7.6.1 Tax policy
7.6.2. Stock control
7.6.3 "Spontaneous" tenure changes
7.6.4 Relevant exercises
Granting individual tenure rights is one option for addressing overstocking problems. Two reforms intended to improve communal tenure are tax policy and stocking controls administered by national governments.
Unable to control the stocking decisions of others, individual herders will compete for available forage by increasing their individual herd sizes. The net effect is that total profits and economic efficiency will be less than that which could be achieved at carrying capacity. However, stocking levels above those which maximise profit are still profitable, up to open-access equilibrium, where profits equal zero.
One possible external control on the stocking decisions of individual herders would be a livestock tax levied per animal grazed on the range. The purpose of the tax would be to make the cost to the owner of keeping an extra animal equal to the total cost of doing so to the community as a whole. This would include the opportunity costs of the feed the animal eats on the common pasture and which it diverts from the mouths of animals already there, thus lowering production. As illustrated in Figure 7.4, the optimal tax rate from the point of view of the nation as a whole would be one that made total costs (tax cost plus other costs) to producers equal to the total value of output at stocking rate N*. Herders would then have no incentive to stock beyond the level of N*. Of these total costs at stocking rate N*, c* would represent other costs and q* - c* would represent tax costs. However, q* - c* also represents the totality of the profits which would otherwise have accrued to the community of herders, who will probably be violently opposed to the imposition of this tax unless it is redistributed to them. However, this must be done in a way which does not restore the incentive to stock above stocking level N*.
How this works at the level of the individual producer is shown in Table 7.4. It shows the effect of an animal tax (at the rate of $ 129/animal) on outputs and stocking rates. As a consequence of the tax under open-access conditions, the marginal new stockholder wondering whether to put one animal on the (10 ha) range will do so only if the existing stocking rate is less than 0.3 head/ha, which is the (socially optimum) level of maximum profits in the no-taxed situation.
Table 7.4. Maximum, optimum and de facto outputs and stocking rates with and without an animal tax.
* = level of maximum profit (optimal) per ha before tax.+ = level of maximum output per ha.
01 = limit de facto where in the absence of tax, existing stock owner will add one further animal.
02 = limit, de facto, where in the absence of tax, new stock owner will add one animal.
00 = limit, de facto, when tax must be paid, existing stock owner will add one animal.
** = limit, de facto, when tax must be paid, new stock owner will add one animal.
Figure 7.4. Effect of grazing tax on pastoralist production and income.
Jarvis (1984) points out several problems with grazing taxes. First, precise information on the relationship between stocking rate and livestock output would be needed to determine the appropriate tax. This is difficult to do and subject to variability in time and place. Unless adjusted, taxes would remain too high during a drought and too low during a recovery. A centralised government bureaucratic institution would be unable to determine the optimum stocking rate at a particular time sufficiently promptly and would thus be unable to adjust the tax appropriately. Collecting the tax would incur high administrative costs, offsetting much of the benefits resulting from achieving the optimal stocking rate.
According to Jarvis (1984), pastoralist income over the short and long run would also decline. Over the long run, total profits might rise but pastoralists would receive none of the additional profits because they would accrue to the government in the form of the tax.
In the short run, imposing a tax will force herders to reduce their herds dramatically, thus flooding markets and depressing prices. Paying the tax might force pastoralists with small herds yielding only minimum subsistence to reduce their holdings to sub-subsistence levels. However, as a matter of policy, holdings below a certain minimum level could be made exempt. Jarvis believes that the most likely outcome of a livestock tax would be a herder revolt and a political crisis.
There is an urgent need to analyse various tax policy options. Three policies or programmes have been proposed to relieve a perceived overstocking problem. These are:
· improved livestock marketing
· range improvement measures
· cost recovery.
Improved livestock marketing
One of the most widely advocated proposals is to improve livestock marketing to increase the marketed offtake. A variety of measures have been proposed including improved or more extensive marketing infrastructure (sale yards, trek routes, water points en route, transport equipment), higher prices or producer subsidies, better market information and direct government participation in marketing. To the extent that these measures are successful, they will raise the farmer's return on livestock sales and/or lower selling costs. Figure 7.5 plots how these measures will raise the value of output curve and/or rotate the cost curve downwards.
Figure 7.5. Effect of marketing and range improvements on open-access equilibrium.
The result would be to shift open-access equilibrium from N+ to N++ (if both actions occur simultaneously). Thus, improved marketing will tend to increase rather than decrease stocking rates. This apparent paradox can be understood once it is realised that stock owners can increase offtake rates in only two ways: from more favourable herd dynamic parameters or from larger herds. In the absence of the former (which marketing programmes do nothing to address), stockowners will build up their herds in order to take advantage of the higher incomes from higher off-takes that the improvements imply. Whatever may be the usefulness of marketing improvements in raising rural incomes, improving urban meat supplies or as an adjacent to a sound culling programme, they will not stimulate destocking. In fact, they will tend to worsen the problem.
Range improvement measures
These are aimed at improving range productivity or quality and are often proposed to relieve overstocking. Range improvement measures may include reseeding the range, rotational grazing or providing watering points. If successful, these will shift the weight gain/ha curve in Figure 7.2 upwards and, as a result, also the value of output curve (as in Figure 7.5). Thus, incentives will be provided for stockholders to increase herd size. While short-term improvements in range condition may be registered, these are likely to be eliminated in the long term by increases in the stocking rate.
Cost recovery
Proposals are increasingly being made that subsidies currently provided to livestock keepers be eliminated and that the costs of veterinary, marketing and, perhaps, extension services be at least partially recovered from users. While these proposals are motivated primarily by declining livestock service recurrent budgets, they can contribute to solving the overstocking problem. By increasing the costs of livestock keeping, they make it less profitable for farmers to retain low productive animals. As costs rise, farmers reduce herd size, as can be seen from N+ to N++ in Figure 7.6.
Figure 7.6. Effect of cost recovery measures on open-access equilibrium.
Governments could attempt to control stock levels by assigning quotas on grazing rights. As is the case with determining an appropriate tax, timely information on carrying capacity would be needed to make such a system work. In addition, widely acceptable principles for distributing grazing rights among herders would have to be worked out. This would be difficult.
One approach sometimes suggested would be to divide the overall quota of grazing rights in a given area equally among all qualified users. In this case, those having livestock in excess of an individual's quota could seek out persons owning less stock than their quota and negotiate to rent or purchase surplus grazing rights. Establishing such a "market" in grazing rights would assure a flow of income holders of few or no livestock and would provide a mechanism by which larger holders could maintain larger than average holdings. This approach overlooks the fact that in most of Africa, grazing rights are exercised through owning and grazing livestock. In most pastoral societies there is no recognised a priori grazing right apart from that asserted by grazing one's animals; and it may be difficult to obtain public acceptance of such an a priori right.
Tenure change will not result from state action only. Herders themselves may assert privileged rights to rangelands in relation to other herders or groups. At minimum, common property tenures establish some qualifications by which individual rights to use a commons are determined. Qualifications will often be based on some social criterion, such as residence in a village or membership in an ethnic group. Often, these qualifications are not established or enforced by the state, but are nonetheless recognised to be legitimate by all affected.
In the future, it is likely that policy analysts will be faced increasingly with situations where individual herders assert exclusive rights to extensive areas of previously communal rangeland. Attempts at "spontaneous enclosure" have already taken place in several countries, including Somalia, Sudan, Kenya and Botswana.
In central Somalia, land around concentrated borehole development has become intensively utilised and subject to overgrazing. Those living closest to the wells have extended their fences around cropping areas to incorporate extensive range areas as well. Commercial producers and livestock traders, because they are able to employ labour, have enclosed far larger areas than poorer households (Behnke, 1986). Since the late 1960s, collective forms of range management based on claims by clans to grazing areas have broken down, giving further scope to individuals to assert private claims to rangelands.
The Idd el-Ghanam District in south Darfur Province of Sudan is on well-drained soils and provides a refuge for nomadic stock fleeing seasonally flooded areas to the south and the west. Under open-access tenure, local herders are forced to share their wet season grazing with nomads. The result is that the amount of forage available for local use during the dry season is much depleted and the economic welfare of local producers is reduced considerably. Local herders responded by enclosing a portion of the local rangelands for their exclusive use (Behnke, 1986).
As problems with group ranches in Maasailand became apparent, some Maasai refused to allow their traditional grazing areas to be adjudicated as group ranches and argued instead for individual holdings. Jacobs (1984) noted that by 1979, 29 of the 52 group ranches in Kajiado District had passed resolutions calling for the ranches to be sub-divided into individual holdings.
Pressures for individualisation and attempts to enclose rangelands will result from the interaction of a number of social and economic factors. Behnke (1986) believes the myriad of factors can be summarised in terms of a process. The process has three interrelated components:
· a decline in the supply and a corresponding increase in the scarcity value of grazing land· increases in the commercial value of range or livestock production
· decreases in the relative costs of enclosure, costs which are social and political in nature as well as monetary.
Governments can consider a number of options in response to enclosure. One option might be to sanction and accommodate the enclosure process by officially recognising the de facto distribution of tenure rights in law. Such a response would be likely to accelerate the process of enclosure by setting off a scramble by herders to make claims before others. However, "spontaneous" individualisation may have serious implications for stability, equity and even economic efficiency considerations. Policy analysts would need to consider these implications.
Exercise 7.2: Group exercise: Land tenure problems in Alphabeta.
Question 1. Identify and briefly describe the principal land tenure systems in Alphabeta relevant to the livestock subsector. In your view, are communal grazing pastures more accurately described as open access or common property? Explain. What are the principal controls operating under common property systems in Alphabeta?Question 2. How well does the model portrayed in Figures 7.1-7.3 describe rangeland conditions in Alphabeta? Explain. What impact does this have on stockholder investment in rangeland improvements?
Question 3. Although many factors can affect the condition of the range (e.g. drought), do you consider land tenure to be a major policy issue for the livestock subsector of Alphabeta? Why do you think so? How does it affect stocking rates?
Question 4. In Alphabeta, have individual herders attempted to assert private control over grazing land by enclosing previously communal areas? What are the factors behind and circumstances leading up to such enclosure? What has been government's response?
Question 5. What could be done to improve tenure systems in Alphabeta? How might these improvements be geared to overcome the problem of overgrazing and land degradation?
Question 6. What would be the implications for the stability and equity objectives if the Government of Alphabeta undertook to individualise land tenure in grazing areas?
(Hint to instructors. Alternatively, the questions in Exercise 7.2. can be posed about participants' own countries. However it is ILCA's experience that, in the absence of carefully pre-digested data and under time pressure, participants often do not analyse their own country situation rigorously enough).
