1. Food Insecurity in Southern Africa: Regional Dynamics Peter Draper Trade Research Fellow GSI Seminar, Pretoria 3 rd November, 2008

2. OVERVIEW 1. Forces shaping regional food insecurity: “old” conventional wisdoms in a fast- changing world 2. What role for subsidies?

3. Forces shaping regional food insecurity: “old” conventional wisdoms in a fast-changing world “Old” picture New reality

4. 1. Forces shaping food insecurity: “old” conventional wisdoms Global demand/supply mismatches Supply side shocks and constraints Technology and productivity Socio-political dynamics Multilateral trade regulations

5. Global demand/supply mismatches: old picture Main culprit?

6. Global demand/supply mismatches: old picture Australian drought

7. Global demand/supply mismatch 2006/7 saw substantial production declines and associated declines in inventories of major food crops Diversion of production into ethanol undoubtedly exacerbated this What will 2009/10 bring? Increased plantings owing to 2007/8 price signals? Reduced demand owing to financial crisis? At least a reversal of upward speculative pressures? How long will this last before structural dynamics resume?

8. Supply side shocks and constraints Shocks to the system have been severe in recent years Oil price rises, which underpinned high input costs The global financial crisis, which entails: Reduced aid flows and availability of multilateral funds Reduced commodity prices means lower availability of domestic revenues, even if well-managed Albeit lower input prices In Africa supply-side constraints are acknowledged as being severe: Infrastructure Institutions Capital stock These are likely to persist for a sustained period, owing to dynamics of underdevelopment and lack of financing

9. Technology and productivity

10. Decades of under-investment in agriculture to blame? IMF/World Bank structural adjustment? Manifestation of broader supply-side constraints? What about developing country (African) attitudes to science-based production, eg GMOs? Lack of a “green-revolution” in Africa

11. Socio-political dynamics Colonial legacies, especially: land ownership Concentration on cash-crop production Combined with pre-colonial inheritances: Communal land-ownership Subsistence production Land-tenure is a central political dynamic: Subsistence versus commercial production Inhibits urbanization and industrialization?

12. Multilateral trade regulations “Faustian bargain” with developed world, especially the EU: Preferential access ensures “locking-in” effect EU subsidies and tariff peaks combine to shut out other producers (especially Latin American) Dismantling this system would: Introduce competition from efficient, Cairns group exporters into EU markets Put upward pressure on prices – a problem for food importers and food-aid dependent states But begin the process of correcting price signals Hence the politics of the Doha round are fraught

13. 2. What role for subsidies? Start with “African” political economy Revenue-raising capacities severely constrained Aid dependencies widespread Weak institutions (governance agenda) Subsidies mean managing potentially powerful political interests even assuming the money was available (which it isn’t) Hence other policy measures are more important, but the subject for another day And implementation remains the key Nonetheless:

14. What role for subsidies? Supply – side investments: Rural and cross-border roads Irrigation Research and development (GMOs?) Extension services Climate – proofing? Water management Urban infrastructure Diversification (those preferences…) Transforming land ownership (towards commercial agriculture) Food prices (bread and circuses…)

15. What role for subsidies? Developed countries… Of greater importance is the multilateral agenda, specifically: Disciplining price supports Eliminating export subsidies Disciplining food aid Which has to be sensitively managed (no big bangs) if it is to be sustainable

16. Some things seem eternal…

17. Thank you draperp@mweb.co.za