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Note: This document is from the archive of the Africa Policy E-Journal, published by the Africa Policy Information Center (APIC) from 1995 to 2001 and by Africa Action from 2001 to 2003. APIC was merged into Africa Action in 2001. Please note that many outdated links in this archived document may not work.


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.

URL for this file: http://www.africafocus.org/docs02/ag0209a.php