APPENDIX 5
Memorandum submitted by Traidcraft[12]
INTRODUCTION
1. Traidcraft welcomes this inquiry into
the humanitarian crisis in southern Africa. Traidcraft is a fair
trade organisation encompassing a trading company (Traidcraft
Plc) and a capacity building NGO (Traidcraft Exchange), committed
to using trade as a vehicle for poverty alleviation. Traidcraft
Plc is the UK's largest fair trade company with an annual turnover
of £10 million per annum. Traidcraft is an active participant
in the wider movement to promote fair trade[13].
2. Traidcraft works in developing countries
with producers of agricultural, manufactured or handcrafted products
whose circumstances effectively exclude or marginalise them from
the mainstream trading system. Terms of trading are set in a way
that ensures producers receive a price that covers a fair return
on capital costs and labour, and business training and support
where needed. In particular Traidcraft works to establish trading
relationships that are transparent, equitable and sustainable
thereby ensuring that producers are able to overcome barriers
to trade and establish sustainable livelihoods. Traidcraft views
its work as actively contributing to the realisation of the Millennium
Development Goals, which seek to reduce the number of people living
in absolute poverty by half by 2015. Traidcraft works with producers
from South and South East Asia, Central and South America, the
Caribbean and East Africa. In southern Africa, Traidcraft works
in Malawi, Mauritius, Zambia, South Africa and Zimbabwe.
3. As an organisation working to secure
long-term, sustainable development for some of the poorest groups,
the current humanitarian crisis in southern Africa is of deep
concern to Traidcraft. Systemic poverty ensures that people are
vulnerable to the kind of shocks that southern Africa is currently
experiencing—and greatly exacerbates their impacts on marginalised
communities. While critical for providing emergency relief once
a shock has reached crisis proportions, the policies of donors
and the international community more widely can either contribute
to or lessen this vulnerability.
4. This submission does not offer an exhaustive
analysis of the factors contributing to the current crisis, but
will rather focus on the experience of the Traidcraft network
in the region, in particular the factors directly affecting people
in our suppliers' trading chains at present[14].
Traidcraft seeks to "fight poverty through trade", so
this submission will also point to the relevant links between
trade and poverty.
THE IMPACT
OF THE
CRISIS
5. FAMINE
RELATED DEATHS
In Malawi, according to Traidcraft partners
and suppliers, there is no doubt that the current crisis has led
to many deaths, particularly in late 2001 and early 2002. According
to the NGO ActionAid, between January and April 2002 at least
500-1,000 people died of hunger and hunger-related diseases in
southern and central Malawi, making this the worst famine in living
memory[15].
Lack of access to food forced vulnerable farmers to consume their
maize harvest before it was ready—while it was still "green".
This left many without adequate supplies to plant and is expected
to lead to a second crisis later this year and early next year
when harvests again will be unable to meet demand.
6. INCREASED
LEVELS OF
MALNUTRITION AND
DISEASE
The crisis has affected communities in other
ways. Many families are now unable to have even one meal a day
leading to increased levels of malnutrition which leaves the young
and the old vulnerable to disease. This places a severe burden
on families where members are unable to work and therefore generate
cash income due to illness. This in turn leads to a vicious cycle
as lack of a cash income leaves families unable to buy medicines
when required.
7. EDUCATION
SUFFERING
Traidcraft's partners point to the effects that
the crisis is having on education. Many parents are unable to
pay the school fees for children in secondary school or provide
the food needed by their children at primary school. Children
may also be taken out of school to help their parents look for
food. Some children are simply too weak and hungry to attend school.
ActionAid reports a 25 per cent drop out rate in one area due
to hunger[16].
8. MIGRATION
The crisis in rural areas has lead to increased
migration to nearby towns and urban centres. Employees of one
of Traidcraft's producer organisations—PAMET[17]—based
in Blantyre report pressure as relatives who have not been able
to harvest enough maize arrive from the villages.
9. ECONOMIC
SLOW DOWN
Economic activity in Malawi is primarily driven
by the performance of the agricultural sector. The current crisis
has led to a more general decline in economic activity with some
high profile companies closing down or operating below capacity.
The associated retrenchments have exacerbated poverty and insecurity.
Press Corporation Limited group Chief Executive, Matthews Chikaonda
attributed the recent closure of one of its subsidiaries, Hardware
and General Dealer Limited to, "stoppage of development aid,
famine and the under-performance of the economy which has eroded
the purchasing power of households."[18]
This is compounded by falling prices for key commodities such
as tea, coffee and tobacco. Workers in these industries are particularly
vulnerable when they are dependent on estate owners to provide
them with food. Following the dramatic rise of food prices there
have been reports of owners releasing workers so that they do
not have to feed them[19].
Agriculture across southern Africa has been impacted by recent
events in Zimbabwe, which has frightened buyers away from the
region.
VULNERABILITY AND
SECURITY FACTORS
IDENTIFIED
10. Southern Africa has been racked by shockwaves
from a relatively minor climatic hiccup—certainly when compared
to the two years of sustained drought that preceded the 1991-92
crisis. It is important to understand the factors contributing
to this. In particular it is important to find out why so many
people are more vulnerable now—and have been tipped over
the edge into chronic food insecurity—than they were 10
years ago and what factors can reduce this vulnerability and provide
effective coping strategies for poor and marginalised communities.
Lack of sustainable income generating opportunities
11. In Malawi 87 per cent of total employment
is agriculture based and agriculture provides over 60 per cent
of the income of the rural poor[20].
There is a chronic lack of reliable, year-round income generating
opportunities, which could provide people with the means to survive
such a crisis. Reasons for this include the high cost of borrowing,
lack of effective market access, lack of access to credit and
poor transport facilities. This ensures that communities remain
dependent on subsistence farming supplemented by seasonal casual
work on plantations and neighbours farms—often for very
low rates of pay. When the agricultural sector as a whole is hit
by a crisis, the coping strategies available to the poor are severely
limited.
12. Traidcraft's approach aims to broaden
coping mechanisms and ultimately sustain livelihoods through providing
access to year-round trading and income earning opportunities.
In Malawi, Traidcraft's partner fair trade company, Development
Trading Limited, pays a group of over 1000 basket weavers a deposit
of 25-50 per cent of the final price of each basket on commencement
of weaving. The balance is paid on collection of the baskets.
The baskets are exported to businesses in Germany and the UK.
13. This kind of equitable financial partnership
has proved to be a vital tool for sustainable poverty alleviation
for the communities involved, but has been especially critical
in the present crisis. Part of the money the basket weavers earn
is used to buy food. Weavers with children in secondary school
have been able to pay their fees. Even though primary school is
free, fair income generating opportunities can make a real difference
to school attendance and performance. Where children are not provided
a meal at school, being able to take food with them means that
there are both more likely to attend and will be more able to
concentrate.
14. Importantly such income generating opportunities
provide an element of year-round security to supplement income
from sale of crops, which is earned only once or twice a year—or
not at all in crisis years. Income earned provides incentive for
saving and investment in other non-seasonal enterprises. This
increases the number of coping strategies available to vulnerable
groups. Livelihood opportunities that can be combined with agriculture
and farm tasks are particularly important; for example DTL are
also buying rice from smallholders for a fair price and then selling
this to National Milling in Blantyre.
15. The fair prices and premium paid to
businesses and communities engaged in fair trade also allows collective
saving schemes which are then invested in community-based projects
that improve the standard of living of all.
Failure of donor policies
16. The countries in southern Africa affected
by the current crisis are extremely poor. Several partners have
pointed out that the current crisis is only an extension of the
hardships and insecurities faced by poor communities in these
areas each year. According to Malawi's 1998 integrated household
survey 65 per cent of the population is poor and nearly thirty
per cent are living in extreme poverty. Malawi is particularly
dependent on donor finance. 80 per cent of the development budget
and 40 per cent of the recurrent budget comes from donors[21].
Those countries most severely affected by the current crisis are
also heavily indebted.[22]
These factors lead to a high degree of donor responsibility for
policy making. The levels of (sometimes conflicting) policy prescriptions
and conditionalities imposed by donors places an increased burden
on domestic governments and decreases the space for domestic policy
making. Several partners have pointed to inappropriate donor policies
and lack of donor co-ordination as factors contributing to the
current crisis.
17. Access to agricultural inputs is critical
to production in Malawi. A number of problems have been faced
on this front. Liberalisation of farm inputs, such as seeds and
fertilisers, combined with exchange rate liberalisation, as part
of donor prescribed structural adjustment programmes have made
them too expensive for most people. The Starter Pack scheme aimed
to support production by restoring access to these inputs. Following
widespread distribution of the packs in 1998-99 and 1999-2000,
in 2000 it was scaled back and "targeted". The number
of households receiving this vital input fell from 2.8 million
to 1 million. Combined with localised flooding this contributed
to a dramatic decline in agricultural output and a rapid rise
in food prices. In Malawi, production fell from 2.5 million metric
tons in 1999-2000 to 1.7 million metric tons in 2000-01. The price
for one kilo of maize rose from MK4 in June 2001 to over MK40
in January 2002.
18. Donor driven partial deregulation of
Malawi's grain marketing board, ADMARC, has meant that structures
and safety nets that were in place in the 1991-92 crisis are no
longer there. In particular the board had in the past had a comprehensive
network of outlets through which food could be delivered in times
of crisis.
19. Traidcraft's partnerships around the
world show that trade based on principles of transparency, equity
and sustainability can contribute to poverty alleviation. Where
merely boosting competition and economic openness are the driving
factors, trade's contribution to sustainable development can be
minimal and in the worse case, can be counter productive.
Governance issues
20. It is clear that in Malawi, mismanagement,
governance and accountability issues have contributed to the current
crisis. Following donor advice to reduce the level at which Malawi
held strategic grain reserves, it appears that the entire reserve
was sold off. It also appears that the bulk was sold locally—rather
than being exported as the IMF recommended. This allowed local
traders to hoard the maize and benefit from higher prices when
hunger hit. Investigations into the involvement of senior figures
in this matter are continuing.
21. Traidcraft believes that donors owe
a duty of care to governments where they have a high degree of
responsibility for decision making to support the development
of the principles and practice of open, responsible and accountable
governance. We recognise the important work that DFID is doing
in Malawi on this subject.
HIV/AIDS
22. HIV/AIDS rates have increased dramatically
in southern Africa since the 1991-92 crisis. In Malawi it is estimated
that 15 per cent of the adult population is HIV positive, in Zambia
this figure is 21.5 per cent and in Zimbabwe 33.7 per cent.[23]
This has been critical is exacerbating vulnerability. People are
less able to devote sufficient attention to their crops because
they are sick or are giving care to a family member who is sick.
What spare income a family has may have to be spent on medicines
to treat opportunistic infections. For people living with HIV/AIDS,
food shortages bring a host of problems, including an increase
in the occurrence of secondary infections as their resistance
declines due to poor nutrition. The resulting increased costs
of care-giving and loss of productive labour has an asset-stripping
effect on households as well as on their purchasing power.
23. Traidcraft's approach of creating sustainable
livelihood opportunities to poor and marginalised communities
through trade can be important in helping to mitigate the increased
vulnerability of already-marginalised communities due to HIV/AIDS.
Traidcraft is exploring ways of ensuring that its practice takes
into account these impacts and encourages other agencies and donors
to do the same.
RECOMMENDATIONS
24. INCREASED
SUPPORT FOR
SUSTAINABLE INCOME-GENERATING
PROJECTS
The experience of the current crisis in Southern
Africa demonstrates that access to fair and sustainable income
generating activities has been critical in mitigating the impacts
of the current humanitarian crisis for the poor and marginalised
groups that Traidcraft works with. In Malawi, DFID are supporting
this approach through a £2.6 million grant to Traidcraft
Exchange. Such relationships should be further supported, encouraged
and replicated wherever possible, including through donor policies
and national owned and agreed poverty plans. The development of
a strong agricultural sector should not only be seen as important
for food security, but also as a springboard for economic diversification
and subsequent further industrialisation.
25. SUPPORT
FOR GREATER
PARTICIPATION OF
MARGINALISED GROUPS
IN POLICY
MAKING
It is clear that total liberalisation of agricultural
markets was not an appropriate policy recommendation for a country
like Malawi. In this case donors' "one size fits all"
approach to economic development has had disastrous consequences.
Countries should be allowed the flexibility and policy space to
support and promote those industries or sectors that they deem
most appropriate for their people and their future development.
In poor and unequal societies the voice of marginalised producers
and the informal sector is too easily overwhelmed by more powerful
economic interests, leading to policies that may have limited
effects on poverty. In particular donors should encourage the
effective participation in policy making of those most affected.
26. GREATER
ATTENTION TO
THE QUALITY
OF TRADE
PROMOTED
The relationship between poverty and trading
is a delicate one. Access to trading opportunities can—when
organised in a fair and sustainable way—lessen vulnerability
and support poverty alleviation. However too much emphasis on
an aggregate increase in trade with insufficient attention paid
to the structure and quality of the relationships involved may
lead to increased vulnerability of the poorest.
Traidcraft
October 2002
12 The following from Traidcraft's network contributed
to this paper: Elvas Kadzako, Managing Director of Development
Trading Limited (Malawi); John McGrath, Chair of the TEEM Project
(Malawi); Bonaventura Chidzard, Managing Director of Pamet (Malawi). Back
13
Other bodies that make up the Fair Trade Movement include, the
International Federation for Alternative Trade (IFAT) www.ifat.org;
the Fairtrade Labelling Organisation (FLO) www.fairtrade.net and
its UK representative, the Fairtrade Foundation (FTF) www.fairtrade.org.uk
Consumption of fair trade products in the UK grew by over 40 per
cent in 2000-01. Back
14
Traidcraft would be happy to supply the Committee with further
detailed information on the issues highlighted in this submission. Back
15
"State of Disaster: Causes, Consequences and Policy Lessons
from Malawi", Action Aid, June 2002. Available at: www.actionaid.org/resources/pdfs/malawifamine.pdf Back
16
"State of Disaster: Causes, Consequences and Policy Lessons
from Malawi", Action Aid, June 2002. Back
17
PAMET aims address the shortage of school supplies and improve
the quality of primary education in Malawi using small-scale paper
making and recycling technology. Back
18
The Malawi Nation "Hardware and General Dealers Limited
Closes", 2 October 2002. Back
19
"State of Disaster: Causes, Consequences and Policy Lessons
from Malawi", Action Aid, June 2002. Back
20
Government of Malawi, "Poverty Reduction Strategy Paper"
2002. Back
21
Reserve Bank of Malawi, 2000. Back
22
In the case of Malawi, interim debt relief has not been released-despite
the severity of the current crisis-as the IMF deems that the government
is off track with its commitments. According to the Jubilee Debt
Network, the World Bank has stated that even with full HIPC relief
Malawi's debt will remain unsustainable. Zambia has only just
had its finance released after suspension and again, its debt
is considered unsustainable even after relief. Zambia's debt service
is 126 per cent of what it receives in aid. Back
23
UNAIDS, 2002. Back
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