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PART II

REGIONAL REVIEW


REGIONAL REVIEW

AFRICA

REGIONAL OVERVIEW

The global community has recognized the development of Africa, especially sub-Saharan Africa, as the world’s foremost development challenge. This recognition manifested itself most forcefully at the 1996 World Food Summit, which stressed the need to address the multifaceted factors underlying food insecurity and placed a special emphasis on sub-Saharan Africa. The approval of the World Food Summit Plan of Action, along with a number of recent favourable economic and agricultural developments in many countries in the region, has raised hopeful expectations for the emergence of a more positive trend in economic development and food security in the years to come.

Figure 7A

Figure 7B

General economic performance

Economic performance in Africa improved significantly in 1996, with GDP estimated to have increased by 5 percent compared with 2.9 percent in 1995 and an average of only 1.7 percent over the period 1990-94. In sub-Saharan Africa, in particular, against the background of more than a decade of deep recession, the growth performance over the past two years is encouraging.1 The change in GDP in 1996 was estimated to have increased by about 4.4 percent2 (5.6 percent excluding Nigeria and South Africa), up from 4 percent the previous year and the strongest growth rate in 20 years. GDP growth rates of 5 percent or more were recorded in about 20 of the countries in sub-Saharan Africa, exceeding by a significant margin the yearly population growth rate of 3 percent. Negative growth rates were only experienced in Burundi, the Central African Republic and Djibouti. While still remaining very high, consumer price inflation for the region as a whole dropped from 39.6 percent in 1995 to 31.5 percent in 1996.

Much of the region’s improved economic performance can be attributed to the primary export sector, which was particularly strong in 1996 owing to favourable weather and a productive agricultural season. Such a strong link between overall economic and agricultural performances underlines the relevance of emphasizing agricultural production in the region. Other factors contributing to the improved economic situation include the notable progress made towards macroeconomic stability in a number of countries and the success of the CFA franc devaluation in several countries in the franc zone region.

The year witnessed stronger stabilization and reform efforts in an increasing number of countries. Ghana, Uganda, Malawi, Senegal, Benin and Côte d’Ivoire, for example, strengthened policies favouring private sector involvement in the economy as well as trade liberalization. Several of these countries have achieved unexpectedly strong and sustained economic performances accompanied by lower inflation, suggesting, in the view of some analysts, that the long-awaited rewards of reform may now be forthcoming. For example, Uganda’s real GDP growth of 7 percent in 1996, one of the highest in the region, followed two years of even more striking growth (11.5 and 9.8 percent in 1994 and 1995, respectively), thus further enhancing the credibility of the country’s macroeconomic policies. Moreover, inflation was held at 5 percent, the freely convertible currency remained steady, foreign reserves rose to nearly five months import cover and investment was buoyant, boosted by donor support amounting to more than $500 million a year.

Most countries of the CFA franc zone, in particular Côte d’Ivoire, Senegal, Togo and Benin, have witnessed a remarkable turn around in their economies since the January 1994 devaluation. The real GDP rate of growth of the CFA franc zone in 1996 was about 5.2 percent, up from 2.6 percent in 1994 and 4.6 percent in 1995. Inflation at first erupted in the zone with the devaluation, hitting the urban areas the hardest, but was contained relatively quickly through tight fiscal and monetary policies, price controls, the limiting of wage increases in the public sector and a reduction of some tax rates. For the whole area of the franc zone, for example, consumer price inflation dropped from 15.3 percent in 1995 to 6 percent in 1996; however, inflation still remained in the double digits in a few countries such as Chad and the Congo.

Several factors explain the economic turnaround in countries of the CFA zone. In addition to increases in exports, contributing factors included debt forgiveness and increased official and private inflows of financial resources. Other coinciding events that were not related to the devaluation also contributed to the improved economic situation: for example, new oilfields started production in Côte d’Ivoire and Equatorial Guinea while the socio-political situation improved in both Chad and Togo.

Of all the countries in the zone, the Niger benefited least from the devaluation partially because of adverse climatic conditions and low export earnings from uranium, which continues to command a low market price. Cameroon likewise has not enjoyed the post-devaluation takeoffs that other countries have.

Varied performances are found elsewhere in the region. South Africa’s economy continued to grow steadily as it reintegrated into the world market. However, the growth rate of 3 percent in 1996 was somewhat weaker than had been expected, considering the vigorous expansion in private investment, exports (owing in particular to a successful agricultural season) and manufacturing output. However, a high unemployment rate of about 40 percent constitutes a serious economic challenge as well as a factor of socio-political instability.

The Nigerian economy, still rather unstable, grew by 2.1 percent in 1996, down from 2.5 percent the previous year. After a sharp rise to 70 percent in 1995, inflation fell to 29.3 percent in 1996, its lowest rate of increase since 1991. An appreciable rise in oil production and exports, coinciding with higher than expected world oil prices, improved the short-term outlook.

Economic conditions remained difficult in the Sudan, the Democratic Republic of the Congo and Zambia. The Democratic Republic of the Congo experienced triple-digit inflation, with the total rise in consumer prices amounting to well over 600 percent in 1996. Zambia had to deal with a sharp drop in copper prices and the need, in the first half of the year, to import substantial quantities of maize following the 1995 drought. It also had to contend with the depreciation of the kwacha, persistently high inflation, high interest rates and, consequently, little interest on the part of international investors.

African countries still continue to suffer from high external indebtedness. Despite some countries’ buoyant commodity exports and improved current account balances in 1996, export growth still did not keep pace with the growth of external debt in many countries. The total debt-service ratio for the region, however, declined from 14.9 percent in 1995 to 12.1 percent in 1996. The debt burden in sub-Saharan Africa continues to exert significant pressure on public finances; according to the International Monetary Fund (IMF) 33 out of the 41 heavily indebted countries are in sub-Saharan Africa. A large debt breakthrough, however, came in September 1996 when bilateral creditors (the Group of Seven industrial nations) and IMF officials agreed to a minimum $5 billion plan to offer more generous relief to as many as 20 of the world’s poorest debtor countries.

Agricultural performance

Agriculture has continued to dominate the livelihood and economic performance of African countries, and weather conditions continue to be the major determinant of agricultural performance. After droughts in 1995, good rainfall generally returned to southern Africa and a favourable agricultural season was experienced by the majority of sub-Saharan African countries, with the notable exception of those affected by civil strife. Improved weather and other factors, such as farmers’ response to favourable market conditions for export crops in 1994/95, enabled agricultural production in the region to increase by 4.2 percent in 1996, up from 3 percent in 1995 and 2.3 percent in 1994. While the overall production increase accrued mainly to non-food crops in 1995, the increase in 1996 stemmed from a more balanced growth of both food and non-food crops.

After many years of unfavourable production conditions, all members of the Southern African Development Community (SADC) enjoyed exceptional rainfall levels in 1996, with the exception of Namibia which was still suffering from a persistent drought. As a result, coarse grain production in the subregion was 88 percent above the 1995 drought-reduced level and 39 percent above the average. Wheat production was 32 percent higher than the previous year.

Maize production rose considerably throughout southern Africa. South Africa, for example, produced a record maize crop, estimated to be 112 percent larger than in 1995, and a wheat crop that was 32 percent larger. Lesotho’s maize production doubled while grain production in Zimbabwe also rose significantly, thereby contributing to the country’s return to self-sufficiency. Similarly, Malawi’s 1996 maize crop harvest of 2 million tonnes (up from 1.5 million tonnes in 1995) more than met the domestic requirements of the country and therefore enabled stockpiling.

In West Africa in 1996, record cereal crops were reported in Benin, Côte d’Ivoire, Ghana, Cameroon and Nigeria. The subregion (in particular Côte d’Ivoire, Senegal and Liberia) reached a record rice production of 7.1 million tonnes, 27 percent higher than the previous year. Nigeria’s agricultural output, however, is estimated to have grown by only 1.7 percent compared with 3.3 percent in 1995. Although Nigeria maintained its lead in world cassava production, its production of maize and rice was affected by an endemic shortage of fertilizers.

With a record wheat crop, the total grain harvest in Ethiopia almost covered domestic needs and some reports claim that food imports may soon be unnecessary. Kenya also achieved record levels of wheat production.

Despite the fact that 1996 food production levels reached an all-time high in a number of sub-Saharan African countries, several of which significantly reduced their food import needs, food supply problems remained acute or worsened in parts of the region.

Burkina Faso and the Niger registered major cereal deficits. For the second year running, inadequate rainfall and locust invasions left more than 2 700 villages with cereal shortages in the Niger. Namibia experienced one of its worst rainy seasons ever: very few parts of the country receiving even half of the normal rainfall, which left approximately 180 000 people in need of drought relief food aid. While the 1995/96 maize crop in the United Republic of Tanzania increased from the previous year, the rice and wheat harvests declined, and 280 000 people were left in need of food assistance. A poor year of rainfall in Mauritania left the country with an estimated food deficit of 115 000 tonnes of cereals in 1997.3 Although the agricultural sector in Kenya has grown by a modest amount this past year, the overall food security situation is said to be weakening. Production of the country’s most important food items (maize, wheat and sugar) has failed to keep pace with the growing demand of its soaring population.

Some sub-Saharan African countries enjoyed a particularly successful production year for cash crops, in particular cocoa, coffee and cotton. In addition to higher than average production levels in Cameroon and Nigeria, Côte d’Ivoire, the world’s top cocoa producer, produced an all-time record cocoa crop while Ghana produced its largest cocoa crop in 30 years. Cotton also had a record year in Cameroon as well as South Africa, Zimbabwe and Mali, which enjoyed increased net exports of cotton stemming from a substantial increase in area under cotton. In Ethiopia, despite a record volume of exports, total earnings from coffee in 1995/96 were slightly down from the previous year because of lower world coffee prices. Production surpluses were in fact experienced in all the largest coffee-producing countries such as Côte d’Ivoire, Uganda and Kenya. Production and exports of groundnuts, sunflower seeds, soybeans, sugar and dried beans also expanded in South Africa, aided by the devaluation of the rand.

While currency devaluation has stimulated exports and economic growth in a number of countries, it has also negatively affected food consumers in the short term. Such situations have been observed after the devaluation of the CFA franc4 and, more recently, in countries such as Nigeria and South Africa. In the case of Nigeria, the food index (which accounted for nearly 70 percent of total household expenditure) rose by 71.8 percent in 1996 compared with 46.8 percent in the preceding year, without a corresponding increase in income levels. The strong depreciation of the South African rand also resulted in pronounced consumer food price increases, inevitably accentuating food insecurity, particularly among the 20 percent of urban and 60 percent of rural populations still living at minimum subsistence levels.


BOX 5

POLITICAL STABILITY, DEMOCRACY AND FOOD SECURITY

Despite the democratization process in many countries in Africa (1996 was a pivotal year, with a record 18 multiparty elections held), the region continued to experience political instability and protracted civil wars in many areas. This past year saw political instability resurface in some countries such as Sierra Leone, while in other countries, for example Liberia, civil war was intensified and had devastating effects with respect to cereal production and food supply. Food aid operations were in fact cut back owing to repeated looting and intimidation by the militias, and rice and other basic foods were well beyond the reach of most Liberians as shortages sent prices rocketing in the capital city. Conflict and resulting population displacements continue to disrupt food production and supplies in Burundi, the Democratic Republic of the Congo (former Zaire), Somalia, Uganda and the Sudan, where ongoing insurgency persisted. Overall cereal production in Somalia, for example, was 37 percent lower than the pre-war average. In the Central African Republic, a 7 percent GDP growth estimate for 1996 was forced down to 2 percent, with a fall in fiscal revenue of well over 50 percent owing to a military rebellion in April.

Compounding the obvious effects of war on production, an embargo imposed on Burundi by neighbouring countries not only stifled agricultural production by rendering agricultural inputs inaccessible, but the country’s inability to export tea and coffee (which provides 90 percent of its hard currency) resulted in a devastating revenue collapse. In July 1996, at a summit in the Tanzanian city of Arusha, Kenya, Rwanda, the United Republic of Tanzania, Uganda, (former) Zaire, Ethiopia and Cameroon agreed to impose sanctions on landlocked Burundi until civilian rule returned. On a more positive note, with the resolution of longstanding conflicts in Angola, Ethiopia and Mozambique, countries that had been plagued by civil wars for almost two decades, dramatic recoveries were made this past year in grain production as farmers returned to their homes and land. In Angola, however, despite the large increases in production, the overall economic environment remains fragile and the food supply situation problematic, with several hundred thousand people still relying on external assistance. This is also true for Rwanda, where the influx of hundreds of thousands of refugees returning from neighbouring countries strained the already delicate and unstable food situation, and where more than half a million people were still in need of food aid. Although the agricultural sector is recovering, and agricultural production increased by 15 percent from the previous year, harvests were still 23 percent down on their pre-war levels. Despite good harvests in Eritrea, 750 000 people were in need of food assistance.

Progress towards democratization and the resolution of civil wars and ethnic tensions will no doubt have a favourable impact on economic performance and development in the region. The emergence of a new regime in the Democratic Republic of the Congo has raised new uncertainties but also new hopes in this context. Among other things, continued peace should bring benefits through increased flows of investment and trade, as recently seen in the growth path of the Horn of Africa and southern Africa.


Policy developments

The overall trend of strengthening macroeconomic reform also extended to the agricultural sector. Privatization continued to be a major policy objective as a means to improve productivity and reduce government subsidies on public enterprises that run at a loss. However, the overall degree of government intervention in the economy and in agricultural markets remained significant within the region.

A case in point is Kenya where, despite a strong push for full liberalization in the agricultural sector since late 1992, the government continued to control the trade of vital commodities such as maize, wheat and dairy products. Domestic prices remained low, resulting in a lack of incentives for farmers to expand production. The milling of coffee was opened up to competition, but marketing and grading remained effectively in the hands of the Coffee Board of Kenya. A March 1996 agreement between the donor community and the Kenyan Government included the privatization of agricultural parastatals and the reduction of government intervention in agricultural markets.

Numerous examples may be cited of recent privatization moves in the region. Uganda’s Coffee Marketing Board, formerly a state monopoly, was privatized in 1996. In addition, as part of the process of revitalizing its cotton industry, the Ugandan Government sold a further 11 parastatal ginneries to the private sector; nine plants had already been privatized prior to 1996.

After much controversy, South Africa’s Marketing of Agricultural Products Act was finally implemented in November 1996. It set a 13-month timetable for the dismantling of all state-controlled marketing boards for a wide range of agricultural products, including fruit, cotton, maize, meat, lucerne, wheat, oilseeds and wool.5

South Africa intends to bring about a free market for agricultural produce with as little government intervention as possible. As part of this initiative, the government moved towards liberalization by allowing the private sector to export maize. Domestic maize market prices were deregulated and imports freed in May 1995, while in 1996 export permits were issued by the South African Maize Board, which only two years ago was responsible for the buying and selling of maize on both the domestic and international markets as well as for setting producer and consumer prices.


BOX 6

DEVELOPMENTS IN REGIONAL COOPERATION

Positive developments were recorded in 1996 with respect to the establishment of intraregional trade alliances. At their annual summit, held in Lesotho in August, all the 12 member countries of SADC adopted a free trade protocol which provides for the phased reduction and eventual elimination of trade barriers over the next eight to ten years with a view to building a common market similar to the European Union (EU). The pledge is an essential part of SADC’s strategy to reduce its dependence on aid and to encourage regional and foreign private sector investment. To focus their energies more on SADC, Lesotho, Mozambique and Namibia have decided to withdraw from the Common Market for East and Southern Africa (COMESA).1

The SADC agreement comes at a time when Zimbabwe and South Africa have also agreed in principle to renew a bilateral trade agreement that provides preferential treatment to Zimbabwean exports but which expired in 1992. South Africa is Zimbabwe’s single largest foreign trading partner. The South African/EU deliberations for a preferential trade agreement continue in parallel, with the EU reluctant to allow many agricultural products into the agreement.

March 1996 marked the inauguration of the Commission for East African Co-operation, established by and for the East African subregion and made up of Kenya, Uganda and the United Republic of Tanzania. The commission seeks to establish closer economic ties, coordinate efforts to develop the region, increase agricultural trade within the subregion and lead to the eventual creation of a single common market. It aims to strengthen business ties and create a favourable environment for activities led by the private sector. To initiate the drive to revive the East African Community (which had collapsed in 1977 as a result of political and economic divergences) as well as reducing business costs, the currencies of countries in the subregion were declared convertible in June. It may be several years, however, before the three countries begin lowering tariffs, reducing non-tariff barriers and establishing a common external tariff.

The West African Economic and Monetary Union (WAEMU) ratified a plan for a preferential customs area, aimed at encouraging trade between its member countries, Benin, Burkina Faso, Côte d’Ivoire, Mali, the Niger, Senegal and Togo.

The Government of Ghana signed the Free Zone Act of 1995 into law. This promotes Ghana as a gateway to Europe and West Africa. Through this export processing zone, similar to those of both Togo and Côte d’Ivoire, it is hoped that Ghana will eventually reach a positive trade balance as exports by Ghana and through Ghana increase.

Six coastal states, Cape Verde, the Gambia, Guinea, Guinea-Bissau, Mauritania and Senegal, all members of the Subregional Commission on Fisheries, pledged in April to harmonize their fisheries policies. In particular, they agreed to improve protection and conservation of common fishing grounds by sharing their air surveillance information and equipment.

1 COMESA now groups Angola, Burundi, Comoros, the Democratic Republic of the Congo, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Rwanda, the Sudan, Swaziland, the United Republic of Tanzania, Uganda, Zambia and Zimbabwe.


In Zambia the National Milling Company was fully privatized in December 1996. In Zimbabwe, now that all government marketing parastatals have been converted into wholly owned government companies (with the exception of the Grain Marketing Board), discussions are focusing on how best to change these companies to privately owned concerns. The privatization programme in Côte d’Ivoire has been completed for rubber production and palm oil production and is in the initial stages for cotton, sugar and livestock. The government has now announced a privatization plan for the parastatal cotton company Compagnie Ivorienne pour le Développement des Textiles (CIDT). This plan may set the tone for other franc zone cotton companies. The cotton industry in Senegal is still dominated by the ginning parastatal Société de Développement des Fibres Textiles (SODE-FITEX), the privatization of which is one of the objectives outlined in Senegal’s new Agricultural Sectoral Adjustment Programme (PASA). Another objective is the privatization of the oilseed processing firm Société Nationale de Commercialisation des Oléagineux du Sénégal (SONACOS), and this programme is already under way.

In Ethiopia the parastatal Fertilizer Industry Agency, responsible for the marketing and distribution of agricultural fertilizers, has announced that the controversial fertilizer subsidy scheme would be modified so that only wholesale prices would be regulated. It is hoped that this measure will introduce competition between private fertilizer merchants and allow price reductions for farmers.6

Another important area of policy liberalization has been external trade. Here again, many recent examples illustrate the efforts made by countries in the region towards reforming the trade regime for agricultural products and inputs.

The Government of Zimbabwe further liberalized the trading of agricultural products by allowing producers both to export and import wheat and soybean directly without going through the government marketing board. Now that most of the restrictions on access to foreign currency have been removed, the number of farmers with access to "off-shore" financing for covering production costs and the availability of input items, such as crop chemicals and tractors, have significantly increased. Prior to this last policy development, the government had only permitted those farmers who produced export products to have access to this source of funding. The Government of Zimbabwe, however, retained exclusive rights to export maize even though the domestic marketing of maize has been liberalized. On the whole, unless agricultural produce is imported by a government parastatal (or former parastatal), it is still subject to import duties.

In Côte d’Ivoire, although flour imports were liberalized in January 1996, the 30 percent protection tariff (which is only 5 percent for wheat) acts as a disincentive to imports. By January 1997, rice imports were also freed. The government will remove its annual rice import quota but taxes will be levied on imports at variable rates based on world prices to protect local growers and encourage self-sufficiency. In April 1997 an electronic auction system was implemented for export permits for cocoa and coffee, the intention being to make the awarding of export permits more transparent.

In Senegal, the Caisse de Péréquation et Stabilisation de Prix (CPSP), which acted as the state rice-importing agency, was closed in 1996. In addition to rice, export subsidies were eliminated and imports liberalized for sugar, wheat and flour. The wheat market remains highly protected, however, with a 45 percent import tariff on wheat flour.

In Zambia, the ban on maize exports was lifted in May 1996, but farmers were reported to have been refused export licences during July and August, when the price of maize was at its lowest. In Lesotho, price controls on cereals were lifted in June, along with the ban on maize meal imports.

As mentioned previously, Nigeria experienced an endemic shortage of fertilizers owing to the government’s decision to extend a ban on fertilizer imports in 1996. Although the government has been subsidizing fertilizers, various entrepreneurial practices have prevented the fertilizers from reaching farmers at low costs.

MOZAMBIQUE AND ANGOLA

Mozambique and Angola are often paired together by the development and donor communities because of their similar and concurrent colonial heritage, socialist experimentation, prolonged and exceptionally destructive civil wars and recent transition to liberalized market economies. For more than 25 years, they have endured almost continuous instability as a result of these events. Both countries have evoked images of extreme hardship in the form of widespread war and drought-induced poverty and hunger, vast numbers of displaced and conflict-affected people and numerous war amputees. At last there is some promise for peace and stability. Only by maintaining the current peace and carefully reconstructing their economic base will Mozambique and Angola be able to move forwards and emerge as self-determined nations with distinct and viable economies.

Colonial heritage

Angola’s experience. Angola was the Portuguese colonial seat in Africa. During much of the colonial era Angola’s agricultural sector was dependent on slavery and forced labour until the Portuguese abolished slavery in the late nineteenth century and forced labour in 1961. Up until independence (1975), the economy was strong and diverse, with a solid export base. Angola was the third largest exporter of coffee and sisal, while vegetable oil, tea, tobacco and meat were also exported. Trade extended beyond the limits of Portuguese markets to Europe and elsewhere. In addition, Angola was self-sufficient in all food crops except wheat, and it even produced maize surpluses for export. Livestock played a critical role in the country’s agriculture long before the arrival of the Portuguese. Cattle were used for animal traction and also represented an important store of wealth.

Supporting Angola’s agricultural success was an excellent integrated transport system including port, rail and primary and secondary road linkages. There was a substantial network of Portuguese bush traders who bought produce and extended credit to semi-subsistent peasants as well as to Portuguese medium-sized commercial farmers. There were numerous agricultural input suppliers as well as agro-industries such as breweries, oil processing plants and mills, which provided local outlets for agricultural surpluses. The colonial government had also established a number of agricultural research stations. Oil reserves, and to a lesser extent timber resources, of Cabinda district, provided substantial export revenue; however, the district of Cabinda was only integrated into the colony in 1946. Although representing a much smaller percentage of GDP than oil or agriculture, diamond mining also contributed to the generation of foreign exchange.

Mozambique’s experience. As a Portuguese colony, Mozambique’s economy functioned predominantly as a supplier of raw material for Portuguese-based agro-industries (e.g. cotton, copra, tea, sisal and cashew) with a few notable exceptions, such as sugar which was processed locally. The agricultural sector comprised a few plantations, several thousand commercial concessions (settler farms with long-term, liberal usufruct rights) and approximately 1.5 million African smallholder farms. The colonialist economy operated on a system of forced labour. Mozambican peasants were obligated to provide free labour to cotton and rice production or, alternatively, to public works projects located in various, and often distant, regions of the country. The institution of rural taxes induced Mozambicans to seek employment on plantations and at the mines in neighbouring South Africa. In addition to the exploitation of agriculture, the colonial authorities extracted significant revenue from transport services provided to British landlocked colonies as well as from the export of prawns.

Independence and agriculture under socialist systems

The socialist system. After more than a decade of multiple independence struggles, Portugal granted all of it’s African colonies independence in 1975. A high percentage of Portuguese settlers fled the newly liberated colonies and deliberately destroyed the property and animals they were forced to abandon. As a result, this mass exodus of Portuguese left an enormous economic and managerial vacuum. Mozambique and Angola initially established similar soviet-style, one-party, Marxist-Leninist regimes: FRELIMO (Frente para a Libertação de Moçambique) and the MPLA (Movimento Popular de Libertação de Angola). Factories and processing facilities were nationalized, plantations were converted into state farms, prices and marketing margins were administered at nearly every stage of the production and distribution chain and all marketing of produce and agricultural inputs was centralized and controlled by government-owned marketing boards or parastatals. Both countries established lojas do povo which were stores that sold goods at government-fixed prices through a rationing system. In Mozambique, FRELIMO attempted to collectivize widely dispersed rural communities into communal villages and production cooperatives.

Agricultural performance under socialism. Both the Angolan and Mozambican Governments favoured state farms, ignoring peasant farmers while spending scarce foreign currency on imported agricultural equipment and inputs for highly mechanized state farms. Neither government had the managerial capability to run the state farms effectively and, as a consequence, both productivity and production rapidly declined. Angolan coffee production suffered a great infestation one year after independence because beans were not picked on time but left to rot and attract pests. Coffee prices were set so low that farmers dug up coffee trees and replaced them with cassava; coffee exports fell from 218 700 tonnes in 1973 to just 47 200 tonnes in 1980, a mere 21 percent of the 1973 level. In the case of maize, Angola went from being a net exporter (112 000 tonnes) in 1973 to being a net importer (142 700 tonnes) in 1980.7 Similarly, Mozambique’s cashew, rice and maize production dropped more than 50 percent between 1975 and 1980. Sisal and copra production dropped by 15 and 25 percent, respectively, over the same period.8 It has often been noted that, given their extremely limited human resource capacity, one mistake of both FRELIMO and the MPLA was to overcentralize and overadministrate.

Civil war. Another important factor contributing to the poor economic performance of these newly formed socialist countries was civil unrest. The degree of insecurity caused vast numbers of rural households to abandon their farms and relocate to urban centres. In Angola, UNITA (União Nacional para a Independência Total de Angola) was one of several factions which fought against Portuguese colonialism and was later the sole form of opposition to the MPLA government. It was well organized, highly disciplined and adequately supplied by many loyal farmers. UNITA exploited coffee-, oil- and timber-producing areas that were under MPLA control. Angola soon became geographically, as well as politically, divided with MPLA controlling urban centres and UNITA controlling rural areas. In contrast, RENAMO (Resistência Nacional Moçambicana), the opposition to FRELIMO in Mozambique, was formed after independence and sometimes looted rural communities and sabotaged economic activity by repeatedly blowing up transport and hydroelectric power infrastructure. RENAMO was not well organized and did not forge strong links with agricultural producers. These prolonged civil wars demolished the physical and economic infrastructure of both countries, particularly in Angola when the war resumed and intensified after the 1992 presidential election results were released.

Economic liberalization in Mozambique

Mozambique began a process of market liberalization in the early 1980s. A landmark conclusion of the Third Party Congress in 1983 was that the current agricultural development strategy emphasizing state farm production was not working and that more support should be granted to the private and family farm sector. In order to provide greater production and marketing incentives to this sector, price controls on fruits and vegetables were removed and fixed prices on other agricultural commodities were increased. The following year, Mozambique joined IMF and the World Bank and, within three years, had launched a structural adjustment package of broad market reforms known as the Economic Rehabilitation Programme (PRE).9 The programme addressed macroeconomic distortions and imbalances, market liberalization and privatization.

Market liberalization. Beginning in 1988, producer and consumer prices were gradually liberalized. Many fixed prices were replaced by mandatory minimum prices and later by recommended minimum prices. The latter were to serve merely as a reference to traders and to provide some leverage for farmers. Prices of 22 agricultural products were freed in 1993, and consumer price controls were retained only on bread and wheat flour. There were, and still are, a number of non-agricultural consumer goods, such as cooking fuel, which remain under price controls.

During the same period, international trade was progressively liberalized. Cotton and cashew prices have always been controlled, even during the colonial era. However, the method of calculating boarder prices of cashew and cotton was adjusted to reflect the international market more closely in 1994. In accordance with the 1991 tariff code, import tariffs were to be simplified into five rates ranging from 5 to 35 percent. The definition of product groups was to be clarified and exemption criteria minimized in order to reduce the need for discretion to be used in applying tariffs. The code also stipulated that all export taxes, with the exception of those levied on raw cashews, would be limited to 0.5 percent in 1991 and, at a later stage, completely eliminated. The government also instituted a significant reduction in the export tax on raw cashews, which was expected to result in improved farmgate prices and increased production. Under PRE provisions, there should be no export tax on any commodity beyond the year 2000. Currently, the raw cashew tax is the only one remaining. Although export licence restrictions have been substantially reduced, the application process for import licences continues to be complex and cumbersome.

Privatization. The 1989 privatization programme began the process of selling off state farms and enterprises. To date, nearly all state farms and more than 500 small-, medium- and large-scale enterprises have been privatized, including all cashew processing plants and the customs offices. Lojas do povo have also been abolished, and the government has become progressively more tolerant of private traders. The state still has interests in sugar production, cotton ginning and fishing. Ginneries historically had contracting relationships with small-scale cotton producers. Currently, these ginneries are operating under joint venture concessions with the government. While traditionally supplied by large estates, joint venture sugar mills are considering contracting arrangements with small farmers as well. It is important to note that while farming operations have been privatized, all land is still owned by the state.

The 1991 law providing for the restructuring all state enterprises changed those firms that had not yet been privatized into "public" enterprises that are required to operate along commercial lines with improved record-keeping and greater financial accountability. The Foreign Investment Law, enacted in June 1993, cleared the way for greater foreign investment in Mozambique. The largest investors to date are Portugal and South Africa, and the most favoured sectors have been agriculture and tourism.10 This law also allowed for the opening of two foreign banks and an insurance company in Maputo.

Correcting macroeconomic distortions and imbalances. In an effort to address macroeconomic distortions and imbalances, the Mozambican Government has enacted a series of standard structural adjustment measures. Devaluation of the national currency has reduced the difference between the parallel and official exchange rates from 2 100 percent in 1989 to 3.6 percent in 1995. While devaluation makes Mozambican export crops more attractive to foreign buyers, there is a cost in terms of the increased burden of importing equipment and other material required for reconstruction and rehabilitation. Such is the case for revitalizing sugar mill operations. Credit extended to parastatals had previously been essentially unlimited and unmonitored, but limits have now been imposed and more standard international banking and reporting procedures have been adopted. The government has also raised interest rates and set controls on growth in the money supply. Largely as a result of these measures, inflation dropped from 163 percent in 1987 to less than 50 percent in 1996.

The Mozambican Government has instituted a hiring freeze, expanded and improved tax collection and reduced the level of spending on certain programmes in order to close the gap between government revenue and spending and to decrease the deficit. External debt was 400 percent of GDP in 1994, while the debt service ratio has been almost continually declining since 1990: from 162 percent in 1990, it had reached 77 percent in 1996.11

A strategy for agriculture. Mozambique has good agricultural potential for basic grains as well as a number of cash crops such as cashew, cotton, sisal, tea, tobacco, groundnuts, sunflower oil, citrus and vegetables. The northern portion of the country has more reliable rains and better soils, while livestock is limited to tsetse fly-free areas of the south. Communications and transport links between the north and the south are weak: at present each region is better connected to international markets. Although transport, energy, fisheries and tourism hold excellent economic promise, agriculture represents approximately 30 percent of GDP and employs 80 percent of the active population. The vast majority of Mozambican farmers have approximately 1 ha of land; yet, together, these plots comprise 95 percent of all cultivated land area. Most farmers are very poor and seasonally food-insecure. Fewer than 30 percent have off-farm income opportunities.

Given the importance of agriculture, the development strategy for Mozambique logically centres on the agricultural sector. In cooperation with donors, the government has designed a five-year sector-wide programme, PROAGRI, which lays out priorities and strategies in dealing with the expansion of agricultural production, poverty alleviation and natural resource conservation. The emphasis of the programme is on planning, coordination and capacity building within the Ministry of Agriculture and Fisheries.12 There has been some concern expressed that the programme is too narrowly focused on production at the expense of off-farm opportunities and post-production aspects of agriculture such as marketing and processing.

Issues in Mozambican agriculture today

Revitalization of agricultural production. The peace accord to end the protracted civil war was finally signed in 1992. Vestiges of the war, however, haunt rural areas in the form of hidden landmines,13 banditry, demolished infrastructure, poverty and virtually non-existent markets for producer and basic consumer goods. Exacerbating the problem was a severe drought in 1992. As a result, approximately 80 percent of total cereals available in 1992 was derived from food aid (72 percent) and commercial imports (8 percent).14 Since then, food aid has been slowly tapering off with lingering programmes for the extremely vulnerable, such as food-for-work arrangements on specific rehabilitation projects and the provision of seeds and agricultural tools for resettlement. Preliminary estimates for 1996/97 suggest that food aid and commercial imports have dropped to just 10 percent of cereal supplies. Local cereal production has displayed repeated increases, rising from a 3.4 percent increase in 1994 to a 30 percent increase in 1995 and a further 34 percent increase in 1996. Continued growth in agricultural output will depend increasingly on the availability of productivity-enhancing inputs such as fertilizer or improved seeds and less on area expansion. Cashew, copra, cottonseed and sugar-cane production have been expanding at a more gradual rate than grains. The future performance of the agricultural sector will depend largely on input and credit availability, the rehabilitation of processing facilities and rural infrastructure and market outlet development.

Marketing. Less than 30 percent of Mozambican farmers market surplus production. Groundnuts and then maize are the most commonly traded commodities. A number of significant constraints impede the diversification and expansion of agricultural marketing. The rural trade network is composed of an estimated 9 564 commercial establishments, of which only 61 percent were in operation in 1995. Transport costs are very high, while movement throughout the country is still restricted by instances of banditry. Owing to war-related sabotage and neglect of maintenance, only 30 percent of the road network is suitable for travel, and storage facilities are severely limited. Warehouses of the Instituto Moçambicano de Cereais (IMC), the Mozambican grain marketing board, are seriously underutilized. Irregularly enforced pan-territoral minimum reference prices prejudice the marketability of produce. The lack of liquidity and absence of rural credit limit the volume and geographic spread of trade, and transaction costs are soaring as traders resort to the use of barter. Circulation taxes and outdated and burdensome licensing requirements discourage new entrants to rural markets.


BOX 7

RECENT DEVELOPMENTS IN MOZAMBIQUE’S CROP AND FOOD SUPPLY

An FAO/World Food Programme Crop and Food Supply Assessment mission visited Mozambique in April 1997 to estimate the country’s 1996/97 production of food crops, forecast cereal import requirements for 1997/98 and determine the likely food aid needs. The mission found encouraging developments in the crop and food supply situation, but nevertheless estimated that considerable amounts of food aid would still be needed.

Reflecting the natural increase in population and the timely reintegration of returnees and demobilized soldiers, the total area planted to cereals and other food crops in 1996/97 is 6 percent higher than last year. The total 1996/97 production of cereals is estimated to be 11 percent higher than the previous year. Production of cassava, the other major staple, has also increased, while the production of beans and groundnuts is estimated to have increased by 8.5 percent over the previous year.

Owing to these increases in both cereal and other food production, the overall food supply situation in Mozambique in the 1997/98 marketing year (April/March) is expected to be better than last year, with a coarse grain surplus of an estimated 63 000 tonnes. However, in 1997/98 the country will have an estimated import requirement for rice and wheat of 205 000 tonnes.

The mission estimated that approximately 172 000 people will require food assistance for four months and that a further 77 000 people might require assistance for an additional three months, contingent on the evaluation of the second-season crop performance since the crop fields of the first harvest were inundated by floods. Heavy rains in several areas in the central region caused floods that brought considerable damage to crops, notably on farms along the Zambezi, Pungue and Buzi Rivers.

Even with a promising second harvest, however, there would still be a significant number of people who would have difficulty coping with shortages without receiving assistance. There are families in some areas in the normally food-deficit south as well as in parts of other provinces who are not likely to be able to meet their consumption needs from their own production or afford to purchase food on the market. The population in the south has never been self-sufficient and, therefore, has usually depended on the market to secure its requirements. For many food-deficit rural areas, lack of infrastructure remains a serious bottleneck. As a result, prices tend to be high for those who rely on the market. While families that grow cash crops such as cotton and cashew nuts and those who find employment in non-farm sectors can afford to buy the food they need, many low-wage earners and the unemployed are unable to have access to adequate food.

The mission estimates that, out of the total cereal import requirement, 102 000 tonnes will be covered by commercial imports, leaving a deficit of 103 000 tonnes to be covered by food aid. Emergency food aid is estimated at 10 000 tonnes, including 1 000 tonnes of pulses, which can be secured through local purchases. Overall, the 1997/98 food assistance requirement represents 46 percent of that provided in the previous marketing year.


Land tenure. Mozambique’s current land law dates back to the colonial period. A new law has been drafted but is still to be reviewed by Parliament. All land is currently owned by the state, which issues 50-year renewable leases granting liberal usufruct rights whereby the holder may sell and bequeath improvements and access rights. Authority to assign access rights and the issuance of a title depends on the size of the landholding. Although the actual limits vary according to land use, smallholdings are under the jurisdiction of provincial authorities and do not require titles, while larger holdings are titled and administered by the Ministry of Agriculture and Fisheries and holdings exceeding 10 000 ha are in the domain of the Land Commission. Although Mozambique is generally considered a land-abundant country, only 3 to 4 million of an estimated 36 million cultivable hectares are classified as good-quality and easily accessible to markets. The more densely populated Maputo, Gaza and Inhambane provinces all have imminent land constraints, especially when fuelwood collection, hunting and grazing needs are factored in.

Economic liberalization in Angola

In 1984 the Government of Angola acknowledged the failure of state farms and began to allocate land and other resources such as inputs and technical assistance to farmers’ associations. Discussions arose concerning liberalizing prices, increasing the role of the private sector, decentralizing management and allowing more financial autonomy for public enterprises. The drop in international petroleum prices in 1985 and 1986 had disastrous effects on the already troubled balance of payments. This prompted the government to initiate an economic and financial "cleansing programme" (Programa de Saneamento Económico e Financeiro), and later that year the government applied for membership in IMF and the World Bank. Similar to Mozambique, Angola adopted PRE, a reform programme which addressed market liberalization, macroeconomic distortions and imbalances and privatization.

However, Angola’s route to market liberalization has been more circuitous, utilizing a longer succession of occasionally awkward policy instruments to reach a similar end. Planning in Angola was further hampered by a resurgence of the civil war in 1992. Although the government and UNITA signed a new accord in 1994, not all negotiated terms have been fulfilled. The deadline for the complete demobilization of soldiers and withdrawal of the UN peace-keeping forces (UNAVEM III) was extended, and the country remains physically and politically divided. The fact that long-lasting peace is not yet assured impedes the implementation of market liberalization measures and compromises economic performance.

Market liberalization. Market liberalization began gradually in 1988 with the removal of price controls on fruits and vegetables. In 1991, the government disbanded all price controls with the exception of seven basic products (flour, bread, rice, sugar, cooking oil, condensed milk and soap), which were assigned margin restrictions a short time later. The government also maintained fixed prices for another group of basic consumer items, including rent, public transport fares, electricity and water. There are currently three sets of price systems: fixed, free and fixed margins. Adding a further complication, parallel market prices diverge widely from administered prices. The international donor community continues to apply pressure to eliminate all price controls. In 1991, the government created the Caixa de Crédito Agropecuario e Pescas, an agricultural and fisheries credit programme for small and medium-sized farms and enterprises. Unfortunately, the war undermined the successful implementation of the programme, and rural credit remains virtually non-existent today.

The Foreign Investment Law restructured taxes so that they are more favourable to foreign investors. Import quotas and authorization from the Ministry of Commerce have been abolished. Nevertheless, serious impediments to trade persist. There are taxes, fees, licensing requirements and a heavily bureaucratic process of documenting all transactions. The complexity of the system lends itself to instances of abuse.

Privatization. Two laws enacted in 1988 and 1991 governed the process of privatization. The laws granted preferential treatment to Angolan nationals, imposed a ceiling of 49 percent on private ownership and created a system of allocating shares of the enterprises being privatized to managers and workers. By 1992, hundreds of state-owned companies and farms had been divided into smaller private units through a less than completely transparent bidding process. Private investment is expected to increase with a greater assurance of long-lasting peace.

Correcting macroeconomic distortions and imbalances. Correcting macroeconomic distortions in Angola has not been as straightforward or successful as it has with Mozambique. In battling hyperinflation, the government issued a new currency in 1990 which was devalued by 95 percent the following year. The government then established a complex system of multiple exchange rates which functioned through taxes levied on imports and exports at different rates depending on the type, use and destination of the commodity. In order to curb spending, the government instituted a hiring freeze and tightened access to credit by state enterprises. Over the past six years, approximately two-thirds of the budget has been spent on defence and administration. In contrast, agriculture has received on average just 1.5 percent. The share of the budget allocated to defence recently fell by 50 percent while the share allocated to administration increased. Although accounting and auditing standards were introduced in 1989, IMF and the World Bank continue to exert pressure for de facto improved banking practices and reporting procedures.

Despite the war, Angola has managed to demonstrate some limited improvement in a number of standard macroeconomic measures. The differential between the parallel and official exchange rates has diminished substantially. Inflation dropped from 4 000 percent in 1995 to approximately 2 000 percent this past year.15

Issues in Angolan agriculture today

Revitalization of agricultural production. Angola has excellent agricultural potential. The diversity in agro-ecological regions allows for the production of both temperate and tropical crops, and livestock is expected once again to play an important role within the sector. Although mining, including oil and diamonds, constitutes the largest share of GDP, agriculture is still a significant sector of the Angolan economy, representing approximately 20 percent of GDP. Despite war-related disruptions, more than 80 percent of the population is still dependent on agriculture.

With the resurgence of the war in 1992, violence, banditry and crop vandalism rose sharply; rural infrastructure was completely demolished; and the country was littered with landmines. As a result, farmers and even whole villages chose to flee to the relative safety of urban centres, and agricultural production plummeted, particularly in MPLA areas. Because UNITA was dependent on local sources for its food supply, UNITA disturbed producers as little as possible and even provided some extension services. Until now, the country remains divided, despite the removal of most check points. The worst year in terms of production of cereals and cassava was 1993/94. Since then, output has been expanding, yet nearly half of 1996/97 cereal needs will nonetheless be met by aid and commercial imports, even though cereal production increased by 100 percent between 1995/96 and 1996/97.

Angola is in an early phase of resettlement. Many rural families have settled in temporary locations and plan to continue their migration in stages. WFP and non-governmental organizations (NGOs) continue to distribute food and agricultural seeds and tools. WFP expects 1998 to be its final year of involvement in food aid. There is some concern that the youth who are currently concentrated in urban centres may not return to the rural lifestyles they left behind. Nevertheless, rural areas are beginning to normalize and, as a result, marketing activities have gradually picked up. This is expected to continue as greater freedom of movement is gained.

The government’s current programme for agriculture logically focuses on rehabilitation and capacity building; however, the funds for such activities are derived mostly from donors and not from the national budget. The donor community, in collaboration with the Angolan Government, has developed the Community Rehabilitation Programme. Like Mozambique’s PROAGRI, but not limited to the agricultural sector, it is an integrated programme that coordinates donor efforts.

Given the current attention on markets, the scarcity of agricultural labour and historic patterns, the Ministry of Agriculture and Rural Development has proposed a programme which emphasizes animal traction, fertilizer use and private commercial farm enterprises. Currently, donors, NGOs and international research institutes are working to rebuild and improve local seed stocks.

Confidence building. One major impediment to progress in Angola is the lack of confidence in nearly all aspects of Angolan life: political, economic and social. The reigniting of the war in 1992 and the continued postponements in the reconciliation process cast doubt on future prospects for consolidating peace. Many Angolans fear for their physical safety. In 1990, the government dealt a devastating blow to the public’s already shaky confidence in the currency. In issuing new kwanza notes, old notes were exchanged at par with the new ones but only 5 percent of the value was distributed in cash: the rest was to be converted to government securities. Rural people who were unable to make the exchange ended up with worthless old notes, while, for those who were able to secure new notes, the maximum 5 percent provided insufficient cash to cover immediate expenses, including food.

Oil and diamond wealth. Angola is blessed with oil and diamonds. Oil alone accounts for as much as 90 percent of exports and half of GDP.16 Ironically, it is the extreme lucrativeness of this sector that acts as a curse as well. The huge concentrated export earnings tend to cause chronic overvaluation of the local currency and inflationary pressure, especially when the government spends rather than invests these earnings. Some argue that the government is preoccupied with this sector at the expense of socially more important sectors such as agriculture, education and health.

Land tenure. Angola recently enacted a new land law. Like the case of Mozambique, the state owns all of the land and grants liberal access rights in the form of long-term release leases. Unfortunately, the law is not without fault. It allows multiple ministries to grant access rights independently, and there are several different cadastres mapping and recording land information. Under this form of administration, multiple users are likely to be assigned rights to the same parcel of land and conflicts are bound to arise.

CONCLUDING REMARKS

Macroeconomic reform and market liberalization have undoubtedly contributed to economic stabilization in both Mozambique and Angola. However, after more than three decades of civil unrest, the most significant factor is clearly the establishment of peace. The emphasis is now on rehabilitation and the creation of conditions that will induce development, including fine-tuning recent macroeconomic reforms. Currently, rehabilitation programmes are being sponsored by the donor community. The future of both countries depends heavily on the form of this reconstruction. With respect to the agricultural sector, the most important issues are the guarantee of personal safety, recapitalization, production increases and productivity improvements, marketable output diversification, creation of market opportunities and agro-industrial linkages, and human and institutional capacity development. Underlying these issues is the need for rural finance and clearer, less-conflicting land rights.

1 The remaining part of the section focuses on sub-Saharan countries, as the North African countries are discussed in the context of the regional review for the Near East and North Africa.

2 IMF. 1997. World Economic Outlook. Washington, DC.

3 Economist Intelligence Unit. Country Report – Mauritania (1st quarter 1997).

4 See FAO. 1995. The State of Food and Agriculture 1995. Rome.

5 Economist Intelligence Unit. Country Report – South Africa (1st quarter 1997).

6 Economist Intelligence Unit. Country Report – Ethiopia (1st quarter 1997).

7 World Bank. 1994. Angola strategic orientation for agricultural development: an agenda for discussion. Washington, DC.

8 World Bank. 1996. Mozambique agricultural sector memorandum. Volume II. Main report. Washington, DC.

9 Tinker, V. 1992. Structural adjustment and agricultural pricing in Mozambique. Review of African Political Economy, 53: 25-42.

10 South African Economist. July 1993. Drumming up investment.

11 World Bank. 1993. Mozambique policy framework paper for 1994-96. Washington, DC.

12 Programa Nacional de Desenvolvimento Agrário (PROAGRI): Draft III. 1996. Maputo, Ministry of Agriculture and Fisheries.

13 Some 10 000 Mozambicans have been landmine victims, with 8 000 of them amputees. It is estimated that hundreds of thousands of landmines are yet to be found.

14 Boletim de Segurança Alimentar. 1991/92. Maputo, Department of Food Security, Ministry of Commerce.

15 FAO. 1996. Agriculture and macroeconomy: linkages and sector policy. Angola agricultural recovery and development options review. Working Paper No. 14. By S. Kyle. Rome.

16 World Bank. 1994. Angola: strategic orientation for agricultural development. Washington, DC.

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