Food Production

Increases in food prices have the potential to reverse gains in poverty reduction and progress toward the MDGs. Africa, in particular, has higher levels of poverty and the poor are hit hardest as they spend a significantly large proportion of their income on food. Food prices during 2008 were muchhigher than in previous years, particularly for cereals  maize, wheat, and rice. The continent’s cereal import bill is estimated to have increased by 49 percent during 2008 compared to rises of 25 percent in Asia and 31 percent in Latin America.

Food-related demonstrations occurred in a number of RMCs during the year, threatening political stability. In response, some countries adopted measures to either reduce prices and/or increase access to food, which had negative implications on fiscal and external balances.

Despite a general decline in global food prices in the second half of 2008, prices in African countries did not fall by the same margin. This clearly shows that markets on the continent are not as efficient as elsewhere in the world. For example, in some East African countries, maize prices are still 36 percent higher than world levels.

A similar situation holds for West African countries, where cereal prices continued to rise until the last quarter of 2008. This demonstrates that Africa’s situation is unique and requires both short-term and long-term responses to address its vulnerability to unstable food prices and to achieve food security.

Ensure sustainable food security

To address the problem, after due consultation with RMCs, other MDBs and international development organizations, the Bank established in 2008 the Africa Food Crisis Response (AFCR) initiative. This aims to reduce food poverty and malnutrition in the short term and to ensure sustainable food security in the medium to longer term.

The AFCR will provide financial assistance to RMCs to the tune of UA 472.0 million in the short term and UA 1.4 billion in the medium to long term. It is expected that the estimated requirement of UA 1.4 billion will come from regular Bank instruments – ADB, ADF, and cofinancing from development partners. These funds will focus on agricultural infrastructure, including water mobilization for irrigation, rural access roads, and facilities for reducing post-harvest losses.

In the short term, the AFCR seeks to increase the supply of food in RMCs through increased provision of agricultural inputs. Its approach is to:

• Realign the existing agricultural portfolio and restructure non-agricultural projects, thereby releasing funds for the purchase of agricultural inputs to boost food crop production;
• Stabilize food prices through the use of a budget support instrument to quickly disburse resources to RMCs that have experienced drastically reduced tax revenues and exports as a result of the crisis;
• Boost the use of the high-yield New Rice for Africa (NERICA) seeds in suitable projects; and
• Allocate specific resources from the Bank’s Surplus Account to RMCs, particularly some of the fragile states.

The AFCR’s medium- to long-term measures will run over a period of 3 years and adopt several approaches:

• Transformation and revitalization of the agriculture sector by adopting/adapting new technologies;
• Improved rural infrastructure;
• Opera- 30 Annual Report 2008 Chapter 003 Operational Priorities tionalizing the African Fertilizer Financing Mechanism (AFFM);
• Increasing NERICA rice production;
• Capacity building, policy dialogue, and trade promotion;
• Scaling up private sector operations for food security;
• Promoting agricultural research, and
• The establishment of the Crisis Response Facility.

The 5 countries that benefited from the AFCR initiative in 2008 were Central African Republic, Comoros, Burundi, Djibouti and Liberia. In December 2008, the Bank approved UA 10.5 million to help these countries tackle their growing food shortages.