Climate change is reversing the downward trend in food insecurity after many years of improvements associated with the economic development of the continent. The Russian invasion to Ukraine has exacerbated this trend by increasing prices of commodities and key inputs further. Although prices are returning to the levels before the invasion, they remain high in comparison to five years ago. Costs of food was 42% higher in 2022 than 2014-2016. FAO estimates that in 2022, there are an estimated 346million people in Africa affected by food crisis.
Climate change turns areas once perfectly suitable for agriculture production into deserts. It modifies rain patterns, increasing uncertainty and reducing yields. These climate change driven phenomena, in addition to others, are present in multiple places across Africa and particularly in the Sahel. It is projected that by 2030, approximately four out of five countries in Africa are unlikely to have sustainably managed waters resources, leading to an estimated 250 million people in water stress.
Addressing food insecurity in Africa is essential to achieving continental collective objectives. It is inconceivable that African integration, galvanised by the AfCFTA, will be achieved in a context of food insecurity. Increasing food production is key in a context in which food demand in Africa, measured by the growth of its population, is expected to increase by 60% in 2030 compared with 2015.
Integration, in fact, could constitute the key to addressing the food insecurity crisis. Intra-African agriculture trade remains below 20% compared to more than 60% for Europe and Asia. Africa has 60% of the world’s unused arable land. Many of the AfCFTA provisions, if adequately implemented and supplemented by other actions, could not only solve the crisis, but they could also turn Africa into a powerhouse of world food production. The AfCFTA Secretariat has prioritised the agri-food value chain in its development strategy within the AfCFTA.
Here are five key considerations on how Africa integration under the AfCFTA can help achieve food security across the continent:
Eliminating tariffs on food products across the continent
Eliminating intra-African tariffs and trade barriers in agriculture trade is essential. AfCFTA aims to phase out tariffs on 97% of tariff lines. Tariffs and, in many cases, VAT and excise duties applied on food are a major culprit of high food prices. In some cases, this level of protection aims to support local production. However, the reality is much more complex. We often observe high food prices (fueled by high tariffs and taxes) in a context of low agriculture productivity. Farmers find little commercial viability of their activities, leading them to spend little on fertilisers or other inputs, because its customers are also extremely impoverished by, among other things, high prices of products, particularly food. Of course, the elimination of duties in fertilisers, agro-chemicals and other critical inputs, given its impact on productivity is crucial. A major way in which the AfCFTA could contribute to food security and to build African food value chains, is by eliminating these duties.
Eliminating duties on food imports coming from Africa will need to address the issue of tariff revenue. In Somalia, for example, tariffs on food could be as high as 25% and they can raise up to 40% of the Federal Government’s revenue. Eliminating import duties of food without addressing this revenue challenge is impossible. It requires the creation of adjustments mechanisms like the one recently created by the AfCFTA Secretariat, but dedicated exclusively to addressing tariff revenue losses associated to agricultural trade.
Harmonizing food standards
Countries set food standards in trading agricultural goods across borders. Food products need to meet sanitary and phytosanitary (SPS) measures, which are critical to protect public health. AfCFTA contains specific SPS provisions to guide these measures. SPS measures have become more significant than tariffs in restricting trade flows over time because of high compliance costs, especially for small producers and traders. For instance, studies show that the average domestic food prices in sub-Saharan Africa are 13% higher due to SPS measures.
The harmonisation and recognition of equivalence of food safety measures across several African countries is important to realize the full potential under AfCFTA. The synchronisation of SPS measures and comparability across the border can reduce compliance costs, facilitate more food trade and increase consumer welfare.
Facilitating intra-Africa trade
Trade facilitation measures in Sanitary and Phytosanitary (SPS) can increase intra-African food trade across borders as it reduces cross-border trade cost, which finally results in lower consumer prices for agricultural goods. The facilitation measure is particularly important for agricultural and perishable goods, as they are more vulnerable to trade disruptions at international borders. One trade facilitation measure is to provide capacity building training in the implementation of national SPS , building testing infrastructure in standard testing laboratories, creating certification and accreditation bodies, which can aid in adhering to SPS requirements and decrease trade costs. High-intra African trade provides food to flow from surplus region to deficit at lower cost.
For example, One-Stop Border Posts (OSBPs) supported by TradeMark Africa (TMA) aims to reduce the time and associated operational costs for transport companies generated by the duplication of customs procedures between both countries. This may include the lack of coordination in the provision of services within each country and other inefficiencies. ODI assessed the effects of OSBPs in several border posts across East Africa. OSBPs reduced total border crossing idle time between 62-87% due to significant reductions in the time it takes for customs procedures and, consequently, the transport costs. This leads also to a reduction maize price. Specifically, the implementation of OSBPs lead to 9-12.3% reduction the price of maize sourced from Busia and 4.5 and 6.8% for maize sourced from Taveta. We find similar result, but the magnitude of gain is lower for rice.
Explaining the role of services, transport and digital trade
Unsurprisingly, much of the activity associated with agriculture and food trade policy are related to other sectors. The Services protocol of the AfCFTA, for example, allows the possibility of making commitments acceding to key services for the agricultural sector such as transportation, finance, insurance and production services (veterinary and agronomic). Eliminating barriers on mode 4 (movement of natural persons) could allow farmers to access to veterinary and agronomic professionals available in other African countries that are scarce locally. Allowing farmers to hire insurance provided by insurers placed in other African countries, will make farmers want to increase investment as the impact of weather uncertainty, for example, is reduced.
Transportation across the continent also needs to be addressed. For example, there are few intra-African maritime routes to facilitate transport, not only of food products. Recent experiences under the Guided Trade Initiative between Ghana and Kenya involved shipping products via Singapore. The provisions of the services protocol, together with a continental strategy for the transport sector that is currently under development is critical. In this sense, reducing restrictions to the provision of transport services by other African providers (even in cabotage) will contribute to a more competitive continental and national transport services. This, in addition to the development of a continental transport strategy, currently under development, should contribute to addressing the transport issues across the continent.
Critically, the services protocol does not command countries to take these actions. The service protocol provides a framework for services trade liberalisation, typically a GATS+ approach. Each of the member states sets the level of ambition in its commitments.
The digital trade protocol, currently under negotiation, could constitute a significant boost to agricultural trade and production within the continent. The use of different technologies, such as mobile phone applications to commercialise inputs and products with significant impacts on productivity (and even women and youth participation), requires the agreement across the continent in relation to the exchange and localisation of data.
Unpacking complementary measures to AfCFTA
Access to credit and other payment instruments remain critical for food producers and consumers. Many food value chains in Africa operate primarily in cash. Even imports are paid by taking cash from one country to another. Therefore, the development of an efficient and cost-effective Africa-wide payment system, making use of technology such as the Pan-African Payment and Settlement System (PAPSS), remains essential. On the credit side, on the other hand, the availability of line of credits tailored to accommodate different African realities (e.g., limitations on use of land to collateral loans) is extremely important.
Infrastructure remains a challenge for integration and development of value chains. The needs are diverse and the resources limited. However, there are a series of interventions that are critical to support trade and accessible food prices. Port infrastructure (larger berths, grain elevators and storage) is critical to allow the operation of larger vessels and reduce the demurrage costs, which leads to lower prices for imported food.
Prioritise investment in road infrastructure over railroad (except on specific circumstances) is key in virtue of the versatility, diversity and reach of road transport. Railroads are good to transport large volumes of standardised cargo over relatively long distances. The need of transporting extremely diverse and complex cargoes such as grains, animals, fruits, liquids, refrigerated goods and packaged foods to multiple locations spread large regions makes road transport more suitable.
Many of these interventions can be implemented in partnership with the private sector and with the support of donor countries through Development Financial Institutions (DFIs). DFIs can provide guarantees or working capital, they can invest in the production and the provision of agricultural services and inputs in partnership with the local private sector.
Traditional development assistance can also help, for instance, by supporting a fund to address the tariff revenue loss generated by the tariff reduction. In addition, donors should continue supporting productive capacity development in agricultural production and commercialisation.