|The Courier N° 143 - Jan - Feb 1994 Dossier: Fighting Poverty - Country Report : Niger (EC Courier, 1994, 96 p.)|
by Roger HAY
Southern Africa has just experienced its worst drought in 50 years. The crisis was so severe that its onset could not be missed. International donors were ready to respond and indeed took a lead. This was a major advance, even if it had taken 20 years to achieve. The Bretton Woods institutions were particularly anxious that hard-won support for economic reform should not be derailed and played a major part in mobilising international resources. The speed of government response was more variable.
Few governments or donors had retained the lessons of past experience in institutional memory. In particular, there was an almost universal failure to recognise that drought needs to figure in economic reform programme design and that it requires a more sophisticated and calibrated response than the wholesale deliveries of food aid. As a result, response to drought was, at best, a hastily constructed add-on to programmes designed to mitigate the social costs of economic adjustment. More often, it bore neither conceptual nor operational relationship to long term programmes and policies.
Some lessons from Southern Africa
In Southern Africa, agriculture is closely linked with other productive sectors and with the macroeconomy as a whole. As a result, the effects of drought were not confined to an isolated peasant sector but induced a widespread recession. People lost their jobs in construction and mining, both substantial users of water, as well as in commercial agriculture. Agro-processing either prospered, if food aid donors could be persuaded to import unprocessed food commodities, or suffered from supply shortages if they could not. Energy from hydro-electricity generators had to be rationed affecting industries and services as well as households. The result was a reduction in alternative employment opportunities and remittance incomes, a crucial factor for many rural households, exacerbating drought's direct effects on rural incomes and employment.
Second, drought was superimposed on long-term declines in the balance between people, on the one hand, and land and water on the other. Stocks of underground water are being used up in countries such as Botswana and Namibia more quickly than they are being replenished, primarily by mining companies and large-scale commercial farmers. Although the land seems empty compared with West Africa or Asia, there are twice as many people farming as there were 20 years ago and an increasing number are attempting to grow crops in conditions which are too dry for arable agriculture Employment growth in other sectors is nowhere equal to the number of new job-seekers so that this pressure on increasingly scarce natural resources looks set to continue. The drought accelerated these long-term trends.
Third, the design of reform in drought-prone countries cannot afford to assume steady-state growth. Drought may exacerbate the problems which led to the need for reform: poor growth performance and government account and trade balance deficits. It may also be impossible to achieve macroeconomic targets if drought risk is disregarded. Reasonable consumer price stability may be difficult to secure in the face of a drought shock if public trading capacity has been reduced or dismantled before private capacity has had time to develop. Arrangements for public intervention to supply rural markets in drought years while private trading is gathering strength are a sine qua non of prudent market reform. More generally, an assessment of drought risk needs to have a greater influence on both private and public investment choices.
Fourth, the superimposition of a drought shock on economic reform requires different operational strategies. Drought may jeopardise the reform process itself. Reforms are likely to proceed more rapidly and have wider support when times are good. They may have to be halted or even reversed when times are hard. Embryonic markets for food and labour, previously supplanted by regulation, can be easily undermined by public distribution and employment programmes. Trucking food into rural areas past traders struggling to set up in business is in conflict with strategies aimed at supporting the growth of private trade. Embryonic markets, however, can also easily be overwhelmed if undue reliance is placed on them.
Finally, the drought-induced depletion of household assets affects the poorest first and most. Not only does this lead to a greater concentration of wealth, but it may result in a new class of impoverishment. This poses sharp dilemmas for private choice and public policy Farming families may migrate to urban centres for wage employment, if jobs exist. If they do not, rural job-seekers may face even greater risks in urban labour markets. On the other hand, a prolongation of safety-net transfers in the presence of high structural unemployment is the surest way to induce dependency.
Economic policy in drought-prone countries
As long as drought continues to be regarded as unusual, unexpected and unknown in its impact, economic planners will ignore it. However, drought is not uncertain; it is a known hazard. The first key to more effective drought management therefore lies in turning drought uncertainty into a measured risk by estimating the chances of its occurrence. It may then be possible to decide how this risk should be financed. Fiscal provisions for drought expenditure are made only by Botswana and South Africa. Even if other countries believe that insuring themselves against drought is unaffordable, they might explore the possibility of regional insurance schemes, or insuring with the international donor community. This would have the advantage of setting clear criteria for a draw on resources when the rains fail.
Secondly, the direction and rate at which drought accelerates structural changes in the composition of incomes, employment, output and natural resource base needs to be examined Otherwise policies can easily be directed at prolonging unviable economic activities. This is perhaps most important in the case of agriculture, where continued investment in, or subsidies to, farming on marginal land increases the long-term risks attached to livelihoods and accelerates environmental degradation. Instead, more emphasis needs to be placed on public transfers, investment and job creation where the latter has a chance of being permanent.
A third issue is the need to find more efficient ways of stabilising incomes and employment, as well as food supply in response to drought shocks. The institutional capacity to manage social programmes designed to mitigate the costs of adjustment need not be duplicated by parallel capacity to manage the income and employment effects of drought. Food may have a greater nutritional impact than cash, although this seems unlikely, but cash is much cheaper to transport than food. Effective targeting strategies remain elusive and the evidence contradictory. For example, the Botswana experience suggests that public and private remittances may have maintained income and consumption distribution during drought years but that measures of wealth have become more unequal. Other evidence from the same country suggests that the lowest 40% of income earners receive less than 10% of government transfers.
Finally, government policy needs to be feasible as well as effective. Employment programmes may be better than free handouts, but the task of finding new employment for three million people in three months is certain to be overwhelming. However, contracts with the private sector and NGOs, in food marketing, employment management and transport, may mobilise additional organisational capacities. The state could, for instance, provide financial incentives for private enterprises to take on more apprentices, or pay for training schemes, when drought increases unemployment. The management of more conventional labour-intensive works programmes could also be contracted out to the private sector. Public-private sector contracts may be a way of avoiding heavy public intervention and capitalising on private sector efficiencies but leaving the final responsibility for social welfare in public hands.
Making drought management a more central part of economic strategy should be part of the agenda for African governments and donors during the 1990s.