Workshop on Food Security, Economic Growth and Poverty

Reduction

by Don Mitchell USAID

Feed the Future Sera Project

Implemented by Booz Allen Hamilton

Presentation to Agr. Donor Working Group

June 21, 2012

USAID Feed the Future SERA Project

• SERA is the Policy Component of Feed the Future• Focused on improving the agricultural policies

through research to better understanding policy tradeoffs and options

• This activity looks at food security and the export ban• Presented to Government in Dodoma on June 16th

and all stakeholders at Kunduchi Beach on June 19th

Background on activity

• Concept Note to Government in October 2011 proposing three studies on Tanzania food security, economic growth and poverty reduction

• Process: Teams brought together in March• Regional Export Potential to 2025 (AIRD)• Economy-wide Impacts of Export Bans (IFPRI)• Food Security and Policy Options (USDA)• Impacts of Climate Change on Exports (World Bank)

G8 Summit in Washington in May

• Launched a New Alliance for Food and Nutrition Security between African nations, international donors and private firms

• The Government of Tanzania committed to pursuing policy goals to build investor confidence and investments in order to reduce poverty and end hunger

• Tanzania also committed to finding an alternative to the export ban on staple commodities used during food emergencies

Main Messages of Research

• Regional markets offers good export opportunities for maize and rice through at least 2025

• Tanzania will need to increase production and productivity to take advantage

• The export ban is not very effective and discourages investments

• Diets are changing and maize is no longer the only important food security crop

Main Messages continued

• Poor data is hampering analysis and decision making• New approaches to food security should be

considered• NFRA could be more effective if more focused on

providing food aid

Maize and Rice Regional Export Potential• The East Africa Region is expected to face growing

deficits of maize and rice through at least 2020 2009 2020– Maize Deficit (mil tons) 1.3 7.8– Rice Deficit (mil tons) 1.2 2.8

• Tanzanian Export Potential to 2020– Maize at 4% production growth net exports of .6 mil tons

at 5% production growth net exports of 1.6 mil tons– Rice at 7.3% production growth net exports of .17 mil tons

at 10.% production growth, net exports of 1.03 mil tons

Climate Change Could Benefit Maize Exports• World Bank study examines climate change models

and concludes that Tanzania will likely have increased rainfall in the future.

• Key African trading partners, including Mozambique, South Africa and Zimbabwe, will have lower rainfall.

• In addition, climate change will reduce the similarity of weather patterns between Tanzania and key trading partners.

Export Bans

• Discourage investments and reduce production• Not very effective in controlling inflation• Not very effective at limiting exports• Harm poorest farmers while benefiting weathiest

consumers• Have significant regional impacts• Institutionalized Export Permits which impede exports

Export bans have a modest effect on food prices

• Maize and maize flours account for 16% of consumer food spending.• Banning cross border maize exports lowers the national food price index by only

2.0-2.4 percent.

CPI Agr. CPI Food CPI

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

Price indices, % change from free exports

2011 2017

Trend of Annual Inflation Rate 2011

13 14.116.8 17.9 19.2

14.817.4

21.322.8

24.7

10.8 10.2 11.4 12.2 12.6

5

10

15

20

25

July Aug Sep Oct NovAnnual Headline Food inflation RateNon Food Inflation Rate

Tanzania Maize and Rice Reported Exports

vs. Partner Reported Imports, 2011 (tons)

Tanzania Exports to:

Maize RiceReportedExports

ReportedImports

Reported Exports

Reported Imports

Uganda 30 254 7,743 27,338Rwanda 1,830 11,042 23,985 24,228Kenya 1,012 79,073 2,622 10,475Burundi - 4,719 155 5,877DRC 1 1 1,409 1,409Total 2,873 95,089 35,914 69,327

Exports are reported by Tanzania. Imports are reported by trade partner.

Export bans hurt rural poor and benefit urban rich

• Export bans benefit urban consumers at a cost to rural households

Note: Income quintiles (q1-q5) are defined according to per capita income at the national level. q1 represents the poorest 20% of households while q5 the richest 20% of households

q1 q2 q3 q4 q5 q1 q2 q3 q4 q5Rural Urban

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

Income effect by quintile, % change from free exports

2011 2017

Rural poverty population rises due to export bans (2017)

Note: A positive number indicates increased poverty in 2017, while a negative number means a fall in poverty.

Maize surplus region, rural Maize deficit region, ruralArusha 0Coast -8,139Iringa 32,000Dodoma -9,478

Kigoma 0Kagera -15,021

Mbeya 13,879Kilimanjaro 0

Morogoro 0Lindi 0

Manyara 40,792Mara 9,274

Rukwa 26,735Mtwara 0

Ruvuma -22,273Mwanza 0

Tanga 43,781Shinyanga 27,148  Singida 47,651  Tabora 23,819

Surplus rural total 134,915 Deficit rural total 75,254Rural total 210,169Urban total -48,624National total 161,544   

The effect of export bans on maize producer prices differs across regions

• In the surplus regions maize producer prices are about 20-26% lower than the free export scenario• In the maize deficit regions, the price effect is modest. Maize producer prices decline by a modest

10-12%

Arush

a

Dodom

a

Iring

aKig

oma

Lind

iM

beya

Mtw

ara

Man

yara

Ruvum

a

Singi

da

Tanga

-30

-25

-20

-15

-10

-5

0

Maize regional producer price, % change from free exports

2011 2017

Maize Prices in Arusha, Mbeya and Nairobi

2007-01

2007-03

2007-05

2007-07

2007-09

2007-11

2008-01

2008-03

2008-05

2008-07

2008-09

2008-11

2009-01

2009-03

2009-05

2009-07

2009-09

2009-11

2010-01

2010-03

2010-05

2010-07

2010-09

2010-11

2011-01

2011-03

2011-05

2011-07

2011-09

2011-11

2012-01

2012-03

0

100

200

300

400

500

600

700

800

900

Maize Prices in Arusha, Mbeya and Nairobi, Tsh/Kg2007 - 2012

Arusha Mbeya Nairobi

March 2011

Requiring Export Permits discourages legal exports

• Exporters must travel to both regional and national capitals to obtain permits to export food

• Required even when no export ban because authorities expect it

• Leads to bribes and corruption• Severely constrains exporter’s business activities

according to recent TANEXA survey*

*TANEX 2012, Problems of Official Export Permits to EAC and SADAC: The case of Tanzania

Food Security – the focus on maize

• Maize is still the staple food crop and accounts for 40% of total calories and 16% of household expenditures

• However, there are large regional differences in calorie shares and household expenditures

• Rice and wheat account for 26% of calories in urban areas and 12% in rural areas

Calorie share of maize declines with income…

quintile 1 quintile 2 quintile 3 quintile 4 quintile 5 -

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

Beverages

Oil/fat

Milk

Meats

Fruits

Vegetables

Nuts, seeds and spices

Pulses

Sugars

Starches

Other grains

Rice

Maize and maize products

shar

e

Maize and Rice Production

• Method of estimation not rigorous and possibly biased

• Comparisons with Other Data:– Agricultural Census-Survey of 2002/03 and 2007/08– Household Budget and Consumption Survey of 2000/01 – Simulate consumption growth based on population and

income

• Conclusion - maize production is much higher than MAFC’s estimates and rice is lower

NFRA not very effective

• NFRA bought only 121,000 tons of maize in 2011/12 – about 6% of marketed maize production

• Buying price was well above market price which limited quantities that could be purchased and disrupted markets

• Lack of transparency disrupted private sector marketing

• Small farmers not able to benefit from NFRA higher prices

New approaches to dealing with food security• Conditional Cash Transfers

– Government to launch a Productive Social Safety Net Program that will provide cash and conditional cash transfers to low-income households

– Financed by World Bank Loan– If successful this could become the main way to deliver food

aid assistance

• Currently used in Rwanda, Ethiopia and Malawi

Conclusions

• Government committed to building investor confidence and finding alternatives to export ban

• Regional export opportunities are attractive• The export ban is not very effective• Broader definition of food is needed• Better data is essential• New approaches to food security are promising• NFRA could play a more important role in food

security