AGRA 2019 Annual Report: High Level Summary of Political Economy Analysis

Political economy issues remain the critical constraint to policy predictability and private sector investments in agricultural value chains. AGRA's Regional Food Trade Programme undertook political economy analyses in 13 countries to assess the government's ability and willingness to shift towards a more open, market-oriented approach to achieving food security via efficient and predictable trade in food staples. The study assumed a four-stage process, which included a detailed analysis of the political, social, economic, and regulatory context to offer context-specific, actionable insights. The analysis also involved an independent review of policy documents and reports, consultations with stakeholders in the public and private sector, and mapping of investment flows, legislative agendas, and political and policy decision-making processes. The findings of the political economy analysis revealed several broad categories of issues affecting regional cross-border trade and predictability in food markets. Non-tariff trade barriers (NTBs) were identified as a major constraint, with a tangled web of rules, fees, high-cost services, arbitrary taxes, trade controls, restrictions on issuance of permits, subsidies, and others strangling regional trade in food in Africa. Ad hoc export or import controls were also prevalent in most AGRA priority countries, disrupting private sector behavior and investments in the market. Information and data gaps were also evident, with serious data gaps around food production, trade, prices, and climate monitoring in almost all the countries where AGRA is present. The program will prioritize this area of work and attempt to address the gaps through building capacities of governments and/or private sector in building reliable data and information systems for enhanced policy predictability and investments. Strategic food reserves were also identified as a challenge, with countries struggling with operationalization of initiatives. Poor implementation of food reserve initiatives entails unplanned state interventions through procurement or release of stock into the market, often at prices and volumes that are not informed by market dynamics, causing a distortionary effect to the private sector. Staple foods standards harmonization and implementation were also identified as a thorny issue in eastern, southern, and West Africa, where regional economic communities are grappling with food standards harmonization. Aflatoxin contamination was also identified as a common feature in southern, western, and eastern Africa regions for key specific value chains such as maize and groundnuts. Informal cross-border trade was also prevalent in the region, with at least 60% of all agriculture trade in the region being informal and usually carried out by women. Informal cross-border trade in agriculture products is exacerbated by high costs of formalization, limited physical infrastructure, lack of information on trade requirements, and sometimes it is a way of avoiding harassment and corruption perpetrated by officials. Political economy issues limit the implementation of open regional food trade, despite commitments towards opening regional trade in food. Opening food staples to regional trade will lead to both winners and some losers, with farmers and poor consumers gaining while intermediaries earning rents will lose. Reform becomes particularly difficult when politicians themselves are involved in the production and distribution of food. The absence of a stable and predictable policy environment breaks down trust and constrains private-sector investment in food staples, which in turn limits production and trade. Establishing regional protocols and policies gives no value add to the citizens or society without them being implemented by the Partner States at national level. In ECOWAS, for example, despite the existence of the ECOWAS Trade Liberalization Scheme (ETLS), many countries still levy tariffs/levies and impose non-tariff trade barriers on food commodities moving in the region.