IMF roots for cross-border Africa trade to stem rising food insecurity

The International Monetary Fund is appealing to African countries to open up their local markets to commodities from their regional peers as a long-term solution to persistent food shortages.

Last week, the fund released a policy paper urging countries to expand cross-border trade to better deal with the rising food crisis on the continent.

According to the paper How Africa can Escape Chronic Food Insecurity amid Climate Change”, only 15 percent of food imports into the continent are from neighbouring countries.

“African countries have not lifted most of the restrictions even though it could benefit both net food importers and exporters from trading with one another,” states the document authored by a team of African economists.

The report underscores the implementation of the African Continental Free Trade Area (AfCFTA) as a step in the right direction, noting that opening up of markets would further reduce trade costs by 16 to 17 percent.

“In the context of climate change, greater regional trade integration can enhance food availability and affordability,” the paper says. “Combined with resilient storage and transport infrastructure, it can facilitate sales of one country’s bumper harvests — that may have gone to waste — to a neighbouring country facing shortfalls.”

Also read: Africa losing 15pc of GDP growth to climate change

The economists called for robust fiscal, monetary, and financial policies to improve the affordability and accessibility of food products. They are also recommending targeted interventions such as social cash transfers to allow families and small businesses to invest in resilience-building equipment and technology.

According to the paper, the targeted interventions are “more effective at containing inequality than agricultural subsidies”.

Digitalisation has also been encouraged, to improve farmers’ access to early warning systems, mobile banking and other platforms to buy farm inputs and sell output, enabling small-scale farmers to a wider market in the continent.

Financing

Access to credit and financing from private markets for small-scale farmers and traders also needs to be improved to better position Africa as a food-secure continent.

“In the interim, micro-finance or public-private partnerships can help provide credit to people who currently don’t have access through banks,” the authors state, adding that developing the required financial markets to improve access could take time even as the risk is urgent.

The IMF paper follows an earlier report by the United Nations Economic Commission for Africa (ECA), which stated that the war in Ukraine and other economic shocks on the continent have pushed nearly half of its population to the brink of starvation.

The July 2022 report showed that 124 million people in Africa are already starving, 300 million more are at risk of food insecurity and several others spend majority of their household budget on food.

The food crisis on the continent, according to ECA, results from a mix of economic shocks instigated by the conflict in Eastern Europe, the Covid-19 pandemic, and natural calamities like droughts and floods occasioned by climate change.

ECA recommends the utilisation of the African Trade Exchange (Atex) platform, which was created in May this year in collaboration with the African Development Bank, African Export-Import Bank and the AfCFTA secretariat.

The Atex platform aims to ensure Africa’s supply chain resilience by enabling trade of major agricultural commodities and inputs imported from Russia and Ukraine, consequently improving their price stability.

According to the IMF, climate change is intensifying food insecurity, and Russia’s war in Ukraine and the Covid-19 pandemic are also adding to food shortages and high prices.

The fund notes that climate events, which destroy crops and disrupt food transport, are disproportionately common in the region.

According to the fund one-third of the world’s droughts occur in sub-Saharan Africa, and Ethiopia and Kenya are enduring one of the worst in at least four decades.

Countries such as Chad are being severely impacted by torrential rains and floods.

The resulting rise in poverty and other human costs are compounded by cascading macroeconomic effects, including slower economic growth. Supplies and prices are especially vulnerable to climate change in sub-Saharan Africa because of a lack of resilience to climatic events, food import dependence, and excessive government intervention.

Most people live in rural agricultural and fishing communities that can’t afford infrastructure to protect them from adverse weather. For instance, they depend on rain to water their crops, as less than one percent of arable land is irrigated.

Weather-sensitive domestic food production results in heavy reliance on imports, with some 85 percent coming from outside the region.

SOURCE


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