House of Commons - International Development

Select Committee on International Development Third Report

V. FROM CRISIS RESPONSE TO FOOD SECURITY AND SUSTAINABLE LIVELIHOODS

Poverty traps, vulnerability and risk management

102. In southern Africa, individuals, households, communities and indeed rural economies as a whole find themselves trapped in a cycle of poverty, vulnerability and crisis (see figure 2).[180] In poor rural economies, low levels of agricultural productivity lead to low levels of market demand and marketed produce; low levels of market activity lead to high marketing costs and risk, preventing market development; and lack of market development prevents the use of more productive agricultural inputs and sales of farm produce.[181] If communities in southern Africa are to become food secure and move towards sustainable livelihoods, they must be enabled to escape the rural poverty trap, and to break the cycle of poverty, vulnerability and crisis.

Figure 11: The rural poverty trap

Source: Andrew Dorward, Jonathan Kydd, Jamie Morrison and Colin Poulton (2002), Institutions, markets and policies for pro-poor agricultural growth[182]

103. Vulnerable communities are unable to manage risk. They are ill-equipped to deal with crises, and—being at the margins of survival—are likely to be unwilling to make risky investments to improve their well-being, even if they have the resources to consider such investments. People in rural areas in the countries of southern Africa face high risks on any investment that they might make, including climatic risks, coordination risks and risks of opportunism. Coordination risks exist when the complementary investments which are needed for an investment to pay off, may not be made.[183] For instance, investing in irrigation to increase agricultural productivity beyond subsistence levels will not pay off unless there is a road to take the produce to market. So-called risks of opportunism exist where an actor who might make the necessary complementary investment would have an effective monopoly and hence be able to extract an undue share of revenue from the supply chain. Coordination risks and risks of opportunism are both the result of thin markets, with few buyers, few sellers and a lack of institutions to mediate between buyers and sellers. In such situations, where there is a high risk that investments will fail, and people can't afford to fail, it is likely that investment will not take place and people will remain trapped in rural poverty (see figure 11). If people and communities are to escape from poverty traps and move towards food security and sustainable livelihoods, they must be enabled both to cope with crisis-related risks and to make the risky investments which are needed to climb out of poverty.

104. Approaches to reducing poverty and vulnerability through improving risk management range from "protective measures" and welfare support, to "preventive measures", to "promotional measures" and productivity enhancement.[184] Protective measures aim to provide relief from poverty and deprivation. Preventive measures are direct measures for poverty alleviation. Promotional measures aim to improve real incomes and capabilities. This conceptualisation emphasises that reducing insecurity and improving livelihoods are part of a continuum of social protection and improved risk management. This is especially so in contexts such as southern Africa where livelihood insecurity is endemic rather than periodic.[185] This conceptualisation also reinforces the importance of integrating relief, recovery and development activities (see figure 12), and "points to the need for multiple approaches to social protection where poverty and vulnerability are widespread and highly differentiated."[186] As Clare Short emphasised in oral evidence: "we have got to merge the continuing humanitarian catastrophe with the development programme because we are not going to come out of this quickly. Partly because it is so deep, but certainly because of the HIV dimension, recovery is going to take a lot longer."[187] If short-term crisis management is to lead to longer-term development, poor rural communities must be enabled to better manage and deal with their risks. Long-term development reduces the need for short-term crisis management in the future. Donors and Governments must take this wider view when evaluating development interventions and investments.

105. Recognising that relief, recovery and development interventions ought to be integrated, and that protective, preventive and promotional measures form a continuum, in the remainder of this chapter we discuss aspects of rural development ranging from safety nets and social protection, to opportunity ladders, diversification and development. As Dr. Stephen Devereux argued in evidence: "We need to really focus on supporting the private sector, as well as putting in place some kind of safety net or some institutional support for food security. This might sound paradoxical, but I think it is a two-pronged approach […] It is a combination of finding the right mix of minimal support from the state for agriculture and food security and, at the same time, promoting the private sector really strongly and giving them the right signals so that they can fill those gaps they were supposed to fill."[188] It should be noted that there is no simple mapping between the time horizon of an intervention, and whether it focuses on helping people to cope with crisis, or to take opportunities. Interventions to enable people to make the most of their opportunities are likely to be long-term in orientation, but some aspects of social protection—welfare programmes for orphans and people living with AIDS, but not perhaps free inputs programmes—are likely to be needed in the long-term too. We emphasise too in what follows the need to take account of the challenge of HIV/AIDS in all stages of, and approaches to, relief, recovery and development.

Figure 12: The relief-recovery-development continuum

Source: Babu and Bhouraskar (2002), p. 9 in Humanitarian Exchange, p.9 - see footnote 215

Rural development: Agriculture, safety nets and opportunity ladders

The role of agriculture in rural development

106. Agriculture has fallen out of favour with donors and multilateral agencies who have become disenchanted with the poor performance of agricultural investment as a development intervention. Coupled with this has been a growing belief that agriculture alone is insufficient to guarantee sustainable livelihoods and poverty reduction. As DFID notes in its recent issues paper on agriculture: "The proportion of ODA directed towards agriculture and rural development has fallen by almost two thirds between 1988 and 1998."[189] Indeed, while in Malawi, we were appalled to hear that the share of agriculture in the World Bank's Malawi portfolio had been scaled down from 40% to zero.[190] DFID itself does not have a "strategy" for agriculture, because—DFID argues—"it is too diverse a subject", in relation to which developing countries must themselves take the lead.[191] Instead, DFID has recently published an "issues" paper which discusses the role of agriculture in improving the livelihoods of poor people. We fail to see why agriculture is any different in this regard from other sectors such as education, and urge donors such as DFID to encourage their partner governments in southern Africa to take agriculture seriously, and to provide the necessary financial and technical support. Donors should not be active in all sectors—they should work to their comparative advantages—but given its considerable policy influence in the region, we believe that DFID has a responsibility to ensure that agriculture is not neglected by governments in southern Africa.

107. Poverty reduction requires economic growth, and for many developing countries—particularly in Africa, where agriculture remains the largest source of employment and accounts for one-third of GDP and one-half of exports—agriculture is an important engine of growth.[192] With the exception of Hong Kong and Singapore, all recorded rapid reductions in widespread poverty began with livelihoods being enhanced through agricultural transformation.[193] As Kydd, Dorward and Vaughan put it in their memo:

Historically, dramatic poverty reduction in other parts of the world has most commonly been achieved by technological and institutional changes that have led to increased labour productivity, increased demand for labour, and increased wage incomes in relation to staple food prices. This has generally involved in its earlier stages sustained increases in productivity in staple food production (wheat, rice or maize), outstripping population growth. Increased cash crop production has played a supporting role, and then once growth has been stimulated by increased agricultural productivity stimulating labour markets, diversification into non-farm activities has taken off, and taken over as the engine of poverty reducing growth.[194]

108. Whilst accepting that poverty reduction strategies in countries such as Malawi or Zambia do need to address agriculture, DFID officials told us that: "meeting the needs of the rural poor does not necessarily mean concentrating on agricultural strategy."[195] We accept that agriculture on its own will not ensure poverty reduction, and agree with DFID when it says that: "Improving food security will increasingly become a matter for employment strategies, social security policy and food policies relating to international trade, food marketing and subsidy programmes and relief. In other words, although agriculture will remain central to food security in sub-Saharan Africa, policies to tackle hunger will need to become increasingly multi-sectoral."[196] We disagree with DFID that meeting the needs of the rural poor does not necessarily mean focussing on their agricultural capacity. We believe there is a risk that agriculture—which is the key component of rural livelihoods for millions of people in southern Africa, and the basis for growth and development—will continue to be neglected. We welcome Clare Short's acknowledgement that, "the swing away [from agriculture] went too far and we need to look again at how you can pay more attention to improving the livelihoods of poor rural communities. […] The move away from agriculture has been too big."[197]

109. We accept that there is a need to try to find alternative incomes, livelihood strategies and ways out of poverty, in addition to agriculture, but we were told that: "At the moment, nobody seems to know where those alternative livelihoods are going to come from."[198] The work of organisations such as Traidcraft, who seek to create sustainable livelihood opportunities through production and trade of handicrafts is important, but it is not a solution to widespread rural poverty.[199] If poverty reduction and food security is to be achieved in southern Africa, agricultural investment must not be neglected. Rather than despairing at the hitherto poor performance of agriculture, donors must help to put in place the institutional environment which is needed to support agricultural investment and make it deliver significant poverty-reducing returns. Donors should support the re-building of agricultural extension services which were undermined as donor support to agriculture decreased. We agree with Christian Aid that: "Support is needed for programmes to increase agricultural productivity through targeted affordable inputs and credit, rural social and economic infrastructure, and large-scale irrigation."[200]

110. Attention must also be paid to the form of agricultural development. According to DFID, the "greatest impact on poverty has been seen in countries where small and medium scale agricultural producers have driven agricultural growth. Agricultural growth has not had as much effect in countries where the bulk of increased farm income has accrued to larger businesses."[201] The development of a cash-crop economy and export businesses can play an important role (see paragraphs 139-140), not least in transferring technology to developing countries, but for widespread poverty reduction and livelihood enhancement the focus must be on small and medium scale agricultural producers.[202]

Safety nets and social protection

111. Safety nets and social protection measures have two inter-linked aims. First, to ensure that people do not fall below a certain level of poverty. Second, by providing this buffer against risk, to encourage people to invest and take the associated risks.[203] As figure 13 shows, there are some social protection measures in Mozambique, and discussions have taken place in Zimbabwe, but in the countries affected by the current crisis only Malawi has a well-developed safety nets strategy. Malawi's National Safety Nets Strategy has four components, targeted at different groups of vulnerable people: firstly, welfare transfers targeted at the chronically ill, the elderly and the disabled; secondly, targeted nutrition for malnourished children, vulnerable pregnant or lactating mothers; thirdly, public works programmes for the rural poor who have spare labour, and the urban poor; and, fourthly, targeted inputs (seed and fertiliser) for the rural poor with land.[204] Targeting assistance by type of vulnerability is key to the effective functioning of social protection measures. We applaud DFID for its role in supporting the design of Malawi's National Safety Nets Strategy. We urge DFID to do its utmost to ensure that the strategy is put into practice, that the different elements of the strategy are integrated, and that, where appropriate, safety nets strategies are developed throughout the region.

Figure 13: Safety Nets in southern Africa
Malawi	In 1999 the World Bank led a consultative process of designing a National Safety Net Programme for the poorest 20% of Malawi's population. Implementation of the Safety Nets Strategy stalled after it was handed over to the Government of Malawi in 2000, and at present it remains as a series of uncoordinated donor-funded projects, the largest among these being the World Bank-financed Malawi Social Action Fund (MASAF), and DFID's Targeted Inputs Programme (TIP).
Zimbabwe	The World Bank and the Government prepared a draft framework for a National Social Protection Strategy in 2000 that would pull together and enhance the various schemes that were operating in the country. While this was a fully consultative process the current political situation precludes further dialogue while the Government's arrears in both interest and capital repayments in excess of US$130 million prevents the World Bank from taking this forward.
Mozambique	While there is no safety net programme the cash-for-work programme being developed by DFID as part of a longer-term relief programme could be the precursor for a wider Safety Net programme within the Poverty Reduction Strategy Paper.
Zambia	No discussions have taken place with Government or donors on a national safety net strategy.
Swaziland	No moves towards developing safety net programmes.
Lesotho	No moves towards developing safety net programmes.

Sources: DFID Supplementary memorandum and Committee's research

FOOD SUPPLIES: SCHOOL FEEDING, PRICE SUBSIDIES AND GRAIN RESERVES

112. Humanitarian interventions should seek to build on positive livelihood strategies and mitigate the damaging coping strategies that households adopt to survive shocks and crises. Targeted nutrition programmes, organised through school feeding programmes such as UNICEF's "Food for education" scheme have the added benefit of keeping children in school. As Clare Short told us: "In Zimbabwe children are dropping out of school and getting food to children in school gets food to children but it also keeps children in school, which in terms of their future lives is important for them."[205] In addition, such schemes can usefully target orphans and geographic areas of particular need. We therefore endorse the recommendations made by UN-OCHA, which as well as encouraging support for food-for-work and food-for-asset-creation programmes—(see paragraphs 117-119)—include increasing support to school feeding programmes to reduce withdrawals of children and promote enrolment and attendance.[206]

113. The provision of targeted nutrition and food supplies has been a matter of contention in southern Africa. Whilst in Malawi, we became aware of the World Bank's scheme to support a general maize subsidy to ensure that poor people could afford food, a scheme which is part of the Emergency Drought Recovery Project.[207] We would not argue with this goal, but in our view the general subsidy scheme is misguided and its implementation—without adequate consultation with other donors—was unhelpful. It undermined plans for a targeted subsidy which DFID and other donors had been drawing up with the Government of Malawi. The World Bank-supported general subsidy also increases Malawi's debt by US$50 million. The general subsidy scheme was justified to us by Malawian government and World Bank officials in terms of the immediate and pressing emergency needs, and the difficulty and cost of targeting subsidies accurately, particularly given the widespread nature of poverty in Malawi. Indeed, as Clare Short accepted in oral evidence: "one of the things that happens in food shortages is prices do go shooting up, so some intervention to bring them down while organising a recovery is not necessarily ruled out."[208] We were also told that as most maize is produced for subsistence, its market price has little impact on the incentives or otherwise to produce more.[209]

114. We consider that a general maize subsidy is likely to strike the wrong balance between short-term relief and longer-term development. No doubt it will contribute to short-term food security. But it is likely to work counter to the longer-term development needs of Malawi by removing the incentives for farmers to move beyond subsistence levels of production and by undermining the incentives for traders. In addition, given the likelihood of corruption in the sale of the SGR (see paragraph 36 and figure 3), and the possibility that a general maize subsidy might be diverted to buy votes at forthcoming elections[210] or leaked through resale to neighbouring countries where prices are higher, we are not confident that a general maize subsidy is the most effective way of combating poverty and improving food security. It is essential that efforts to meet the short-term needs of communities do not undermine longer-term development. We accept that the needy in Malawi form a substantial majority of the population, and that differentiating between the poor and the very poor so as to target only the latter may seem to be perverse. But every effort must be made to maximise the effectiveness of (costly) social protection measures. Targeting assistance to the most needy is the most effective way of spending scarce resources, and is likely to minimise the risk of profiteering by elites. We remain concerned at the likely impacts of the general maize subsidy in Malawi, and share DFID's frustration at the World Bank's lack of consultation during the design of the scheme.

115. Governments in southern Africa have, since the 1970s and 1980s, maintained strategic grain reserves in order to ensure that their people have access to affordable maize. Over recent years, some members of the donor community—including the World Bank, the IMF, and DFID—have been opposed to the maintenance of substantial grain reserves, and encouraged governments to reduce their holdings.[211] This opposition has been for understandable reasons. In the past, grain reserves have often been poorly managed and costly to maintain. It has also been thought that their existence and use to smooth prices between harvests might act as a disincentive to increasing maize production. In Malawi there have been serious concerns about the sale of the SGR as discussed in figure 3. We are not a committee of inquiry into the complexities of the sale of Malawi's Strategic Grain Reserve, but such episodes do cast light on issues of governance and accountability. Greedy and corrupt officials in positions of responsibility must not be allowed to profit from the sale of a country's grain reserve. As such, we trust—although the removal of Gilton Chiwaula from the Anti-Corruption Bureau does not fill us with confidence—that the continuing inquiries will uncover what happened in Malawi, and that appropriate actions will be taken.

116. Properly managed grain reserves, coupled with the holding of options to purchase grain on commodity markets, must be part of future food security strategies in the region. Further—whilst it is important that the maintenance of grain reserves does not take too large a slice out of scarce governmental resources—we do not think it realistic to expect strategic grain reserves to operate on a full cost-recovery basis.[212] As with other forms of social protection, grain reserves are an investment in social welfare, food security and development, and must be supported as such. However, they must be managed transparently, accountably and efficiently, and in such a way that market disruption is minimised.

PUBLIC WORKS PROGRAMMES

117. Public works programmes seem to offer a promising approach to the provision of safety nets in such a way that they build the assets of individuals and communities, providing the basis for longer-term development. In southern Africa, where many poor families have spare labour in the dry season, public works programmes can utilise this spare capacity for the development of rural infrastructure. Put simply, public works programmes can—as we saw for ourselves in Malawi —construct the roads and bridges which are needed to link agricultural communities to markets for agricultural inputs and products, build the schools which are needed for education, and construct the irrigation schemes which are needed to increase agricultural productivity. As Professor Kydd, Dr. Dorward and Professor Vaughan wrote in their memorandum: "If designed and administered appropriately these can be used to develop input supply markets and maize markets, improve rural roads, increase national and household maize production and food security, strengthen rural administrative capacity, and reduce dependency."[213]

118. Public works programmes can take various forms; payment for work can be made in cash, food, agricultural inputs, or partial repayment of credit.[214] The type of payment must be informed by a clear understanding of the livelihood strategies of the participants, and the contexts in which they find themselves. For instance, cash payment schemes may contribute to the emergence of markets, but if food prices are too high, or markets are non-existent, payment in food or agricultural inputs may be more appropriate.[215] Schemes which reward work by paying off an individual's debt—as suggested by Professor Kydd[216]—may improve people's access to credit. Schemes which provide agricultural inputs in return for work can play an important role in improving agricultural productivity. Stephen Carr reported in his memorandum that: "Experiments with this approach with thousands of farmers (funded by USAID) have proved immensely popular and have brought quite obvious benefits both in terms of food production and rural road development."[217]

119. Public works programmes must be designed carefully. As Rob Holden and Anthony Smith of DFID explained: "it is a question of having a range of tools and interventions at your disposal and using them as appropriate";[218] "there is no blueprint that is applicable across the region."[219] In many ways, local people, including intended participants and beneficiaries, may well be in the best position to advise on the most effective form of payment and should be involved fully in the design and implementation of such schemes. Public works programmes must take account of local situations and gender relations, and other measures must be taken to support those who cannot work. For instance, labour intensive public works programmes are entirely inappropriate for people living with HIV/AIDS, the infirm, and women with child-care responsibilities.[220] But we believe that public works programmes provide an excellent way of linking short-term relief to longer-term development and urge DFID to support such schemes wherever communities in southern Africa have spare labour.

TARGETED SUBSIDISED INPUTS

120. The provision of targeted, subsidised, inputs—seeds and fertiliser—is another way of simultaneously addressing food security needs and promoting longer-term development. Malawi has been something of a pioneer in this regard. During our visit, we saw packs containing 5 kilograms of seed, 10 kilograms of fertiliser, instructions on planting, and leaflets about HIV/AIDS being distributed. DFID and other donors have supported the provision of "Starter Packs" since 1998/99. According to Carlos Barahona and Sarah Levy—the leaders of the team which has evaluated this programme for DFID—two-thirds of smallholders in Malawi cannot afford to purchase inputs. They argue that this is the key reason for the under-production of maize, sharp rises in food prices, and resultant food security crises. The DFID-financed 'Starter Pack' and 'Targeted Inputs Programme' has partially offset the declining access to inputs associated with economic liberalisation (currency devaluation, removal of subsidies, and collapse of rural credit).[221] Introduced as a post-drought rehabilitation programme in the mid-1990s, the free distribution of agricultural inputs aimed to promote both household and national food security. Because of concerns that it was unsustainable and undermining markets, the programme was reduced from a universal to targeted distribution in the season preceding the 2001/02 food crisis.[222] As an immediate response to the crisis, DFID launched a Winter Targeted Inputs Programme in mid-2002, and the Government of Malawi announced a return to universal free inputs distribution for the 2002/03 farming season.

121. There has been criticism of the "stop-go" nature of what is now termed the Targeted Inputs Programme, and of the speed with which the programme was scaled down. Some commentators have suggested that the reduction in the Targeted Inputs Programme contributed to the food shortages of 2001/02. This may be so, but had other factors not come together—erratic rainfall, logistical problems, the sale of the grain reserve—the phasing out of the Targeted Inputs Programme might not have been implicated in a crisis. Inputs programmes and their phasing out should be well-planned, but they cannot be based on perfect foresight. Indeed, Clare Short explained to us the converse risk that Targeted Inputs Programmes might seek to do too much, and hence increase dependency on free inputs. As the Secretary of State recalled: "We were involved in the Starter Packs of seeds and fertiliser scheme but then government wanted us to broaden and broaden it, and we did, and there was a big growth in production and then, of course, prices dropped and we think we overdid it, but it is easy to be wise after the event."[223]

Figure 14: The Malawi Targeted Inputs Programme, 1999-2002: Stop and go?
Year	Weather	Beneficiaries (households and % coverage)	Total Harvest	Targeted Inputs Programme Contribution
1998/99	Good	2.86 million 100%	1 650 000 MT	500 000 MT
1999/2000	Good	2.86 million 100%	1 860 000 MT	350 000 MT
2000/01	Moderate/Poor	1.5 million 50%	1 420 000 MT	75 000 MT
2001/02	Moderate/Poor	1 million 33%	1 280 000 MT	40 000 MT

Source: Ev 122, para 7 [Carlos Barahona and Sarah Levy memorandum]

122. Targeted Inputs Programmes can play an important role in achieving food security. To do so they must be part of a longer-term rural development strategy which, over time and where possible, reduces dependence on free inputs, making inputs more affordable and accessible by raising rural incomes and promoting rural development.[224] We urge DFID to continue its support for Malawi's Targeted Inputs Programme, and to work with other Governments to examine whether such schemes—with carefully planned exit strategies—might enhance their food security and longer-term development prospects.

123. Donors and governments in southern Africa urgently need to find ways of making yield-enhancing inputs (fertiliser and seeds) accessible to smallholder farmers at affordable prices. The free distribution of inputs, whether universal or targeted, in Malawi or elsewhere, is a useful interim measure but does not provide an appropriate model for a sustainable long-term solution to food insecurity. An alternative proposal made to us by Stephen Carr, to amend the existing rural public works programmes so that participants are paid with vouchers for agricultural inputs, rather than in food or cash as at present, should be seriously considered.[225]

124. The key principle of effective social protection strategies is that they must not undermine longer-term sustainable development. As we were told by DFID officials, this meshing of approaches, and time horizons, has not been systematically achieved in southern Africa.[226] Ideally, social protection measures ought to actively contribute to—as well as not undermine—sustainable development. The challenge is to devise asset-building social protection measures which are investments in production rather than simply protective of consumption.[227] Short-term assistance and focused safety nets must contribute towards longer term goals of improving governance, reducing dependency, nurturing functioning and equitable markets, developing infrastructure, and increasing agricultural productivity.[228] Finally, effective social protection strategies, whilst addressing short-term needs, must—by including plans for the phasing out of certain forms of assistance such as free inputs programmes where possible—look to a future where such measures are employed less frequently and less widely.

180 Q 137 [Jonathan Kydd, Imperial College at Wye]; Ev 78 [Jonathan Kydd, Andrew Dorward and Megan Vaughan memorandum] Back

181 Ev 78 [Jonathan Kydd, Andrew Dorward and Megan Vaughan memorandum] Back

182 Andrew Dorward, Jonathan Kydd, Jamie Morrison and Colin Poulton (2002) Institutions, markets and policies for pro-poor agricultural growth. See www.wye.ic.ac.uk/AgEcon/ADU/research/projects/ppag/ghentpap2.pdf Back

183 Q 137 [Jonathan Kydd, Imperial College at Wye] Back

184 Naila Kabeer (2002), "Safety nets and opportunity ladders: Addressing vulnerability and enhancing opportunity in South Asia", Development Policy Review, vol. 20, no. 5, pp. 595-6. Back

185 The World Bank's Social Protection Strategy conceptualises three types of risk management and vulnerability reduction. Risk reduction strategies reduce the probability of risk before it occurs, reducing the variability of income flows and consumption patterns in the face of shocks, and improving welfare. Risk mitigation strategies help to reduce the magnitude of impact of a future shock through diversification and insurance strategies. Risk coping strategies enable people to cope by reducing the severity of the impact after a shock. Such strategies include drawing down savings, increasing child labour, and reducing food consumption. See Caroline Moser with Oscar Antezana (2002), "Social protection in Bolivia: An assessment of the terms of the World Bank's social protection framework and the PRSP", Development Policy Review, vol. 20, no. 5, pp. 637-656. Back

186 Naila Kabeer (2002), p. 595 - see footnote 184. Back

187 Q 170 [Clare Short] Back

188 Q 93 [Stephen Devereux, Institute of Development Studies Back

189 DFID (2002), Better livelihoods for poor people: The role of agriculture, p. 15. See www.dfid.gov.uk/Pubs/files/agri_livelihoods.pdf Back

190 International Development Committee, Notes on Visit to Malawi. Copy placed in House of Commons Library. Back

191 DFID (2002), Better livelihoods for poor people: The role of agriculture, p. 4 - see footnote 189. Back