|RECIPROCAL TRADING AGREEMENTS SET BAD PRECEDENT
THE DOWNSIDE TO REGIONAL TRADE BLOCS
Amid the glowing tributes following the activation of a great economic union consisting of 14 countries, it is important to consider the severe faults contained in the Trade, Development and Cooperation agreement between Azania and the EU.
In 1999 Azania was brow-beaten by the European Union to sign the Trade, Development and Co-operation Agreement TDCA. The TDCA contains no provisions for the SADC (the SADC countries were excluded from the TDCA negotiations even though they asked to be included).
The TDCA is essentially a reciprocal agreement between South Africa and the EU, in which Mbeki provides duty free access to 83% of the EU's highly subsidized agricultural products.
Considering that the subsidies to European farmers to grow agricultural produce amount to more than the entire annual budget of South Africa (US$40+ billion), farmers in Azania will be competing with subsidized EU product dumped on the SA market. The preferential tarrifs within the SADC are undermined by duty free access to highly subsized EU products.
The TDCA will give preferential access to the EU market only to those products that are CERTIFIED as originating from SA (the EU is a significant market for Azania because it buys 40% of Azania's agricultural exports). The effect of the TDCA will be to undermine regional integration, and to concentrate production and processing in Azania.
The TDCA will cost tens of thousands of jobs region-wide, it will result in huge cuts in the revenues of the SADC countries (up to 60% for Lesotho), and it sets a bad precedent for the formation of trading blocs in Africa. The EU will play one African regional bloc against another using such reciprocal trade agreements, a situation the African Unification Front finds unacceptable and deplorable.
The AUF insists that African economic powerhouses (Nigeria and SA) cannot be allowed to continue making unilateral agreements with foreign powers because lack of consultation and cohesion impacts the rest of Africa negatively.
The new SADC must move quickly to neutralize the potential effects of the TDCA. The SADC is in a better position to do so now than it was last year when the TDCA was signed.
N.B.The EU has adopted a groundbreaking trade act that will eliminate quotas and duties on all products, except arms, from the world's 48 poorest countries. The act was effected on 5 March 2001 and full liberalisation of the trade of sugar, rice and bananas will be phased in during a transition period.
None-the-less, African, Caribbean and Pacific (ACP) governments are facing difficulty coping with EU procedures and regulations under the Cotonou Agreement. EU regulations constitute barriers to free trade.
RESTRUCTURING AFRICAN INDUSTRY
Today Africa's leading source of employement is subsistence agriculture, we need to restructure the economy so that medium size industries and services, particularly environment-based production, can become a leading source of employement. Production for the global export market must not be allowed to supercede production for domestic needs.
The extent to which Africa's economy is geared to cash crops can be seen by the fact that most of communities are almost totally dependent on agricultural exports, and only six states in the African Union earn less than 25 per cent of their foreign exchange from agriculture.
Seventeen states derive over 80 per cent of their export income from only three or fewer commodities. The vulnerability inherent in this dependence must be set against the lack of an effective control over the commodity markets, the market structure, world trade systems, or over the prices which must be paid for imported capital equipment and consumer goods.
In response to nationalist demands to reform industry, foreign companies in Africa moved into a network of consultancies, management companies, and technical contracts. Unilever, Shell, Tate&Lyle, Booker MCConnell, ICI, the Imperial Group and Dalgety are just a few that have followed this strategy.
The market is opened for company inputs, and a regular supply of quality cash crops is ensured. Plantations remain profitable, but companies derive their strength and profits from processing, trading, transport, marketing and distribution.
This is the nature of agribusiness. The integration of activities designed to make a profit out of the inputs to farming -the seeds, fertilisers, pesticides, agricultural machinery, management and consultancies, animal feedstuffs, research- as well as from the outputs of the farm.
More recently, agencies such as the World Bank and the Intenrational Monetary Fund played a crucial role in encouraging this prominence of export crops in African economies. Yet throughout the last two decades, production of food crops slumped, and prices for export crops stagnated.
In the last decade, as Africa's governments became increasingly desperate to reverse their recurrent food shortages, they embarked on a range of projects aimed at increasing their domestic food production. The most favoured approach for a growing number of countries was and is a dash for growth in food output, relying on large-scale, highly capitalised and mechanised schemes.
Traditionally, big business has seen its profits only in cash crop agriculture. As the Chairman of General Foods said candidly in 1980,
"It is virtually impossible for a private business establishment to develop, distribute and sell enough of the kinds of food poor people need and still break even, much less look for any profit".
But the financial guarantees of aid agencies have changed this prospect, and made it an extremely profitable area. World aid has risen 400 per cent during the 1970s to $20 billion, much of which is spent on goods and expertise from the developed world. Contracts agreed through aid agencies have the advantage of being largely immune from recessions and national cutbacks.
In effect, the financial risks to agribusiness are eliminated, while an outlet for their products, agricultural inputs such as seeds, fertilisers, pesticides, tracts, harvesters, processing equipment, technical knowledge and expertise is ensured.
Large scale schemes depend heavily on these inputs and hence the African Union's reliance on transnational agribusiness seems set to increase. Such schemes, however will not solve Africa's food deficiency. They are often inappropriate and expensive and they tend to divert attention and cash from the underlying problems of rural poverty. In addition this investment in food production is invariably in those products consumed in the cities. Hence the emphasis is on wheat, rice and sugar.
Aid agencies frequently provide the guarantee of funding for those large-scale food production projects, and many of the recents statements and reports emanating from agencies such as the World Bank and the United States Agency for International Development (USAID) set the scene for grandiose schemes and urge privatisation in such areas as the provision of seeds and basic foodstuff, and stress the need for more middle and high-level trained personnel.
The African Union faces the dilemma of falling food production, and is under intense pressure from the International Monetary Fund and the World Bank to conform to present western economic policies. As a result many of the governments in the African Union have ended state subsidies which have kept food prices low, and moving to a free market system.
Yet as far as the general experience of Africa is concerned, large scale schemes developed by "experts" and funded with aid, channel money into expensive and technically complicated schemes. Foreign advisers, for instance, tend to favour irrigation schemes since agricultural production rises spectacularly with regular water supplies. A sceptic would point out that irrigation schemes offer more for donor countries, or agricultural consultancies, than do rain-fed agricultural projects.
A typical scheme is that on the banks of the Niger River at Namarigounou with plans to irrigate 1,500 hectares of normally dusty river valley to grow food crops. Construction of the irrigation scheme alone works out at $17,000 per hectare ($25.5 million). Yet incredibly, only a mile or so beyond this scheme lies another -now derelict. The now unworkable irrigation scheme is a testament to the difficulties facing poor governments in meeting the running costs necessary to sustain these flash and spectacular ventures.
Farmers in the the African Union point to worse problems, unforeseen by technocrats. In Mopti, 9 years after the opening of a similar capital-intensive irrigation scheme in 1976, rice production had fallen from fifty bags a hectare to only fifteen because of infestation by wild rice, and the low resistance of imported rice seeds to irregular and inadvertent flooding.
In Tanzania, a Canadian-aided wheat scheme caused even greater concern. Since it began in 1970, Canada has committed over $50 million to the project with the hope that the Tanzanian government will be able to run it independently in the future. The Tanzanian government did match the Canadian funds. In addition, $1.5 million was spent on equipment for each of the six farms in the Hanang district (totalling 60,000 acres)
TURNING AFRICA INTO A DUST BOWL
The land for the wheat schemes was taken from the Barbaig, a pastoral people who both occupied and grazed their cattle on the land. They have now been forced to overgraze on the surrounding land. The schemes themselves are far too intensive for the area, and a report on Agricultural and Livestock Production in Arusha Region noted with alarm that the "technology being applied to these large scale fully mechanised operations is alarmingly similar to the technology used in western Canada which contributed to the catastrophic soil erosions (dust bowls of the 1930's).
The farms are laid out prairie style with no allowance for tropical downpours. Erosion was severe as huge gullies cut through the fields -indeed £22,000 was spent on one farm trying to fill such a gully, without success. Those running the project had to consider practically beginning again and switching to the contoured strip farming traditionally used on small wheat farms in Tanzania.
This catalogue of disasters might be excusable if the scheme were at least producing wheat on a comparable scale. In fact, Tanzania is now estimated to be producing less wheat than when the project began, and any prospects of even sustaining production without massive inputs are bleak.
The decision to opt for such large-scale schemes is often made by bureaucrats who prefer to attribute shortfalls in food supplies to inadequacies in peasant production, rather than a more general failure to tackle such underlying causes as land reform, low farm prices, lack of support for marketing, storage and distribution.
In Senegal, an agribusiness-backed scheme to grow rice is underway in the Casamance region. The technology and much of the planning and organisation of the scheme was carried out by International Control & Systems of Houston Texas, a farm implement and agri-industrial firm. The was to double rice yields to 180,000 tons per annum in a highly mechanised commercial operation covering 30,000 hectares of the eastern Casamance. Senegal's socialist land reform act of 1964 legislated for communal ownership but in this scheme the development body, SODAGRI, would hire in wage labourers to work the farm. As in many such schemes, little account is taken of the effect on people already living in the area, among whom are the Balantas, renowmned for their careful soil management techniques and soun environmental use of animals and crops. In producing the rice, intended for the cities, the lifestyle of local indegenous communities and their independence is eroded, their extensive agricultural knowledge and experience is lost.
ARTIFICIAL FOOD DEFICIENCY
The agribusiness-backed schemes cannot reverse Africa's food deficiency. Inappropriate and expensive, western-style agribusiness diverts attention and investment from the underlying problems of rural poverty. The food produced is expensive, and the emphasis on production at the expense of distribution fails to address the problem of why people in rural areas are poor. The food produced by agribusiness is destined for the richer urban populations.
Large-scale food production by-passes the problems confronting peasant communities, who have been moved onto smaller and less fertile land, who are not paid a sufficient price for the crops they produce for the market, who are ill-served by distribution or storage networks, and whose needs for investment in education, health and water supplies are ill-met.
Yet peasant farmers make up 75-80 per cent of the population of the African Union and it is eventually from this source that a solution must be based. These women and men who form the backbone of the African Union's food production receive few inputs, yet their work is heavy and arduous, their effort is undermined by low prices, cheap imported foods and erosion of land rights.
It is wrong to increase quantities of foreign exchange to pay for large agricultural developments, to meet the unnecessary imported inputs and to repay the loans without which the schemes could not be established. Such financing has locked African countries into a downward spiral where-by they find themselves forced to maintain or increase their cash crop production, both to pay for the food schemes and to keep pace with the declining terms of trade for agricultural exports.
Emphasis on cash crops, linked to a dependence on large-scale food production schemes, is diverting resources from the subsistence sector, which must ultimately be the major source of Africa's food production.
For the transnational agribusiness corporations the current approach to food supplies in Africa has opened up large new markets, particularly in productions oriented schemes financed by aid agencies, which bacame dominant the 1980s. The trend has asured agribusiness an increased role in Africa's food production, thus complementing its historic control of Africa's cash crop production. It is imperative to break the cycle and to drastically reduce the role of Western agribusiness corporations in the African Union.