AFRICA: Soaring food and fuel prices may hurt growth

Wednesday, April 9, 2008

Tayech Ali arrived half an hour before the grain distribution centre in Gojam Berenda, in the capital, Addis Ababa, opened, but still had to queue for three hours before she could buy some wheat.

"I cannot afford to buy wheat from the market," Tayech, a single mother of five, told IRIN. "It is too expensive."

A beneficiary of an Ethiopian government programme that supplies 25kg of subsidised wheat monthly to low-income urban dwellers, Tayech has experienced this routine every two months since the initiative started in March 2007.

She qualified for the programme because she is a widow and former street vegetable vendor with no regular income. Standing in the queue at the grain distribution centre - one of 77 in the capital - Tayech said she was worried about possible disorder from the crowd, a frequent occurrence.

"I am not worried about the long line," she told IRIN. "But unexpected disorder could extend my stay in this place."

Ethiopian officials say the grain-subsidy programme was a response to the hardships faced by low-income urban dwellers because of escalating inflation rates - which they blame on the rising costs of oil and other commodities, including grain.

Speaking in parliament on 18 March, Prime Minister Meles Zenawi said: "While our current economic development is encouraging, worsening inflation has created a difficult situation for the low-income urban dwellers."

World commodity prices

Ethiopia is just one of the many African countries reeling from the impact of rising global commodity prices. According to the UN Economic Commission for Africa, rising food and energy prices could hurt Africa's growth in the 21st century.  
"Rapid escalation in food and energy prices, if not managed properly, could pose significant threats to growth and employment, good governance, peace and security," it stated in a paper, Meeting Africa's New Development challenges in the 21st Century, prepared for the annual conference of African finance ministers in Addis Ababa at end-March.

It attributed recent social disturbances in Cameroon, Burkina Faso, Senegal and Mauritania to rising staple food prices. The situation could also erode progress on achieving the Millennium Development Goals.
The number of food-insecure people, it noted, could rise worldwide by more than 16 million for every percentage increase in the real prices of staple foods, meaning 1.2 billion people could be chronically hungry by 2050. That is 600 million more than previously predicted.
In response, the ministers urged the African Union Commission and the African Development Bank to study the feasibility of setting up an oil fund to assist the continent’s low-income oil-importing countries to mitigate the effects of high prices.

They also committed to undertake "vigorous measures" to implement the comprehensive African agricultural development programme.

In December, the Famine Early Warning Systems warned that high cereal and commodity prices in Addis Ababa, and several other monitored markets, including Bahir Dar, Mekelle and Dire Dawa, would affect food security for many of Ethiopia's urban dwellers.

Market-related factors and decreased production would render an estimated eight million Ethiopians food-insecure this year, while 2.4 million acutely food-insecure people would require food and cash assistance.

Of these, 825,000 Ethiopian urban dwellers, including Tayech, already rely on wheat supplied through the government's distribution centres.
"There is food on the shelves but people cannot afford it," Josette Sheeran, executive director of the UN World Food Programme (WFP), said during a recent visit to Ethiopia and Kenya. Food insecurity among urban dwellers had created "a new face of hunger".
"People who were not previously vulnerable have become vulnerable in many different countries around the world," she said. There was more urban hunger than traditionally thought and it tended to hit hardest those earning less than a dollar a day.

Funding gap

The situation has also affected aid agencies. WFP, in an appeal to donors on 20 March, said soaring food and fuel prices had created a critical funding gap of US$500 million in its programmes as at February.

"In the three weeks since that announcement, food prices have increased another 20 percent and such increases show no sign of abating any time soon," the agency said.

Sheeran said WFP would try to assist the urban hungry by partnering with governments to break the hunger cycle. The plan would involve a shift from being a purely food-aid to a food-assistance agency.

"We will have broader tools to help countries deal with urgent hunger pressures that can be more sensitive to markets," Sheeran told journalists after addressing the African finance ministers.

Experts predict more difficult times ahead. "All indicators suggest that food prices are unlikely to fall any time soon and, in fact, may rise much more depending on countries' decisions about biofuels," says Mark Rosegrant of the International Food Policy Research Institute's (IFPRI).

For Africa's poor, whose meagre earnings are being eroded by inflation, the choices are often limited to either buying less food or buying cheaper, less nutritious food. "The result is the same - more hunger and less chance of a healthy future," notes WFP.

Source: IRIN: