Trends in real food prices in six sub-Saharan African countries

This study: (1) assesses the direction and magnitude of changes in real staple food prices since the implementation of food sector policy reforms in Africa; (2) identifies the major factors affecting changes in these food prices; and (3) assesses the resulting effects of food system reform on household food security. The study focuses on six countries: two in East Africa (Kenya and Ethiopia); two in Southern Africa (Zimbabwe and Zambia); and two in West Africa (Mali and Ghana). In all cases except Ghana, major food and pricing reforms were implemented over the past decade. In Ghana, the food marketing system has been primarily affected through macroeconomic and trade policy reform. The report highlights three conclusions. First, grain and grain meal prices have declined in five of the six countries examined: Ghana, since 1984; Zambia, since 1987; Ethiopia, since 1990; Kenya, since 1988; and Mali, since 1982. In the sixth country, Zimbabwe, frequent government subsidies on maize meal artificially depressed prices during the pre-reform period. When the subsidies were removed, maize meal prices to consumers rose, but by a smaller amount than the former subsidy, because of lower marketing and processing costs achieved through maize market reform. In four cases (Kenya, Zambia, Mali, and Zimbabwe), the negative effect of eliminating food subsidies on low-income consumers has been partially or wholly compensated by accompanying reforms that have raised consumers" access to less expensive food products formerly suppressed by regulation. Second, the major factors associated with the decline in real consumer food prices in these countries have been: (a) better transmission of declining real world prices into the domestic economies by removal of trade barriers (Mali, Ghana); (b) increased food aid flows in the reform period (Mali, Ethiopia); and (c) increased competition and lower costs in food marketing and processing, which reduces marketing margins (Zambia, Zimbabwe, Mali, and Kenya). Third, in the countries for which downstream marketing margin information is available (Zimbabwe, Zambia, Kenya, and Mali), mill-to-retail marketing margins appear to have fallen since the major aspects of the reforms were initiated. This has, other factors being constant, passed on tangible benefits to food consumers and/or producers. Declining producer-to-wholesale price spreads were also observed in the two countries where such data was available (sorghum and rice in Mali, and maize in Kenya). In general, the findings from the six countries support the conclusion of USAID"s 1993 report on the performance of the Development Fund for African (DFA) Report (PN-ABQ-266) that real food prices have fallen in numerous African countries. The weight of the evidence indicates that consumers, especially in urban areas, have in most cases benefited from the food marketing and pricing reforms initiated in the countries examined. However, the analysis in this paper does not generally support the DFA report"s premise that downward price changes are only explicable in the face of substantial production increases. Available data indicate that per-capita food production has declined in the post-reform period in at least three of the six countries examined. However, this does not necessarily indicate a welfare loss, since in several cases production levels during the pre-reform period were buoyed by large state transfers to agriculture which had effectively shifted the costs of maintaining the pre-reform food systems from one social group to others. The complex distributional effects associated with food market reform (benefiting farmers and consumers in some regions while imposing greater costs on farmers and consumers in other regions) underscore the major difficulty and controversy associated with normative assessments of the effects of food marketing and pricing reform. A future challenge for food policy is to refocus emphasis from liberalization of food markets to promotion of productivity growth throughout the entire food production and marketing system through development and strategic coordination of markets -- most notably for commodities, inputs, and finance, in a financially sustainable way. Includes references. (Author abstract)