Zimbabwe in need of basic economic development

ZIMBABWE: Agriculture sector can recover, say analysts

Zimbabwe went from being one of the powerhouses of agriculture in the region to a collapsed and ruined shell. 2000 marked the year when policies targetting white farmers were enacted, and resulted in the current economic crisis. Since then, farmers and investment have moved to neighboring countries (Zambia, South Africa, and others) in search of better environment.

But despite the obvious culpability of a government that has traded immediate political support (land redistribution under the auspices of racial justice is a very populist theme) for the country's economic viability, the problem of Zimbabwe's newfound need for development efforts is very real.

Given that the country's agricultural sector was organized around large farm holdings and relatively capital-intesive practices, and the investment will be hard to materialize in the current political climate, what are the best strategies for development and poverty alleviation? As is always the case in the region, the question is closely tied to "food security" (which I find highly myopic, but more on that in the future"). Is there a way to leverage the new efforts into a better model that addresses "food security" without creating an economic dependent on one single terrible crop (such as maize?) Or is the expected demand for corn from the US likely to drive prices high enough to make this crop attractive as a poverty reducing tool?

Lots of good questions. I'm going to post a more pointed version for discussion over at the Development Talk forum.

The importance of language: words have meanings

Goerge Orwell, writing in 1946 about language and politics. As always, his thoughts ring true today. As professionals in an important field, we are obligated to remain precise.

Politics and the English Language

In our time, political speech and writing are largely the defence of the indefensible. Things like the continuance of British rule in India, the Russian purges and deportations, the dropping of the atom bombs on Japan, can indeed be defended, but only by arguments which are too brutal for most people to face, and which do not square with the professed aims of the political parties. Thus political language has to consist largely of euphemism, question-begging and sheer cloudy vagueness. Defenceless villages are bombarded from the air, the inhabitants driven out into the countryside, the cattle machine-gunned, the huts set on fire with incendiary bullets: this is called pacification. Millions of peasants are robbed of their farms and sent trudging along the roads with no more than they can carry: this is called transfer of population or rectification of frontiers. People are imprisoned for years without trial, or shot in the back of the neck or sent to die of scurvy in Arctic lumber camps: this is called elimination of unreliable elements. Such phraseology is needed if one wants to name things without calling up mental pictures of them. Consider for instance some comfortable English professor defending Russian totalitarianism. He cannot say outright, ‘I believe in killing off your opponents when you can get good results by doing so’. Probably, therefore, he will say something like this:

‘While freely conceding that the Soviet regime exhibits certain features which the humanitarian may be inclined to deplore, we must, I think, agree that a certain curtailment of the right to political opposition is an unavoidable concomitant of transitional periods, and that the rigors which the Russian people have been called upon to undergo have been amply justified in the sphere of concrete achievement.’

The inflated style itself is a kind of euphemism. A mass of Latin words falls upon the facts like soft snow, blurring the outline and covering up all the details. The great enemy of clear language is insincerity. When there is a gap between one's real and one's declared aims, one turns as it were instinctively to long words and exhausted idioms, like a cuttlefish spurting out ink. In our age there is no such thing as ‘keeping out of politics’. All issues are political issues, and politics itself is a mass of lies, evasions, folly, hatred, and schizophrenia. When the general atmosphere is bad, language must suffer. I should expect to find — this is a guess which I have not sufficient knowledge to verify — that the German, Russian and Italian languages have all deteriorated in the last ten or fifteen years, as a result of dictatorship.

If you want to chat about development

Check out our list group, Development Talk. Feel free to post and contribute to the discussion.

The Policy is Wrong!

Jim, in response to Rodrik et. al's paper on the cashew industry in Mozambique

Mozambique's cashew policy must be considered a national failure, while Guinea-Bissau's policy (really the lack of a government policy until recently has been the reason for the success) has been a success.

Production has gone down from over 200 thousand tons in 1972 in Mozambique to about 50 thousand tons in the last ten years. Over the same time period Guinea-Bissau has gone from almost nothing to over 110 thousand tons at present.

The Rodrik paper misses what is happening in the present cashew industry in Mozambique and why. There is at present a 18% export tax on raw cashew nut in order to subsidies the processing industry and increase government revenue. The authors defend this tax. They and the government of Mozambique are wrong.

The first idea behind the export tax on the producers (some of the lowest income families in Mozambique) is to support a processing industry. If all of the added value from processing went to the labor for processing it still would be much less than the income that is being taken from the labor for production . The number of labors in the processing factories (estimated at between 4,500 and 6,000) is less that 1% of the number of families producing cashew.

The second idea for the tax is that the government revenue will produce more value for the producers that the cost of the tax. There is a missing study (not published) that was done by the Ministry of Agricultural and Rural Development that shows the opposite.

Another issue made by some defenders (Rodrik & others) of the export tax is that it is not an important cost to the producers. For these defenders it represents a small part of producer income. They compared the total cost of the tax per producer to the minimum wage (Approximately 2% of the rural work force is formally employed and would be illegible for the minimum wage).

The average per capital earnings for a small holder family in either cashew or cotton was $44 in 1996 or less than $4 per month. The average value added per agricultural worker was $117 in 1989-91 and $136 in 2001-3; this is equal to $11.33 per month (World Development Reports 2003 and 2006, World Bank). With average family production of less than 100 kilos per year and with producer prices approximately 32 US cents per kilo family incomes are less than $32 a year. These are averages and the numbers vary year to year based on corps size and world prices but they are in the general range of reality. A tax that takes between 25% and 30% of the family's annual main cash income can be considered to be important at these levels of income for these families.

Mozambique in 1972, its best year for cashew, produced 216 thousand tons of raw nuts. It had 46 million trees with an average productivity of 4.7 kilos per tree. In 1998 its production was 51 thousand tons and the average for the last ten years has been 57 thousand tons. This is a drop of 74%. There were an estimated 26 million trees with a productivity of 2.2 kilos per tree in 1998 a drop of 43% in the stock of trees and a drop of 53% in productivity. From anecdotal observation there is little new planting of trees. While there can be a good crop because of the weather conditions or higher prices cause the farmers to gather more nuts there seems to be little increase in the total stock of tress or increase in productivity.

The present low producer price has contributed to the cashew industry going from a cultivated crop to an extractive activity. The present prices are not enough of an incentive for producers to care for their trees or invest in new trees in order to expand production.

One widely held belief about the cashew tax is that if it was lowered or eliminated the producers would not benefit from the lower cost of exporting. This allegation holds that the traders can collude between themselves to control the price they pay to the producers. This allegation has no empirical bases nor does it conform to the market structure of the trade.

There are hundreds of thousands of producers selling into a large number of buyers. Mostly they sell to the hundreds of local buying stations and buyers in trucks that come through periodically. These in turn sell to more centralized traders. And finally at the other end of the market chain there are the exporters (over 10 in 1999) and the 15 processing factories. Some of these have their own direct buying operations with agents, trucks and warehouses.

The data on prices clearly show that as the FOB prices change so too do the producer prices. A simple observation of the FOB prices changes and the producer price changes show a high degree of positive correlation (84.0%).

If the buyers controlled the prices they would not pass on the higher export prices to the producer. The producer price would be based on a minimal price that the buyers would offer. This is not the case the producer price changes during the season and from season to season as the export prices change.

Also as the export tax has changed over time (from 30% to 20% than to 14% and finally back to 18%) so too has the producer price as a percent of the FOB price but the in the opposite direction with a one year lag. There is a negative correlation of 97.6%.

While there are seasonal price variations these are a function of available supply of nuts and the demand from India over the season and mostly the price processed cashew kernels.

India many private sector importers and not India the country or the government are the buyers of raw cashew nuts. And there is real competition between them. This can be seen when the world price changes there is a high positive relationship to the producer price changes in Mozambique.

The best extension agent does not work for the Ministry of Agricultural. The world best extension agent for Mozambican farmers of cashew is good farmer prices.

The present Mozambican cashew policy of taxing small holder cashew farmers is one of the causes of low producer prices and therefore low family income. It is also one of the reasons that the farmers do not invest and again the national cashew industry is not growing.

The policy is wrong.

Cashews and poverty

Back in mid 2006, IRIN ("the humanitarian news and analysis service of the UN Office for the Coordination of Humanitarian Affairs") published a report on the potential of cashews as a tool to fight poverty in Guinea-Bissau ("GUINEA-BISSAU: Diversification from cashew nuts essential". As my father (and to a small extent myself) worked on exactly this problem in exactly this country, I submitted the article to him. Here is his response:

Interesting but with misinformation. India does not import cashews. India is a country and not an importer. There are many private companies that import that are from India and there is lots of competition. The government of Guinea-Bissau still has an export tax on cashew, and they also restrict who can buy. The production of cashew wine, which has the same return as the nuts on a per tree bases, was not even mentioned.

What is needed is more competition from buyers, freer markets, no taxes, and less FAO.

The average small farmer family produces 1,100 kilos of cashew. (100,000 farmers households produce 110 thousand tons). Their income is at least $220 plus an equal amount from the wine. That means that a family has an cash equivalent of $440 per year. Mozambican cashew farmer make less than $50 per year.

The farmers have already voted on what is most important to them. Cashew production has gone from less than 15 thousand tones in 1990 to 110 thousand tons today (with no rural extension, no credit and no government or FAO support). Rice production is going in the opposite direction. The farmers can only make about $100 a year from rice and it takes about the same time to produce as cashew. Cashew is a perennial tree crop that once planted can last decades. Rice has to be planted every year and in Guinea-Bissau the capital cost and labor for building and maintaining barriers and channels for rice are huge. Why can’t FAO learn from those that know ie the farmers.

The world wants cashews, while rice producing countries subsidies their exports. Guinea-Bissau is producing and exporting a high value international commodity while getting a subsidy on its rice imports.

FAO’s ideas on rice could do more harm to Guinea-Bissau than the last conflict.

Jim

Food security is $100 in your pocket.

War and Death

The website (click on the title of this post) has a set of maps that adjust the country's size according to different criteria (HIV, military spending, war, wealth) is a great visual. I particularly like the maps on wealth on 1500 and 2002.

It's all about perspective.

Kuma! What this blog is about:

I've been getting in to discussions with many people I know in the development field about books, articles, current events, and anything relevant to development professionals. I know that there are lots of sources of information on development. But I haven't found many that specialize in getting the opinions of a diverse group of professionals and academics and creating a round-table collegial atmosphere that aims to disseminate information and perspectives.

I aim for this blog to provide just such a meeting place. As always, please let me know of any suggestions for improvements.

Brazuca.