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DEVELOPMENT-AFRICA: High Food Prices Here For Another Five Years

Miriam Mannak

CAPE TOWN, Jun 12 2008 (IPS) - Hundred million people worldwide – mostly from developing countries – may sink deeper into poverty when food prices continue to rise, the World Bank predicts.

‘‘The majority of those affected are living above the poverty line of one dollar a day. They will find themselves below this mark. That is worrisome,’’ said Danny Leipziger, the World Bank’s vice president for poverty reduction and economic management, at the Annual Bank Conference on Development Economics (ABCDE).

The meeting, themed ‘‘People, Politics, and Globalisation’’, took place in Cape Town, South Africa, from June 9-11. It was organised by the World Bank and the South African government’s treasury department.

Leipziger’s prediction comes in spite of the optimistic findings of the World Bank’s Global Development Finance report that economic growth in sub-Saharan Africa is due to increase further this year.

One of the findings of the report, launched at the ABCDE conference, is that while global economic growth will slow down from 3.7 percent in 2007 to 2.7 percent this year, various developing regions will see their economies grow.

Sub-Saharan Africa, for instance, is expected to increase economic growth with an average of 6.5 percent by the end of 2008 – the highest growth rate the region has experienced in 38 years.

Leipziger explained that the ‘‘figures in the report apply to the macro economy. Problems such as rising food prices hardly have an impact on a macro-economic level but are visible and noticeable at household level’’.

The food prices will not continue to rise forever, said Leipziger: ‘‘They will drop eventually. According to our estimates it will take four to five years before the situation stabilises. However, that does not mean that the food prices will drop back to the level where they were a few years ago.’’

The drivers behind the surging food prices are numerous. What makes it difficult to find a solution to the problem is the fact that many of these drivers are interlinked, according to Professor Sheryl Hendriks, director of the African Centre for Food Security at the University of KwaZulu Natal in Durban, South Africa.

‘‘The ever-increasing oil prices form part of the causes. When fuel goes up, food prices increase too,’’ she said.

Another cause can be found on the supply side which does not meet the growing demand for food. The cultivation of crops for biofuel is one of the culprits.

‘‘The demand for and production of biofuel are increasing while agricultural production for food is declining. This has an impact on food prices,’’ Justin Lin, chief economist at the World Bank, pointed out.

The subsidies put in place by the European Union and U.S. governments to lure farmers into biofuel production instead of the cultivation of crops for food is not helping the situation, said Lin.

‘‘There is nothing good about these subsidies,’’ added Michael Spence, 2001 Nobel Prize Economics Laureate and the chair of the World Bank’s commission on growth. ‘‘The United States and European Union make it more attractive for their farmers to plant crops for fuel instead of for food.

‘‘As a result of this, the food supply has decreased and does not meet the demand. This has resulted in higher food prices.’’

Developing countries – African states included – are hardest hit by the food crisis. According to Spence, ‘‘people in poor countries use a large part of their household income on food. They are the prime victims’’.

But he emphasised that the situation is not all doom and gloom. ‘‘There is a huge opportunity for Africa. This continent is resource-rich compared with other parts of the world. The wealth could be invested in and used for programmes that promote job creation and boost agricultural production.’’

Lin argued that more was need. For Africa to increase its agricultural production, new technologies are crucial. This requires infrastructure too. ‘‘New technologies need to be localised and adapted to individual African countries. What works in China or Brazil, does not necessarily work in Africa.’’

Lesetja Kganyago, director general of the South African government’s treasury department, agreed that the introduction of new technologies is important.

But there are other ways to boost African agriculture. ‘‘We need to make it attractive to our farmers to produce crops for food. What we should not do, however, is implement protectionist tariff barriers,’’ he insisted.

‘‘We can’t use these techniques to protect our farmers and our agricultural industry. We cannot forget that we once fought against the tariffs implemented by Europe and the United States. By using the same tactic (of raising tariffs) we would undermine our attempts to enter the world market,’’ Kganyago argued.