Module 7 - Getting Markets Right in the Post-Reform Era in Africa

Recommendations for Practitioners

Practitioners aiming to get markets right need to focus on developing private sector capacity and investing in the institutions and appropriate infrastructure to enable the private sector to function in areas of input distribution, domestic food grain markets, traditional export markets, and export markets for nontraditional, high-value products.

Policy-related investments must complete the implementation of market reform, with adoption of appropriate accompanying measures to alleviate the negative impact of reforms. This effort will require attention to maintaining credible and stable macroeconomic policies.

Institutional investments are needed to develop official systems of grades and standards for agricultural products, market information systems, and functioning systems of trade finance and warehouse receipts, as well as to institute dispute settlement mechanisms and legal reform. Market coordination can be facilitated through commodity exchanges and auctions and by supporting contract farming, outgrower schemes, farmer organizations, and traders’ associations. Overall there is a need to promote effective governance and capacity building of state agencies for regulating and monitoring markets.

Risk management initiatives to help farmers cope with changing markets can include investment in information on market trends, forecasting future trends, and developing capacity to react to this information. Market chains will need to make greater use of instruments such as forward, futures and options contracts; in turn, farmers will require training and capacity building to use these instruments.

Infrastructure investments are needed to improve transport infrastructure, both in terms of transport fleets and roads, and mechanisms such as transport exchanges to coordinate logistics services and maximize the utilization of transport capacity. Other investments in telecommunications, particularly mobile communications, are needed to facilitate market information flows.

In sum, productivity gains brought about through research and technology diffusion must underlie the future African agricultural revolution. However, markets must play a key role in bringing technology, namely inputs, to producers and in enabling them to realize income gains from increased production. Making markets work for the poor in Africa is a critical challenge and pivotal to reducing poverty and hunger in Africa.

Selected Readings

Asterisk (*) at the end of a reference indicates that it is available on the Web. See Appendix 1 for a full list of Websites.

Gabre-Madhin, E. Z. 2001. Market Institutions, Transaction Costs, and Social Capital in the Ethiopian Grain Market. Research Report 124. Washington, DC: International Food Policy Research Institute (IFPRI).*

Kherallah, M., C. Delgado, E. Gabre-Madhin, N. Minot, and M. Johnson. 2002. Reforming Agricultural Markets in Africa. Baltimore: Johns Hopkins University Press.

References Cited

Jayne, T. S., J. Govereh, A. Mwanaumo, A. Chapoto, and J. K. Nyoro. 2002. “False Promise or False Premise? The Experience of Food and Input Market Reform in Eastern and Southern Africa.” In T.S. Jayne, I. J. Minde, and G. Argwings-Kodhek (eds.), Perspectives on Agricultural Transformation: A View from Africa. New York: Nova Science.

Sansoni, S. 2002. Silicon Mali. Forbes Global, February 4. http://www.forbes.com/global/2002/0204/042.html.