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The COVID-19 Pandemic and African Continental Free Trade Area (AfCFTA): Exploring Potential Impacts and Developmental Implications

The COVID-19 pandemic has caused nontrivial disruptions to global value chains and affected the lives of many people, particularly the poor across the world. The outbreak of the COVID-19 pandemic in the early part of 2020 in Africa, happened during a time that African countries had just signed one of the world’s largest trade agreements and therefore began introducing continental-level structures to strengthen free trade among member states. This chapter examines the potential effect of the COVID-19 pandemic on the agenda for free trade in Africa, both in the short and in the long-term.

https://flic.kr/p/2iVaKD8

By Swati Malhotra and Rob Vos published in Mar 11 2021

 Photo credit: ILRI

 
This news appeared originally on ifpri.org

Introduction

In recent decades, economic growth in Africa south of the Sahara has proven to be a double-edged sword. Higher incomes have helped increase food consumption and reduced rates of undernutrition, though the gains from growth have been unequal; about 20% of Africans, or more than 250 million people, still go to bed hungry every day. At the same time, the prevalence of overweight and obesity is on the rise, in part because a significant share of increased food demand has gone into processed and ultra-processed foods and sugar-sweetened beverages. As a result, the region faces a massive problem of a double burden of malnutrition.

The emergence of the double burden with rapid changes in African food markets

A recent study led by Thomas Reardon and Barry Popkin, and involving IFPRI researchers Bart Minten and Rob Vos and others, associates the emergence of the double burden with rapid changes in African food markets. With rapid urbanization, higher incomes, and employment opportunities for women, demand for convenient (processed) foods is expanding rapidly and supply chains have transformed—shifting production towards cheap processed foods and distribution through supermarkets and local convenience stores, mostly in urban areas.

Consumption of processed and ultra-processed food

Consumption of processed and ultra-processed food is also on the rise in Africa’s rural areas, driven, among other things, by mechanization of farm production, increased incomes from non-farm employment, and an associated increase in the opportunity cost of time and convenience. Many of the processed foods are high in sugar, salt, saturated fats and/or preservatives and thus contribute to overweight and the spread of non-communicable diseases such as diabetes, cardiovascular diseases, and cancer. Meanwhile, those left behind in economic development, including many smallholders and landless in rural areas affected by weather shocks and conflict, also face continued food insecurity and high rates of child stunting and wasting.

The rise in demand for processed foods

The rise in demand for processed foods has come on the back of rapid expansion of food processing and modern distribution and packaging systems in food supply chains, thanks to the proliferation of both small- and medium enterprises (SMEs) and large domestic and foreign food companies. These have also stimulated demand for (ultra-)processed foods through aggressive marketing campaigns and via the lower cost of such foods achieved through investments in economies of scale. Many of the larger players in Africa’s food market have expanded through foreign direct investment, such as from Indonesia’s Indofood, providing package snacks and ready-to-eat products like Indomie ramen noodles in Nigeria.

The emergence of the processed food sector

The emergence of the processed food sector has both positive and negative impacts. On the upside, the processed foods revolution is providing convenience to consumers in general, but especially for women, and is also generating significant numbers of new jobs, increasingly for women, along food supply chains. SMEs involved in processing, wholesale, transportation, and retail currently employ an estimated 20% of the rural and 25% of the urban workforces in Africa. Also, increased supply of some processed foods (like processed and packaged milk) has improved food safety and helped diversify diets, reducing undernourishment and micronutrient deficiency. On the downside, however, as already mentioned, the increased consumption of ultra-processed food has substantially pushed up the prevalence of overweight and obesity, increasing health risks in the form of diabetes, cardiovascular diseases and cancer.

Interventions

Reversing trends that have been ongoing for decades will not be easy. Yet, the study suggests a number of interventions that have proven effective in several contexts. Cash transfers and subsidies for school feeding and scaling up nutrition-sensitive agriculture programs are direct ways to help the poor and reduce undernourishment in a targeted manner. Targeted public investments in public infrastructure (roads, electricity, storage capacity, etc.) will help improve access to markets for poor producers, integrate value chains and enhance food safety, generating better incomes and employment opportunities for poor farmers and rural workers. Such measures will also increase the availability and affordability of both fresh and processed foods. Further complementary measures will be needed to counter food system improvements that encourage the consumption of unhealthy processed foods. Fiscal policies and regulations, such as sugar taxes and the labeling of unhealthy foods, have been successfully applied to reduce demand for unhealthy ultra-processed foods. Chile, for instance, successfully reduced consumption by levying taxes on sugar-sweetened beverages and making front-of-package warning labels mandatory.

Africa's challenges

Replicating such policies in Africa may be challenging, as they may face strong opposition from large food companies with strong market power, and governments may lack the administrative capacities to implement them. In addition, certain measures, such as excise taxes on unhealthy products may be difficult to implement in contexts where processing and retail sectors are fragmented and dominated by informal sector SMEs, as is the case in Africa south of the Sahara. Chile’s experience with nutrient profiling of food items through highly visible front-of-package labeling could thus be a more feasible option for governments in Africa to consider. They could also learn from Chile’s and Mexico’s bans on unhealthy foods distributed in schools, and strongly regulate advertisements for (ultra-)processed foods. Such interventions will need to be tailored to the specific conditions of countries in Africa, and its political as well as industrial landscape. Failing to address Africa’s growing double malnutrition burden, however, will come at an enormous cost to health and human capital, which will over time will lead to significant economic setbacks.

Citations

Essential non‐essentials: COVID‐19 policy missteps in Nigeria rooted in persistent myths about African food supply chains

Food supply chains are extremely important for food access and livelihoods across Africa, but their role is often overlooked and underappreciated. Under normal conditions, the gap between myth and reality can result in the design of policies and programs with limited or negative impacts on food security and welfare. The shock of COVID‐19 has heightened this disconnect, with potentially dire consequences for food security.

africa trade

By Antoine Bouët, Brahima Cissé, and Fousseini Traoré published in Dec 10 2020

 Photo credit: World Bank

This post originally appeared on telos-eu.com.

Introduction

Mark Twain once warned, “There are three kinds of lies: lies, damned lies, and statistics.” Yet statistics are a fundamental tool for economic policy and decision-making by governments, international institutions, and even the private sector. International trade statistics play a particularly important role. They allow us to determine a country's current account balance — that is, whether a country is living above or below its means — which is crucial information for macroeconomic policy. Detailed information on trade flows can be used to identify not only a country’s largest trading partners, but also the sectors in which it has a comparative advantage or disadvantage. This makes it possible to design structural actions to improve the competitiveness of certain sectors or trade relations with certain countries. These same statistics also provide valuable information for the private sector, as they help in identifying both attractive sectors for investment and which countries offer promising markets or are emerging as serious competitors.

The methods used to collect them

However, official international trade indicators must be well measured, or at least not stray far from reality! To understand why these statistics can err significantly, one must keep in mind the methods used to collect them: Either customs officials record all flows of goods crossing borders (the usual source of collection), or central banks use tax declarations (VAT) and banking transactions to estimate these flows (this is the method adopted in the European Union to trace European trade flows within this borderless area), or national statistical institutes conduct surveys on representative samples and extrapolate results to the national scale (method used in the United States to evaluate trade between US states). Of course, using several methods is advisable because each has its flaws.

Agriculture and food products sectors

Yet Africa’s trade flows, particularly in the agriculture and food products sector, are known to be very underestimated, suggesting there is a considerable margin of error. This greatly hampers the continent's governments in making policies for food security; without exhaustive trade statistics, they do not know how much food is available for human consumption. Indeed, to establish the national availability of an agricultural and/or food product, a cereal for example, one must account for both the national production of the product and exports and imports of the product. National production, minus exports, plus imports gives the availability for consumption of this cereal or product in this country.

The margin of error in trade statistics

How do we know that the margin of error in trade statistics is substantial in Africa, given that we only have the official figures and not the real trade values? In fact, African national statistics institutes regularly conduct field surveys: for a period of time and/or at a limited number of crossing points, government-funded collectors survey any convoy or person crossing the border with a commodity. In Benin, for example, the ECENE (Enquête sur le Commerce Extérieur Non Enregistré) survey concluded that smuggling (trade at border posts not covered by customs officials) between that country and Nigeria was 3.8 times higher than official trade in 2011. A survey conducted by Rwanda in 2014 concluded that unregistered trade was equal to 59 percent of official trade with its four neighbors (Burundi, Congo DR, Uganda, Tanzania). More recently, since 2015, Uganda's Bureau of Statistics estimates unrecorded exports at just over 15 percent of official exports, based on a daily survey of almost half of the country's border crossings. The high level of unrecorded trade in Africa can be explained by inefficiency of customs operations and weak incentives for customs staff to complete official records, due in particular to the liberalization of trade in agricultural products, by the quasi-absence of tax declarations, and by the low level of access to banking services on the continent.

Although these surveys are interesting, we cannot expect them to fill the data gap — they are expensive and marred by inconsistency in terms of coverage of border crossings and different means of transport and uncertainty in terms of the representativeness of the estimation period.

It is with the dual objective of filling this statistical gap and developing a sustainable and self-financed means of collecting reliable agricultural and food trade data in West Africa that the project titled Family Farming, Regional Markets and Cross-Border Trade Corridors in the Sahel (FARM-TRAC) was launched in June 2020.

Family Farming, Regional Markets and Cross-Border Trade Corridors in the Sahel (FARM-TRAC)

With initial funding from the International Fund for Agricultural Development (IFAD), and supported by the United States Agency for International Development (USAID), FARM-TRAC is collecting data on agricultural and food trade along all trade corridors in West Africa with the help of the West African Trade Association for Cross-Border Trade in Agro-Forestry Pastoral and Fisheries Products (WACTAF). The project’s innovation lies in organizing the collection of statistics in collaboration with the region’s apex organizations (associations for producers of cereals, livestock and meat, fruits and vegetables, and so on), greatly facilitating cooperation with these economic operators. Procedures have been put in place to record and collect information on trade values and volumes in real time, bring it up to international customs standards, avoid double counting, identify outliers, and otherwise control the quality of the information.

Data are also being collected on the number of illegal controls and checkpoints put in place by the gendarmerie, police, or customs officials along these road corridors, as well as the amount of payments demanded by these officials. What is modestly called “red tape” is indeed a common practice in the region and is equivalent to bribery.

The private sector is benefiting through access to an electronic platform (ECO-ICBT, http://www.eco-icbt.org/) set up to provide real-time information on the volumes and values of products traded, as well on the illegal checkpoints. To sustain the project without external financing, the levy of a modest share on each trade transaction will be set up by the Trade Information and Border Assistance Desk (TIBAD) with the technical assistance of the United Nations International Trade Center.

Both the national statistical institutions of the 15 countries of the region and the statistical service of ECOWAS (Economic Community of West African States) also benefit by using these statistics to improve the measurement of intraregional agricultural and food trade. The process of integrating these data into official statistics has begun.

Results

The measurement of agricultural and food trade is significantly improved as a result. For example, a comparison of data provided by the ECO-ICBT platform and official data shows that between January and October 2020, for Togo, the total value of trade (exports and imports) of products targeted by ECO-ICBT was about 2.9 billion FCFA, while the values recorded on the basis of Togo's official customs statistics on these same products represent only 2.8 million FCFA, or only about 0.1% of the value recorded by the platform.

Last but not least, FARM-TRAC contributes to the implementation of the Regional Support Program for the Regulation of Informal Trade in ECOWAS (PARCI), which aims to encourage informal trade operators to register their operations with the official authorities, and to promote regional integration, which would enable farmers in the region to sell on more markets and thus improve their economic situation and give people access to cheaper food. PARCI communicates about abnormal practices by police, military, and customs authorities, implements customs facilitation procedures, and improves information on regulatory legislation for trade operators.

Economic statistics are an essential tool for policymakers. In developing areas where food security is far from assured, as is the case in West Africa, international trade statistics more in line with reality, and available in the very short term, could help identify, on a weekly basis, areas where there is a significant risk of undernourishment and/or malnutrition. Indeed, we can imagine projects that would enable us to identify these risks over the course of the year, since the production of each crop can now be reliably estimated in near real time thanks to satellite data and climate data. With such production estimates, coupled with export and import statistics, precise food balances can be established by region. These statistics will make it possible to anticipate food shortages, rather than responding to them with delay. But this will require reliable trade statistics in real time. A well-structured partnership between private operators, apex organizations, national statistical institutes, and international institutions can make an important contribution to improving Africa’s international trade statistics.

Aligning macroeconomic policies for agricultural transformation in Africa

This chapter discusses how accounting for macroeconomic perspectives when establishing agricultural policies can help African governments ensure that their agricultural sectors become productive, competitive, and lucrative across agricultural value chains. It presents the two-way linkages between agriculture-led growth strategies and macroeconomic policies by focusing on price, fiscal, monetary, exchange rate, and trade policies.

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by Aminou Arouna, Guillaume Soullier, Patricio Mendez del Villar, Matty Demo, and Sara Gustafson

Photo by World Bank

Introduction

Around the world, governments and populations continue to grapple with the effects of the COVID-19 pandemic. Of particular concern are the potential impacts of the pandemic and related lockdown measures on food security. While global food supply chains have been generally untouched by COVID-19 and AMIS forecasts strong trade in 2020 for major food commodities, local and regional food value chains may not fare so well, particularly in developing countries. A new paper published in Global Food Security examines the potential impacts of COVID-19 on rice value chains in West Africa and identifies several policy options to help prevent increases in food insecurity in the region.

 

West Africa continues to face high levels of food insecurity, with almost 56 million people undernourished in 2018. As a staple in regional diets, rice has a substantial role to play in West Africa’s food security, and regional policymakers have ramped up investments in domestic rice value chains since 2008. However, rice consumption continues to outpace domestic production, and many consumers favor imported rice over lower quality domestically produced rice. This leaves the region reliant on rice imports — and vulnerable to supply disruptions and price spikes.

Policy options for mitigating impacts of COVID-19

The new study finds that global rice prices saw a steep rise between December 2019 — the initial outbreak of COVID-19 — and March 2020. While rice prices stabilized in May, it is not yet clear how rice prices will respond to a potential second wave of the pandemic.

 

The study also examines several channels through which COVID-19 could affect West Africa’s domestic rice value chains. It finds that the pandemic could significantly  negatively impact paddy procurement, financing, human resources and labor, and marketing and sale of rice in the region. Value chain logistics and rice processing, on the other hand, should not experience marked effects.

 

Farmers are the main suppliers of paddy rice in West Africa, so impacts at the farm level could be important for overall value chain functioning as well. According to the authors, farmers’ access to crucial inputs like fertilizers, seeds, credit, and improved technologies and training could be diminished by the COVID-19 pandemic. At the same time, farmers may also have a harder time selling their paddy because of lockdown restrictions preventing access to open air markets and a lack of digital marketing capabilities.

 

To address these varied risks to domestic rice value chains, policymakers in West Africa should take several steps. In the short term, they should provide financial support for rice millers, both traditional and modern, in order to help improve coordination between farmers and millers, maintain continuity of milling operations, and assist in paddy procurement. This support could take the form of interest-free loans and should include safeguards to prevent speculation. In addition, movement of food should continue to be unrestricted in the region, and lockdown measures on millers should be avoided through strict sanitation requirements. Governments can also buy local milled rice to use in national and regional food stocks in order to bolster food security for vulnerable populations.

 

In the medium term, governments should focus on creating an enabling environment that fosters both domestic and foreign direct investment in modernized rice value chains. They should also build a regulatory framework for contract farming in order to reduce reliance on informal markets and make value chains more resilient to shocks like COVID-19.

Upgrading West Africa’s rice value chain

A more in-depth look at the state of upgrading West Africa’s rice value chains will be presented at an upcoming webinar, co-hosted by the CGIAR Research Program on Policies, Institutions and Markets and IFPRI’s Food Security Portal. The webinar will be held on October 27 at 10:00 EST. 

 

About Authors/Citations

Sara Gustafson is a freelance writer.

Citation: Arouna, A., Soullier, G., Del Villar, P. M., & Demont, M. (2020). Policy options for mitigating impacts of COVID-19 on domestic rice value chains and food security in West Africa. Global Food Security, 26(2020) 100405.

 

 

1

by Nhuong Tran, Kelvin Mashisia Shikuku, and Sara Gustafson

Photo by World Bank

Introduction

Although food safety is an important pillar of food and nutrition security, it is often overlooked, particularly in developing country contexts. In 2010, foodborne illnesses caused 420,000 deaths and 33 million disability-adjusted life years (DALYs) worldwide, with Africa suffering most. Fish and seafood safety poses a particular concern. Consumption of these highly nutritious but highly perishable foods has increased in Africa in recent years, as have public and private interventions to address fish and seafood safety. As aquaculture grows to meet increasing demand, associated health risks due to chemical (specifically antibiotic contamination) and biological hazards have also increased.

 Governments and the private sector in the global south have recognized the need to regulate aquaculture activities to ensure a supply of safe, high-quality fish products. In response to the need for a greater understanding of farmed fish value chains and the growing demand for seafood safety, a new study, Demand for seafood safety and environmental sustainability certification standards in sub-Saharan Africa: The case of Nigeria, was undertaken by WorldFish. The study used a bidding experiment involving fish consumers at points of purchase in four divisions of Lagos state, Nigeria to assess their willingness to pay (WTP) for food safety; value chain performance and governance assessment; and a randomized control trial (RCT) to assess farmers’ participation in food safety certification schemes and its potential impacts.

Willingness to pay for food safety

Results of the bidding experiment showed that consumers are willing to pay 416 Naira for 500g of uncertified live catfish. This increased marginally (≈3.4%) to 430 Naira for 500g of safety certified live catfish. Consumers’ WTP for 1000g of live catfish increased from 594 Naira for uncertified fish to 619 Naira for certified fish, corresponding to a 4.2% increase in WTP. For smoked fish, consumers were willing to pay 852 Naira for 250g of uncertified fish, 5.3% lower than the same amount paid for safety certified smoked fish. Consumers’ WTP was highest for 500g of certified smoked catfish: 1,505 Naira compared to 1,258 for uncertified fish, representing 19.6% increase in WTP. These results show consumers’ overall WTP for certified fish.

There also appears to be asymmetry in consumers’ valuation of fish safety. Consumers paid higher premiums for larger fish than smaller fish and for smoked than live fish. Figure 1 presents bid distributions for the eight fish products studied. The bid distribution for certified fish stochastically dominates that of uncertified fish across all sizes and forms of fish products.

Figure 1. Distribution of consumer bids for safety certified and uncertified fish products Notes: NLM=Uncertified, live, 500g catfish; NLL=Uncertified, live, 1kg catfish; NSM=Uncertified, smoked, 500g catfish; NSL=Uncertified, smoked, 1kg catfish; CLM=Certified, live, 500g catfish; CLL=Certified, live, 1kg catfish; CSM=Certified, smoked, 500g catfish; CSL=Certified, smoked, 1kg catfish.

Value chain performance and government assessment

Results from the value chain performance and governance survey showed that Nigeria’s fish value chains are economically viable, with over 80% of post-farmgate value chain actors making a profit. Analysis of cost composition shows that labor and transport account for about 65% of the total variable costs along the post-farmgate segments of farmed fish value chains. This suggests substantial employment creation along the value chains.

At the production stage, aquaculture operation in Nigeria is male-dominated. However, women’s participation in aquaculture activities increases considerably at post-farmgate stages of the value chain. At the retailer level, women substantially dominate men in terms of employment across all age categories. A similar pattern is observed at the processor level, although the differences are not as wide as those observed at the retailer level. However, at the wholesale stage, more men than women are employed across different age groups, except for 36-45 years old; in this age group, the proportion of women employed in wholesale is four times that of men.

 

Can premiums from domestic markets be transferred to producers for fish quality and safety improvement?

Descriptive evidence from key informant interviews and producer household surveys revealed farmers’ willingness to participate in fish food safety certification schemes In Nigeria. More than 70% of the 648 producers interviewed indicated they would be interested in participating in a certification scheme if one were to be established. The most important perceived benefits of aquaculture certification, from a producer’s perspective, include higher price and higher demand for fish. Among the major perceived barriers to participation in certification are high costs, lack of trust in the certifying agents, and difficulty satisfying certification requirements. An RCT is currently ongoing to assess the feasibility of fish food safety certification among aquaculture producers in Nigeria and to evaluate the potential welfare impacts of participation.

Calling for stakeholder actions to improve fish food safety in Nigeria

Several actions are needed to drive forward improvements in fish food safety in Nigeria. These include:

• upgrading and aligning fish value chains to communicate willingness to pay signal from consumers to producers;
• building capacity and improving coordination for implementing fish safety certification; and • improving certification scheme design and implementation (e.g., paying attention to asymmetry of certification schemes).

About Authors/Citations

Nhuong Tran (n.tran@cgiar.org) and Kelvin Mashisia Shikuku (k.shikuku@cgiar.org), scientists with WorldFish are principle investigator and co-investigator on “Demand for seafood safety and sustainable certification standards in sub-Saharan Africa: the case of Nigeria” project, funded by CGIAR Research Program on Policies, Institutions and Markets (PIM), Fish Agri-food Systems (FISH), and Swedish University of Agricultural Sciences (SLU).

 Sara Gustafson is a freelance writer.

Citation: Shikuku, K. M., Tran, N., Pincus, L., Hoffmann, V., Lagerkvist, C. J., Akintola, S. L., ... & Muliro, J. (2020). Experimental and survey-based data on willingness to pay for seafood safety and environmental sustainability certification in Nigeria. Data in Brief, 105540.

 

 

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