Memorandum submitted by Cru Investment
Management
A. BACKGROUND
1. The World Food Programme is a great example
of the fundamental lack of coherence that exists within the international
aid system. It has a clear remit—provide emergency food
relief to people who are in desperate need. Yet, because of its
operational policies, it is of greater advantage to the donor
countries than it is to the recipients. It is our contention that
the WFP needs to be substantially reformed so that it benefits
the countries that it is intended to help and make them able to
feed themselves in the medium and long term.
2. The WFP aims to purchase food from countries
that have food surpluses, helped by huge subsidies, primarily
the rich countries of the world including the USA, Canada, the
EU, and Australia. In 2006 it had a budget of $2.6 billion.[81]
It buys little from countries within the affected regions. In
2005, for example, some 43% of all food aid provided by the WFP
originated as gift-in-kind from the USA. It then donates that
food to countries that face chronic food shortages. They regularly
include some of the poorest countries in Africa.[82]
Many of these countries in good years could of course be self-sufficient
but self-sufficiency is not part of the narrow remit of the WFP.
3. The current appeal (March 2008) launched
by WFP for more funds to meet the shortfall (estimated at close
to $700 million) due to the sharp increase in prices of basic
foods will only make the situation worse. It highlights the tragedy
of not developing the capacity to ensure local food security.[83]
B. COMMENTS
3. Africa Invest wishes to make the following
comments to the Select Committee;
(a) Only about one third of the entire WFP
budget is actually spent on food itself. The rest of it is spent
on administration, transport and related costs.
(b) The costs of buying internationally as
opposed to locally added around $800 million (approx £400
million) per year to the costs of the operation in 2005.[84]
Under US law all aid from the USA needs to be transported in US
ships and airplanes, must be handled by US labour through US ports
and brokers.
(c) Scottish International Relief (SIR),
a charity that operates in Malawi, in mid-2007 paid $320 per tonne
for locally sourced maize and 5% for transport but the US-purchased
WFP equivalent food costs $812 per tonne because of the added
costs, although at source both cost roughly the same.
(d) In 2007 there was a surplus of corn in
Malawi but WFP was donating enough grain to feed some 44,000 children.
Purchasing this food locally would reinvigorate local markets,
provide many jobs, and create micro-economic benefits to the entire
economy.
(e) Short term food surpluses dumped on the
markets of poor countries add to their problems and not to the
long term solution of the problems. There is evidence[85]
that local farmers are unable to sell their own produce on the
markets of their own countries because the imported food is donated.
Farmers need long-term stability and large donations destabilise
the markets. As a result locally produced food is allowed to rot
in the field. The farmer is unable to recoup what he/she invested.
Next year he/she is not able to produce her own food and will
join the queue for the donated food.
(f) There were famines in Malawi in 2002,
2003 and in 2005 an estimated 30% of the population were out of
food. This sort of situation calls for a sensible long term approach
to satisfying local and regional demand and development of production.
In 2002 the price of corn in Malawi dropped from $250 per tonne
to $100 a tonne in 2003 because of donated grain flooding the
market.
(g) The process described above impoverishes
local farmers and is obviously anti-developmental. This must be
contrary not only to the interests of some of the poorest people
on earth but is also inconsistent with the policies of other agencies
within the UN family, including the Food and Agricultural Organisation
of the UN, also based in Rome, like the WFP. The remit of FAO
is to encourage the development of agriculture.
(h) After years of belittling the role of
agriculture in the economies of some of the poorest countries
on earth the World Bank has changed its tune recently and started
to praise the need to develop agriculture in the poorest countries
on the grounds that its enables people to feed themselves, save
on imports, generate employment and protect the environment.[86]
Malawi was castigated by several international agencies including
the World Bank for subsidising the price of fertilisers to its
farmers, and yet this has changed the face of agriculture in the
country.[87]
(i) Africa Invest is in the processing of
raising several million pounds to invest in agriculture in Malawi,
after two years of successful experimentation. The funds have
been utilised in several ways that directly help the farmers in
Malawi. We have leased some farms on long lease from the government.
We have committed ourselves to buying regularly from farmers certain
products for which we have identified good export markets. At
the moment they include paprika and Birdseye chillies. We buy
from the outgrowers and we guarantee the purchase of what they
produce.
(j) The purchases in cash enable the farmers
to spend money on improving the production of food for their own
and local consumption, as well as generating income within the
community.[88]
Current development thinking is that human security is best assured
by providing cash to the poorest to enable them to make their
own choices.
(k) Africa Invest is already enabling some
of the most vulnerable members of the communities in the areas
in which it works to benefit from the profits made locally. We
feed some 1700 people (children and older people) who regularly
receive food that they are too weak to produce themselves. We
believe that the combination of using the market mechanism to
produce food with the employment of the able bodies and to help
by charitable giving to those who cannot help themselves is the
right combination of development and charity.
C. RECOMMENDATIONS
AFRICA INVEST recommends to the Select Committee
that:
1. HM Government should ensure that WFP
radically change its policies of purchasing food primarily from
the major world producers and not from local sources. It should
help countries that suffer from food deficit to develop facilities
for improving their agricultural production; for storing food
from one year to the next to cushion the irregular local production;
and ease regional food exchanges.
2. HM Government should pave the way for
a radical reform of land tenure systems and property rights in
countries where such institutional facilities do not exist. As
a first step PPP should be used to create estate lands that governments
can lease to domestic and foreign investors in agriculture.
3. The Department for International Development
should develop sensible PPP under which public money can go into
infrastructural investment that will support private (both internal
and external) investment in agriculture.[89]
4. The ETHICAL TRADING INITIATIVE of the
DTI should encourage major supermarket chains should reduce the
long chain from farmers to consumer that exploits by favouring
middle men who add no value whatsoever to the produce.
5. DfID should be encouraged to develop
micro-credit schemes that tie over farmers between planting to
harvesting as opposed to the present schemes that primarily encourage
commercial activities.
6. HM Treasury should make tax-incentivised
provisions to enable investment into agriculture in Africa that
generates local food and local jobs to be treated in the same
way as investment in UK high risk or start up companies.[90]
March 2008
81 The source of this information is the WFP website;
http://www.wfp.org/aboutwfp/facts/2006/index.asp?section=1&sub-section=5
and a breakdown can be found at http://www.wfp.org/aboutwfp/facts/2006/pdf/DIRECT.pdf Back
82
The list of countries from which food is purchased and countries
to which food is donated appears on http://www.wfp.org/operations/Procurement/index.asp?section=5&sub<mv3>-<mv-3>section=3 Back
83
Press release 24 March 2008, updated by the Independent
newspaper, 25 March. Back
84
OECD The development Effectiveness of Food Aid; does trying
matter, 2006. The study was undertaken by the well respected
agricultural economist Dr Edward Clay. We have attached an OXFAM
UK briefing paper 71 Food aid or hidden Dumping? March
2005. The reference to African food prices is on page 25 of the
document. (Appendix 1). Back
85
The Observer, May 2007-(Appendix 2). Back
86
The World Bank World Development Report 2008, published October
2007. Back
87
7 Chatham House -The World Today-December 2007 (Appendix 3). Back
88
Dr Alexander R Phiri, Bunda College of Agriculture, Malawi: Comparative
Analysis of potential economic impact of alternative agricultural
and rural development models, May 2007 (Appendix 4). Back
89
Overseas Development Institute (Appendix 5). Back
90
Such as the UK Enterprise Investment Scheme (EIS) and Venture
Capital Trusts (VCTs) which attract tax relief for domestic operations. Back
| 
