tiered maize pricing structure, selling maize at a lower price to large-scale milling firms than it does to other buyers. The GMB has also remained the sole legal exporter and importer of maize, and continues to offer pan-territorial and pan-seasonal maize prices as it did prior to the reform programme. While this policy environment has provided niches for new entry and investment at certain stages of the maize supply chain, notably in assembly, local milling and retailing, it continues to impede private investment at other key stages. It has been argued^[198] that policies that favour communities in remote rural areas can be used as part of the poverty reduction strategy, but that these should not impede sustainable economic development of other regions. Poverty reduction policies that improve conditions for private sector investment in these regions will assist in extending the benefits of market reforms to outlying areas.

Zambia

The former state maize marketing board, NAMBOARD, was abolished in 1989 but since 1992, the government has designated various parastatal or private companies to distribute fertilizer on its behalf. The Food Reserve Agency, formed in 1995 and initially intended to play a limited role of holding maize buffer stocks, became the country’s largest distributor of fertilizer in 1997 and 1998. In 1999 with donors increasingly calling for the government withdrawal from fertilizer distribution, the Government responded by contracting private companies as logistical agents to distribute fertilizer to recipients designated by the Ministry of Agriculture. The designated agents received a flat fee for every tonne distributed. When state enterprises work hand-in-glove with selected agents, commodity market liberalization is incomplete. These government fertilizer programmes have continued distribution at subsidized prices, with repayment rates generally under 40 percent, undercutting private firms’ ability to distribute fertilizer at commercial prices^[199]. After almost a decade of aid-conditionality agreements with the World Bank, new entry of commercial fertilizer firms has been limited due to the uncertainties associated with government distribution programmes.

Ethiopia

As part of aid-conditionality agreements, the Ethiopian government has curtailed the operations of its official state marketing board. However, in 1995 it permitted the creation of regional holding companies which enjoy near-monopoly rights for the distribution of fertilizer in their respective regions. Two large private companies have been forced to reduce significantly their level of participation in the fertilizer market because regional governments have been actively promoting the holding companies while simultaneously raising barriers to private sector companies.

Kenya

Aid-conditionality agreements pertaining to maize market reform commenced in the late 1980s with the Agricultural Sector Adjustment Operation of the World Bank and the Cereal Sector Reform Programme of the (EU). The reform process has been marked by increased political interference in the decisions of key cooperative and joint-venture marketing organizations^[200]. Rent-seeking arrangements that created resistance to reform in the early stages of the process have been re-established within the evolving “market-oriented” institutions that have developed since liberalization, a phenomenon that has been observed more widely in other countries^[201]. In the maize sector, the state-owned marketing board has continued to support maize prices in certain areas^[202]. Maize import tariffs, marketing board price supports, and relatively high transport costs have combined to make maize prices in Kenya among the highest in the world, particularly among countries where maize is a staple crop^[203].

These examples show that many policy barriers continue to inhibit the development of competitive input and commodity markets. There may be legitimate objectives underlying the government actions creating these policy barriers, but it would be inappropriate to evaluate the effects of private sector response to liberalization in such environments. These cases illustrate how de jure market reform can be implemented in such a way as to maintain de facto control over the system. In such cases, the market reform process clearly proceeded in a manner that was unintended by its advocates. Even though farmers in SSA compose the majority of the population, evidence is presented later to show that a smaller portion of these farmers participate in the market as net sellers while the majority are net buyers of food from the market. In these circumstances, price supports to farmers will raise prices for staple food and could render net food buyers insecure.

Intraregional trade liberalization

The liberalization of domestic markets in Africa is taking place at a time when there is increasing renewal or creation of a number of regional trade arrangements. Countries in SSA share common colonial histories and characteristics, especially administrative and legal institutions. An increasing number of countries are coming together to forge stronger trading links among themselves. These trading blocs tend to allow for free movement of factors of agricultural production, agricultural commodities and services. Intra-Africa trade could prove to be a key avenue for achieving sustainable development of economies and preparing for competition and globalization. Increased regional integration in trade and investment is expected to lead to an expansion in the agricultural sectors of exporting countries and an overall improvement in the region’s competitiveness.

Under regional trade liberalization programmes, the core policy changes involve:

• eliminating procedural barriers to free trade e.g., import licences;

• eliminating tariff and non-tariff barriers for intra-region trade;

• avoiding recourse to import bans and export prohibitions;

• eliminating import levies and export tax;

• adhering to a common external tariff in accordance with regional and WTO obligations.

Not all countries are signatories to regional trade protocols and even after signing the protocols, trade tariffs still continue because the level of preparedness is low. Regional agreements that have been active in the 1990s include the West African Economic and Monetary Union (WAEMU), the Regional Integration Facilitation Forum (RIFF) formerly the Cross-Border initiative (CBI), the southern Africa Customs Union (SACU) and the Central Africa Economic and Monetary Community (CAEMC). Regional trade agreements have also been created under the Southern African Development Community (SAADC), the Common Market for eastern and southern Africa (COMESA), the Commission for East African Cooperation (EAC), the Indian Ocean Commission (IOC) and the Economic Community of West African States (ECOWAS) (see Table 12.1). With the exception of WAEMU, members of the other regional bodies also belong to one or two other trading blocs^[204].

Table 12.1 Membership in Regional Trade Agreements of selected African countries

Extra-regional trade reforms

Regional trading blocs may include free trade areas (FTAs) but extra-regional tariffs remain restrictive. The restrictions on extra-regional trade have been lowered to a maximum of 20 percent in the case of West African countries, but in southern Africa, for example, national tariffs are as high as 35 percent. According to Subramanian et al., a number of countries in Africa made significant progress towards opening up their economies to international trade during the 1990s. The number of countries with open trade regimes has increased from 7 in the 1980s to 25 in the late 1990s^[205]. Using the IMF’s assessment of trade regimes, Table 12.2 demonstrates that Africa currently has the most restrictive tariff regimes. Africa also has the highest average level of tariffs and tariff revenue as a ratio to GDP. Countries in eastern and southern Africa are more highly protected than the remaining countries in Africa.

Despite these high tariffs, WTO agreements exempt Least Developed Countries from tariff reductions and allow lower commitments and longer implementation periods in developing countries compared to developed countries. The majority of African states face difficulties in balancing their budgets and cannot afford provision of support programmes and export subsidies to match developed countries.

Table 12.2 IMF Trade Restrictiveness Index, Africa and other regions, 2000

Note: for definitions of the various regimes and groups, see IMF Occasional paper No. 196 Washington DC, Subramanian et al. 2000 Trade and trade policy in Eastern and Southern Africa.

12.3 The impact of market and trade liberalization

At the domestic level, market reforms have a potentially positive impact on consumers, millers, traders and producers in Africa. Domestic agricultural policy reforms can increase competition, reduce costs and risks to farmers, traders and consumers. Governments which opened up domestic markets earlier than the setting up of FTAs were likely to be in an advantageous position to capture the benefits of new regional trade opportunities. In addition, small farmers could move towards a more specialized commercial production system if risks in cereal markets could be reduced and overall marketing costs for inputs and outputs were reduced.. Initial indications, however, show that the benefits of trade liberalization have been skewed in favour of consumers and against farmers.

The impact of domestic market reforms on food security

The part of the food marketing system that has been most affected by the reform process in each country has been at the stages of milling and consumption. For decades prior to the reforms, maize meal consumption in urban and grain-deficit rural areas was predominantly in the form of a refined sifted meal processed by a few large-scale roller milling firms. These registered milling firms were integrated into the state’s grain channel. Governments fixed milling and retail margins based on the milling cost structure. A second form of maize meal, wholemeal, was consumed in rural areas where grain supplies were available. Cross-country studies in eastern and southern Africa indicate that unit processing costs for hammer-milled maize meal are typically less than half those of the refined roller-milled meal, which is significant given that about 30-50 percent of the retail cost of maize meal during the period of state control of marketing operations was comprised of milling margins^[206].

The governments of Kenya, Zambia, and Zimbabwe in 1993, and of Mozambique in 1987, eliminated controls on private grain trading, deregulated maize meal prices, and eliminated subsidies on maize sold to registered millers. In each country, the large-scale millers swiftly lost a major part of their market to small hammer mills, whose numbers rapidly expanded in urban areas. Widely viewed during the period of state control of marketing operations as a product having negligible demand, whole maize meal by 1994 accounted for 40 percent-60 percent of total urban meal consumption in Zimbabwe, Kenya, and Zambia^[207]. The increased availability of wholemeal at 60 percent to 75 percent the cost of roller meal had partially or fully offset the adverse effect of eliminating consumer subsidies on roller meal in these countries. Similar benefits have been achieved in rural grain-deficit areas that were formerly dependent on refined industrially produced meal prior to the reforms. Household surveys carried out in the 1993-1995 period indicated that low-income consumers in particular shifted quickly to hammer-milled meal

Long-term benefits of programmes to reform cereal markets were also expected both at trader and producer levels. The removal of official prices was associated with producer price increases, creating more incentives for farmers to intensify production through increased use of inputs. Between 1986 and 1992, marketing margins for millet and sorghum fell by 20 percent. Since marketing costs account for 40-60 percent of the price consumers pay for staple cereal commodities in the countries reviewed, the reduction in marketing margins represents an opportunity where production incentives and household food security were improved^[208]. The bulk of the evidence suggests that the savings in marketing costs are passed to producers in the form of higher prices. In Ethiopia, the benefits to surplus white teff and maize producers were evident in a producer price raise of 2 percent to 20 percent. More remunerative prices were expected to lead cereal producers to adopt more commercial and less subsistence production strategies^[209]. The case of grain marketing reform in Ethiopia between 1990 and 1997 was associated with higher prices in major grain-producing areas and lower prices in major grain deficit areas. For traders, the benefits included an opportunity to specialize in trader operations including buying in surplus areas, storage, transportation and selling in deficit areas. The reduction in the risk of cereal trading and the elimination of restrictions on grain movement contributed to a stable market in a manner that reduced overall cereal marketing costs. In their review of export crop liberalization in Africa, Shepherd and Farolfi^[210] found it premature to draw any definite conclusions but confirmed that producer returns have been higher and payments more prompt than under the former marketing arrangements. Financial and input market development remains a challenge as these markets are given a chance to develop for the first time.

For countries that have not reformed their commodity markets, reforms can reduce constraints that continue to inflate costs in the food system. Policy reforms are only part of the overall on-going programme of market development and they will not resolve all the problems of food security in Africa. Governments still have a vital role to play in developing key market institutions, infrastructure provision and in contract law and enforcement. While most reforms in Africa have improved output and input marketing, development of credit markets remains a problem.

Impact of trade liberalization on agricultural productivity

There is a strong correlation between export expansion and economic growth but the challenge is whether small farmers in Africa can participate effectively in international specialization^[211]. Such participation is only possible if farmers’ productivity can increase and the costs and risks of engaging in trade are reduced^[212]. As producer prices rise and farm input costs are reduced, farmers are able to invest and commercialize their production activities, leading to structural transformation.

Although there is some evidence that output marketing reforms in Africa have been associated with increases in land and labour productivity at an aggregate level, much of the increase is due to shifts in crop mix and the geographical location of production rather than the intensification of existing farming systems^[213]. There is even less evidence that food marketing reforms have promoted intensification of the key food crops. Crop mix shifts have often been towards crops whose output markets were not liberalized (e.g. cotton in Burkina Faso and Mali, groundnuts in Senegal and coffee in Rwanda). However, this does not imply that cash cropping incentives have not benefited from marketing policy reform in key subsistence crop sectors. It has been shown that the ability to ensure reliable and low-cost food for rural households as purchasers of food is an important determinant of their ability to diversify into higher value non-food crops. Cash crop growers have benefited directly from pre-harvest support provided under commercial out-grower schemes. The development of credit markets to finance commercial cereal production remains a challenge^[214].

Impact of reforms on agricultural trade

Regional integration is occurring as evidenced by an increasing trend in trade volumes^[215]. The countries that benefit most are those with the capacity to respond to the new opportunities conditioned by the domestic reforms carried out prior to regional free trade areas (FTAs). It is strongly suspected that the volume of trade among countries who are members of regional FTAs will increase significantly, but less sure that this trade expansion will be extended to the rest of the world. It is also a challenge for SSA to increase intra-FTA trade in the context of lower import protection on highly subsidized agricultural exports from industrialized countries. Cotton and tea exports from the region have been able to displace imports from Asia. This same impact has been observed in West Africa where Sahel livestock products are substituting for non-regional imports which are often heavily subsidized^[216]. The current picture in COMESA shows more export concentration in regional trade than extra-COMESA trade. While the CFA franc had a remarkably long stability from 1947 to 1994, it hindered competitiveness of countries in the West African Monetary and Economic Union (UMEOA). The overvaluation of the CFA franc meant that EU agricultural imports into the region were cheap. With devaluation in 1994, the international competitiveness of countries in the CFA franc zone improved and opened up opportunities for intra regional trade in meat, cereal and other products. However, increased regional trade has not prevented increases in food imports from third countries, namely wheat and poultry.

An alternative view is that trading blocs are not always good for international trading. Trading blocs create tariffs and barriers which inhibit free trade with third parties. The reverse argument is that international trade is not an end in itself when it links trading partners with highly differentiated levels of productivity and competitiveness. Trade analysts have shown that increased intra-African trade occurs at the cost of reducing trade with the rest of the world, helping to explain the continued under-trading of Africa on the global market. Intra-region trade is diverting trade from outside the trading blocs but no evidence suggests there has been trade creation. If partner-country production displaces production from more efficient non-members, this reduces welfare but when partner country production displaces higher cost domestic production, there is trade creation which enhances welfare. According to the IMF 2001 Economic Outlook^[217], it is more likely that trade diversion is taking place in Africa because of the higher trade barriers and relatively low levels of efficiency. The RIFF trading bloc may have reduced trade with the rest of the world while creating a relatively small expansion of intra-bloc trade. By contrast, the CAEMC and WAEMU show no contraction in extra-regional trade. While these results are preliminary, the overall implication is that regional trade integration has not as yet been a vehicle for substantial extra-African trade creation, even though extra-regional trade is not an end in itself.

A study by Mengistae et al^[218] in a few selected African countries showed that exporting activities contributed a premium of 11 to 28 percent to productivity growth. One source of this gain is due to economies of scale possible only by a production scale larger than for the small domestic market. They also found that direct exporters were four times more productive than indirect exporters. Those exporting to destinations outside Africa were significantly more productive than those exporting within the region. This productivity growth is interpreted as evidence of “learning-by-exporting”, a process of inexpensive flow of technical information to exporters from their clients that lower unit costs or improve product quality. Other evidence of the benefits of openness suggests that greater openness to trade can boost long-term growth, largely through the impact on domestic competition and investment.

Impact of trade liberalization on extra-regional agricultural trade

Although the volume of exports from SSA shows an increasing trend, earnings do not show a similar picture. Trends in the world prices of commodities of importance to the region are an important factor in this weak performance. Between 1997 and 2001, cotton prices fell by 39 percent, coffee prices by 66 percent, food price declined 31 percent and agricultural raw material price by 20 percent, Table 12.3. The decline in the terms of trade is the major reason for the marginalization of the region. Despite the growth in exports from SSA, the share of SSA in world exports and imports has declined, because SSA exports/imports are growing less quickly than world exports and imports. The expansion of exports without any world wide efforts to stop the current slump in prices will not produce the expected impacts at the local level.

Domestic support programmes in some developed countries lead to cheaper imports into Africa, which weakens her capacity to supply these products regionally. This can be illustrated by the case of EU beef export subsidies. Imports into West Africa displaced Sahel meat exports to these countries^[219]. Such programmes in a number of OECD countries, have hurt millions of Africans who depend on earnings from sugar, cotton, meat, groundnuts, fruits and vegetables exports for their livelihood. Some high post-UR tariffs are for tobacco in the United States at 350 percent; for groundnuts and coffee in Japan at 555 percent and 30 percent respectively and for maize to the EU at 84 percent.^[220]. Nevertheless, many others have benefited from preferential access above world prices. On the other hand, a reduction of these domestic support programmes is also viewed as a threat to food security among net food importers in Africa as there appears to be little room for manoeuvre in ensuring food security through a growth in agricultural productivity and more effective market coordination. The impact of eliminating export subsidies on world prices and food security is not well researched.

Table 12.3 Change in price indices of selected primary commodities of importance to SSA, 1997-2001 (1997 = 100)

Source: UNCTAD, 2001. Economic Development in Africa: Performance, Prospects and Policy Issues. New York.

12.4 Conclusion

Substantial controversy remains over the effects of agricultural market reform in Africa. It has been argued that a primary cause of this confusion stems from differing perceptions as to whether the reforms were actually implemented. This review of food and input market liberalization in eastern and southern Africa shows great variation in implementation. Kherallah et al. show that reforms were not fully implemented in most countries and that policy reversal was observed in a number of cases. Reforms went further in markets related to food crops than in export crop or input markets, because government revenue derived from marketing boards involved in the export crop sector were generally positive, but were negative in food crop marketing where pressures to maintain low consumer food prices prevailed. In analysing the extent of liberalization across a range of 13 African countries, Coulter and Poulton 2001 suggest that in only three (Mali, Senegal and South Africa) have reforms been “unambiguously proliberalization”. In the remaining countries there has been a tendency to implement “second generation” controls which can undermine incentives for private sector involvement in marketing activities. Uncertainty over the sustainability of policy reform appears to be a main factor in the private sector’s perceptions regarding the investment climate^[221]. Reform implementation appears to have occurred most comprehensively for commodities that were not the most strategically important and in countries facing fiscal crises. In other countries, particularly the former settler economies where white maize remains the primary staple food, fundamental aspects of market liberalization remain unimplemented; others were reversed after a short period. Perhaps the most common path of reform implementation has been the adoption of some key reforms that legalize private trade, mixed with continued or new government activities that erode its profitability. Governments have typically defended this approach by arguing that markets are unable to perform certain social functions, and that direct government programmes are still necessary. In practice, this has left the door open for large-scale state programmes channelling key resources to selected beneficiaries - generally not the poor^[222]. This approach has often prevailed over strategies based on public investments to overcome market failure problems but which do not enable public officials to choose directly how commodities are distributed.

In this context, reform programmes have been implemented in such a way as to preserve patronage linkages not unlike those that existed before the reforms were implemented. These activities have clearly affected the risks and incentives for private sector investment in agricultural markets. Cases such as these, where some aspects of liberalization have been implemented, but where key features of state allocation of resources remain intact, contribute to the analytical problems of assessing the effects of the reforms or even reaching consensus on whether they have occurred. The weight of the empirical evidence indicates that in the minority of African countries in which agricultural policy reform has largely been implemented and sustained, the growth response has been relatively encouraging. There are market failure problems, but explanations for such problems have emphasized under-investments in complementary public goods and market institutions and have tended to neglect the importance of unresolved policy barriers. In such cases, therefore, frequently-heard conclusions that liberalization has failed to produce its intended effects may be inappropriate.

The co-existence of relatively low levels of productivity in Africa and the availability and widespread use of technical knowledge and productivity-enhancing inputs in many other parts of the world indicates the need for attention to the barriers to the adoption of productivity-enhancing inputs in African food and agricultural systems. So far, agricultural marketing reforms have replaced often unreliable, high-cost, and centralized forms of state marketing with more open markets that may be competitive but often lack information and infrastructure, and are poorly integrated with other key activities. On the input side, financial market failures restrict farmers’ access to credit and thus constrain the demand for productivity-enhancing inputs, which in turn limits private sector investment in input production and delivery systems.

At the international level, the tariffs imposed by African countries across trading blocs are among the highest in the world. Given the limited reforms that have been implemented and the history of trade policy reversal in Africa, the credibility of an open African trading policy remains low. Few African countries have taken advantage of WTO agreements to lock-in their commitments to open trade particularly with trading partners from industrial countries. Like South Africa, other African countries could seek reciprocal free trade agreements with advanced industrial country partners in order to secure market access for their exports, which is currently conditional, partial and unilateral^[223]. Reciprocal free trade agreements may have the additional benefit of eliciting higher levels of FDI and technology flows.