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Africa: Crops and Trade, 1
Africa: Crops and Trade, 1
Date distributed (ymd): 021002
Document reposted by Africa Action
Africa Policy Electronic Distribution List: an information
service provided by AFRICA ACTION (incorporating the Africa
Policy Information Center, The Africa Fund, and the American
Committee on Africa). Find more information for action for
Africa at http://www.africaaction.org
+++++++++++++++++++++Document Profile+++++++++++++++++++++
Region: Continent-Wide
Issue Areas: +economy/development+ +US policy focus+
SUMMARY CONTENTS:
Today's series of two postings contains several recent documents
(from the Mozambique News Agency, the UN's Integrated Regional
Information Network, Oxfam International, and Food First)
highlighting the negative impact on Africa of international
policies on key African export crops, including cashews, cotton,
and coffee. While Oxfam International and Food First (in reports
earlier this year available on their web sites) have taken
different positions of the potential for increased export trade to
benefit developing countries, these documents show convergence in
exposing the damage done by rich country protectionism combined
with imposing free trade on the poor.
+++++++++++++++++end profile++++++++++++++++++++++++++++++
World Bank Urged to Pay for Rescue of Cashew Industry
Mozambique News Agency (AIM, Maputo)
October 1, 2002, Maputo
The chairman of Mozambique's Cashew Industry Association (AICAJU),
Kekobad Patel, told AIM on Tuesday that the World Bank ought to
support the Mozambican government in attempts to rescue the cashew
processing industry.
He pointed out that it was the liberalisation of the trade in raw
cashews, imposed by the World Bank in 1995, that had led to the
collapse of the processing industry.
With the export of raw nuts to India encouraged, and the local
industry stripped of protection, the factories found themselves
unable to acquire raw material, and one by one they ground to a
halt. Now it was time for the World Bank to pay for its disastrous
mistakes, and provide the funds to rescue the deeply indebted
processing companies. Speaking at a Maputo conference on
"Public-Private Partnerships", Patel pointed out that cashew had
once been a corner stone of the Mozambican economy. Four years
before Mozambican independence, in 1971, cashew exports (both
processed kernels and unprocessed nuts) amounted to 151 million US
dollars.
Last year, virtually no kernels were exported, and the value of
exported raw nuts was just 11.5 million dollars.
Patel pointed out that the liberalisation imposed by the World Bank
had been strongly opposed both by the factory owners, and by the
Cashew Workers Union (SINTIC). Now, seven years later, their fears
have proved all too well-founded, and the processing
industry is in ruins.
He recalled that the World Bank consultants had argued that
liberalisation would promote competition, which would lead to
greater production. They predicted that within five years the
cashew orchard would expand to produce 80-90,000 tonnes of nuts a
year.
Peasant producers would supposedly receive higher prices for their
nuts, and though some jobs might be lost in the factories, those
workers could earn good money by growing their own cashews.
None of this has happened. Patel pointed out that production has
stagnated. Over the last five years, average annual production has
been 50,000 tonnes of raw nuts, "almost the same as when the
liberalisation policy was introduced".
Whatever gains producers may have made in the late 1990s were
annulled as from 2000, when the producer price for raw cashews fell
significantly. Patel said that, over the past two years, the export
price for raw nuts has slumped by 40 per cent.
He attributed this to the fact that there is only one buyer -
India. It is the Indian industry that sets the export price, and
with the annihilation of the local processing industry competition
to purchase the nuts has disappeared.
Patel said that currently 12 large processing factories are closed
"with investments of about 50 million dollars transformed into
scrap metal".
10,000 jobs in the processing industry had been lost, with severe
knock-on effects in local economies. Towns such as Manjacaze in
Gaza province, or Angoche in Nampula, had been heavily dependent on
the cashew factories. When the factories closed, there
was "a considerable increase in poverty" in these areas.
Cashew industry wages had been about nine billion meticais (380,000
dollars at current exchange rates) a month. That monthly injection
of cash into local economies no longer exists.
The Mozambican balance of payments suffered, because processed
cashew kernels fetch more money than do raw nuts.
Mozambique lost heavily every time it exported a tonne of raw
cashews rather than transforming the nuts into processed kernels
first. Patel put total losses to the balance of payments over the
past five years at 15 million dollars.
"Once recognised as one of the major suppliers of cashew kernels,
Mozambique has now disappeared from the market", Patel accused.
The failure of the policy followed since 1995 was "more than
evident", and Patel called on the government "to make a deep
reflection on the future of the cashew sector".
That had to involve drawing up a "harmonised and sustainable policy
that defends the national interest and promotes the country's
development".
Patel did not believe the current Cashew Master Plan was viable. It
deals almost exclusively with improving the yields from the cashew
orchard: but the stress is not on planting more trees, but on the
expensive use of chemicals to treat the existing
trees against fungal diseases.
Patel believed the costs of chemical treatment were beyond the
reach of most peasant farmers, and it was fundamental to research
into higher yielding and disease resistant varieties of trees.
As for the processing industry, Patel believed it could be rescued
if the government and World Bank were to clean up the debts of
viable factories (while liquidating those deemed not to be viable).
He also called for medium and long term credit lines, at
preferential interest rates, to help relaunch existing factories,
and encourage new ones.
[for earlier reports on this issue, see
http://www.africafocus.org/docs01/cash0101.php> and
http://www.africafocus.org/docs01/wb0104.php>]
Oxfam International
Press Release
US cotton subsidies driving world's farmers into poverty: Brazil
files case with World Trade Organization
27 September 2002
Read the full report: Cultivating Poverty. The Impact of US Cotton
Subsidies on Africa
http://oxfaminternational.org/pdfs/pp020925_cotton.pdf
US subsidies to cotton producers are contributing to mass poverty
in some of the world's poorest countries, according to a report
published today by the international development agency Oxfam.
Government support to the 25,000 domestic cotton producers in the
US totals $3.9 billion annually, more than three times the US
foreign assistance to Africa's 500 million people.
"The US is the world's strongest proponent of free trade, but when
poor cotton farmers in Mali try to trade on the world market, they
must compete against massively subsidized American cotton," says
Phil Twyford. "This makes a mockery of the idea of a level playing
field. The rules are rigged against the poor."
American cotton subsidies are highly targeted to benefit the
largest farming operations. The largest 10 per cent of American
cotton agro-businesses received three-quarters of the total
subsidies.
The Government of Brazil is launching a complaint with the World
Trade Organization, claiming that US cotton support constitutes an
unfair trade practice.
More than 10 million people in Central and West Africa depend
directly on cotton. It is a major source of revenue for countries
such as Mali, Burkina Faso and Benin. The amount of money America
spends on cotton is more than the entire GDP of Burkina Faso, where
2 million people depend on cotton, half of whom live below the
poverty line.
Oxfam says that Africa is losing $300 million a year, based on
estimates from the International Cotton Advisory Council, and that
the withdrawal of US subsidies would raise the world price of
cotton by 11 cents a pound.
World cotton prices have sunk to as low now as any time since the
Great Depression. The US subsidies are pushing prices even further
into collapse.
Oxfam says that the WTO must:
- Ban the dumping of products at prices below the cost of
production;
- Stop export subsidies;
- Restructure price support schemes in rich countries toward less
intensive agriculture and to enhance the welfare of small farmers.
The High Cost of Coffee
UN Integrated Regional Information Networks
http://www.irinnews.org
September 24, 2002
This report does not necessarily reflect the views of the United
Nations
In Ethiopia they used call coffee their gift to the world. But for
the impoverished African country, known for being the birthplace of
coffee, that gift has now become a poison chalice.
World coffee prices have plummeted, Ethiopia's earnings from its
biggest export have slumped by more than a half, and already-poor
farmers face total ruin.
Abba Milki, 80, has grown coffee all his life. "I am standing on
the ground where coffee was first grown," he told IRIN proudly.
"Our ancestors grew coffee, it is engrained in our history. But
soon no-one will be growing coffee anymore in Choche. We cannot
afford to."
With almost perfect conditions, farmers in Choche, near Jimma in
Ethiopia's Oromiya region were once relatively well off thanks to
coffee beans which can be found in almost every spot of this lush,
fertile countryside. But over the last five years that wealth has
been totally eroded.
They now wear tatty, worn out clothes and many have even taken to
selling off the tins roofs which once set them apart from their
poorer neighbours. Many, who grow their beans on government-owned
small 0.75-hectare farms, are also ripping up the thriving bushes
still laden with beans to plant maize, simply to survive.
COFFEE VITAL FOR ECONOMY
In Ethiopia a million people depend on coffee for their entire
income. Some 15 million households benefit indirectly from coffee
sales.
Its importance in securing vital foreign currency cannot be
overestimated. Coffee accounts for about 60 percent of exports -
but in the last few years the crucial dollars secured from coffee
have plummeted from US $257 million to US $149 million per year.
The economy teeters on the brink because of the crash. It poses a
major hurdle to Ethiopia's poverty reduction strategy - whose
central plank is agriculture-led development, such as coffee. It
also promises to throw off course the debt relief formula produced
by the World Bank and International Monetary Fund, which is
dependent on sustainable strong growth in exports.
Coffee also plays an important role in Ethiopian culture. Ethiopia
proudly uses the ancient coffee ceremony on almost all tourist
promotional literature. Any visitor to the country will usually be
invited to a ceremony.
According to experts, farmers in Choche produce some of the finest
organic Arabica beans - the highest quality beans - in the world.
Third world farmers receive a paltry one percent of the final price
of a cup of coffee. Yet the big coffee sellers are making annual
profits in the region of 26 percent.
The crisis is also hitting employers in the region. In a country as
poor as Ethiopia, the average income is around a dollar a day.
Once-wealthy large producing farmers are also now find themselves
totally indebted to banks.
"The bank came the day before you arrived," said Zeleke Mekuria,
with tears streaming down his face. "They want my house. They said
they would take it if I cannot repay the debt, which I can't. Where
will my children live?"
Zeleke, 54, used to employ 150 people on his coffee farm, but now
just 14 workers pick berries on his 14-hectare farm. He has also
cut the salaries from six birr (US $0.70) a day to 3 birr. The
knock-on effects for the local economy are all too obvious.
DIFFICULT TO DIVERSIFY
But turning to other crops for export poses problems. Massive trade
barriers by the European Union and United States have meant
diversification is a problem. Oxfam International warns that the
collapse in prices is not only devastating poor economies. It
argues that it is exacerbating a serious drought in the country and
forcing farmers to turn to cash crops like chat - a mild stimulant.
But it also says there is a way out.
Already some of the coffee grown in Oromiya is being exported under
fair trade packaging to the US. Steve Sellers, from the US-based
TransFair organisation says the US market is crying out for
specialist fair trade coffee at an acceptable price. In the last
year, his company has doubled the amount of fair trade coffee being
imported into the country.
But it still accounts for a tiny fraction of the US market, just
half a percent. However Sellers argues this means they can make
deep inroads and boost the supply of high grade specialised coffee.
ENORMOUS IMPACT
Oromiya Vice President Mohammed Alyi said without help from the
rest of the world the economic and social impact would be enormous.
"Unless reliable solutions are sought the situation might get to
the stage where it is irreversible," he warned.
Oxfam International's campaign has devised a rescue plan for third
world coffee growers - based on reducing supply and the big four
roasting companies agreeing to forgo some of their profits.
But in Choche, the farmers struggle to retain any hope for the
future.
Abba's gnarled hands clutch his walking stick. "All I know is
coffee," he says. "What I don't understand is that people in your
country drink it but I receive nothing. Why should we grow coffee
when all it does is ruin us?"
This material is being reposted for wider distribution by
Africa Action (incorporating the Africa Policy Information
Center, The Africa Fund, and the American Committee on Africa).
Africa Action's information services provide accessible
information and analysis in order to promote U.S. and
international policies toward Africa that advance economic,
political and social justice and the full spectrum of human rights.
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