2nd Market Information Symposium Marketing Information as a Leverage in National Food Security Planning and Regional Sustainable Trade September 15th – 16th, 2011 at Silver Springs Hotel, Kampala THE ROAD TO THE MARKET Small scale farmers and cell phones in developing countries Bjorn Van Campenhout, IFPRI-Kampala

There IS growth in Africa!

Importance of ICT for development The single most transformative technology for development – Jeffrey Sachs Africa has problems that need priority (eg. Low productivity of small scale farmers, basic health care, education,...)

Framework: technology threadmill Idea: productivity increasing technology is no solution without a consumer market Effect of inovations is dependent on price elasticity of demand: –Inelastisc: quantity demanded increases marginally with a given reduction in price –Elastisc: quantity demanded increases substantially with a given reduction in price –> determines effects of innovation on well- being of innovator

Framework: technology threadmill Ag. Commodities, like eg. maize generaly have low price elasticity Long run: supply increases and prices collapse Innovating farmer is left worse off than before inovation ( consumers) –> condition: sufficiently integrated markets – arbitrage: information is key!

Use In developed countries: social/status symbol In developing countries: –First real broad based technological innovation –Sector itself has substantial effect on the (informal) economy: Public phone services Prepaid selling points, accessories shops,... Battery charging services,... –Technology adapted to local circumstances (in terms of power supply, ease of use,...)

Adapted services M-pesa MIS Health monitoring Prepaid – very small amounts Flexiebele systemes to reload Mobiel internet (tethering)

Impact Lots of anecdotic evidence in popular press (technology quarterly of economist magazine, BBC world,...) –Fishermen in Zanzibar –Taxi drivers in Dar es Salaam –Butchers and producers of various other perishable products –Etc...

Impact

Impact - macro Roller and Waverman (AER 2001): impact of telecom infrastructure – only for fixed lines Fush, Meschi and Waverman (2005): 10 percent increase in cell phone adoption-> 0.6 % increase in growth Qiang (2009): 10 increase in cell phone adoption -> 0.8 % increase in GDP/capita BUT: direction of causality?

Fishermen in India (Jensens 2007 QJE)

Fishermen in India

The man in the middle Middlemen are not liked – not productive, parasites, liars,... BUT: very important function in economy! Study in Tanzania that focusses on the negotiation process between farmers and middlemen

Semi-subsistance farmers in Tanzania 1100 farmers interviewed, focus on maize marketing Focus op onderhandelingspositie van de boer Economic as well as behavioural characteristics: –Attitudes towards risk? –Impatience of farmer? –Knowledge of prices in other markets? Outcome variable: –Difference between farm gate price and consumer price (arbitrage over space) –Difference between price at time of harvest and time of sales (arbitrage over time)

Maize sold?

Sold to who?

Price expectations

Sold to who? Estimate Std. Error t value Pr(>|t|) (Intercept) e-06 *** to_soldlocal market to_soldlocal trader ** to_soldexternal trader ** to_soldexternal market

Owns mobile phone Estimate Std. Error t value Pr(>|t|) (Intercept) * to_soldlocal market to_soldlocal trader ** to_soldexternal trader ** to_soldexternal market own_phoneyes e-06 ***

Access to mobile phones Estimate Std. Error t value Pr(>|t|) (Intercept) to_soldlocal market to_soldlocal trader ** to_soldexternal trader ** to_soldexternal market access_phoneyes

Interactions Estimate Std. Error t value Pr(>|t|) (Intercept) *** to_soldlocal market to_soldlocal trader to_soldexternal trader to_soldexternal market own_phoneyes to_soldlocal market:own_phoneyes to_soldlocal trader:own_phoneyes * to_soldexternal trader:own_phoneyes *** to_soldexternal market:own_phoneyes

Conclusion/discussion Should policy makers encourage marketing cooperatives and empower farmers to organise trade themselves? Or does private price information encourages trade by providing a first mover advantage in a competitive market?