The Political Economy of Food Price Policy in Senegal
The Political Economy of Food Price Policy in Senegal
Abstract and Keywords
Since independence, Senegal has been highly reliant on international markets to meet its food needs, this tendency has only increased with rapid levels of urbanization in recent decades. Poor domestic cereal harvests prior to 2007 exacerbated this import-dependence during a time of high global food prices, resulting in the cost of rice sky-rocketing. Government response was to suspend customs duties and value added taxes, providing consumer subsidies and other modes of social protection, and launching a high-profile agricultural initiative. This chapter argues that the policies which emerged reflected the confluence of a strong, diverse civil society placing disparate pressures on a government increasingly centralized around the personality and populist impulses of its former president. Senegal remains vulnerable to future food price crises, learning from these policy mistakes should be a key priority for government.
In mid-2008, one of Africa’s most stable democracies descended into a period of economic depression and growing social discontent. The sentiments of one taxi driver, who noted that ‘If things continue like this, we’ll have to eat sand’, captured the anxiety of many Senegalese as the price of rice continued to skyrocket.1 Between January 2007 and September 2008, the consumer price of imported Thai A1 rice, which is the country’s main food staple, increased by more than 100 per cent in the capital of Dakar. The rise in the price of rice and other key commodities resulted in a level of inflation not seen since the country was forced to devalue its currency, the Communauté Financière Africaine (CFA) franc, in 1994. In fact, Senegal was one of the worst affected by the 2007/8 global food price crisis, with food prices 24 per cent higher than the African average (Ndione 2008).
Senegal’s historic dependence on external markets to supply its food needs, coupled with two seasons of poor domestic cereals production, made it especially vulnerable to global food price rises. While the high level of price transmission from the international to the domestic market impacted the rice sector most severely, other affected commodities included wheat and milk. Yet, there were a variety of long-term structural factors that contributed to Senegal’s vulnerability. These included the lack of a visionary agricultural strategy for promoting greater domestic production and commercialization of local goods as well as the country’s high level of urbanization and the longstanding preference of urbanites for imported food.
(p.297) The government’s initial response to the crisis was slow and characterized by a diverse array of interventions. After first suspending custom duties and value added taxes (VAT) in July 2007, the government subsequently provided consumer subsidies. These were accompanied by a diverse range of social protection schemes and the launch of a high-profile agricultural initiative known as the Grand Agricultural Offensive for Food and Abundance (GOANA). The cumulative impact of these interventions in protecting the most vulnerable was relatively small, while the burden on the public finances became extraordinarily heavy.
Why and when did the government choose these particular policies? And what key factors limited their ultimate success? I argue that the policies emerged from the confluence of a strong, diverse civil society placing disparate pressures on a government increasingly centralized around the personality and populist impulses of the former president Abdoulaye Wade. Having ascended to the presidency with the support of urbanites, Wade was loath to alienate this constituency. The decision to implement, and then often to rescind, short-term policies reflected the variable pressures exerted by different groups. Both high levels of ministerial instability under Wade and the desire to please different interest groups resulted in inadequate targeting and implementation of policy measures and a lack of long-term planning to weather the crisis. In the face of competing demands by various stakeholders, schizophrenic policy outcomes emerged.
14.2 Contextualizing Senegal’s Agricultural Sector
Although agriculture has long represented an important sector for the Senegalese economy, the country imports about 60 per cent of its food (Ba et al. 2009). Rice in particular constitutes about 5 per cent of total imports and almost 70 per cent of total cereal imports (Cabral, Cissé, and Diagne 2009). The reasons for this high food import dependence are due to the historic promotion of peanuts, key structural constraints, a series of ineffective agricultural reforms, and rapid urbanization.
Challenges for the agricultural sector were further exacerbated when Senegal, along with other members of the CFA zone, devalued its currency in January 1994 by 50 per cent, meaning that the cost of imports purchased on the international market with the CFA franc increased by 100 per cent.2 While the devaluation temporarily reduced the country’s import dependence, the domestic agricultural sector did not experience a large boost in (p.298) exports due to the increased cost of imported inputs. Consequently, many rice producers diversified into other crops. An escalation of civil conflict during the mid-1990s in the Casamance region, which is one of the main rice-producing areas, further hurt local production.3 At the same time, the devaluation concentrated the market structure for imported rice; while there were forty-three importers in 1996, there were only seven importers in 2000, four of which controlled 63 per cent of the total volume of imported rice (Ba et al. 2009).
Spurred by both the impact of the devaluation as well as Senegal’s entry into the West African Economic and Monetary Union (UEMOA), the government adopted in 1994 the Structural Adjustment Programme for the Agricultural Sector (PASA).4 PASA aimed to further liberalize the distribution and price of all agricultural products, privatize the rice sector and eliminate subsidies to the production of local rice, and progressively reduce tariffs with the goal of ultimately adopting a regime of general custom tariffs under UEMOA (IIED 2002).
14.3 Policy and Politics during Wade’s First Term (2000–7)
Senegal’s gradual economic liberalization occurred in parallel with a number of political reforms that paved the way for multi-party democracy in the mid-1990s.5 These reforms culminated with the victory of Abdoulaye Wade, leader of the Parti Démocratique Sénégalais (PDS), in the 2000 presidential elections and ended forty years of Parti Socialist du Sénégal (PS) rule. Much of Wade’s initial support came from the country’s urban poor. Retaining the support of this constituency while also trying to expand his appeal to rural voters partially explains Wade’s erratic approach to the agricultural sector.
Early on in Wade’s tenure, Senegal adopted the Common External Tariff (CET) imposed by its membership within UEMOA. The CET was established in 2000 in order to harmonize member countries’ customs duties on third-country imports and required imposing a 10 per cent levy on cereal imports from countries outside of the UEMOA area. In many ways, this increased the scope for greater rice imports since the previous customs duty was 20 per cent (Baris 2009). At the same time, UEMOA allows every member (p.299) state to choose seven categories of products that are exempt from VAT if they are consumed in large quantities by the poor. The Senegalese government chose to exempt groundnuts, cereals/manioc, fresh vegetables, fresh meat, fresh and frozen fish, eggs, and potatoes and onions (see IMF 2008).
Besides regional trade issues, Wade attempted to put his own mark on agricultural issues. Starting in 2005, Senegal increased the share of government expenditure on agriculture from 4.4 to 14.1 per cent (see Fan, Omilola, and Lambert 2009). This exceeded the target advanced under the Comprehensive Africa Agriculture Development Programme (CAADP) whereby African governments committed to spending at least 10 per cent of their budgets on agriculture. But, instead of having a consolidated vision for the agricultural sector, much of Wade’s tenure was characterized by a variety of scattered interventions that lacked long-term planning. For instance, in 2003, Wade announced a ‘plan for maize’ that envisioned Senegalese farmers producing one million tons annually. Yet, the plan was announced right before the growing season, with little attention to the seed, fertilizer, or land requirements to achieve this goal (see Antil 2010). This was followed by a ‘plan for manioc’, ‘plan for sesame’, and then a ‘plan for bissap’. None of these initiatives were very successful, and they involved minimal engagement with other stakeholders.
The one exception was the Agricultural, Forestry, and Livestock Act (LOASP), which provided a framework for reducing poverty and diminishing inequalities between rural and urban populations over a twenty-year time horizon. To do so, the LOASP primarily was concerned with increasing agricultural exports and generating incentives for private investment in rural areas (Stads and Sène 2011). After drafting the initial version of the LOASP, the Ministry of Agriculture interacted closely with other government agencies and with the National Council of Rural Consultation and Cooperation (CNCR) in order to refine the LOASP. Established in 1993, CNCR is a federation of twenty-eight small-scale producers’ associations and due to its broad representation, CNCR has become the main civil society organization that interacts with the government on issues of agricultural policy. As such, CNCR organized almost 50 consultative meetings throughout the country to discuss an existing draft of the LOASP.
Another agricultural initiative emerged in November 2006 in the wake of increasingly frequent attempts by young, unemployed Senegalese to emigrate to Europe. A series of high-profile deportations by the main destination countries, Spain and Italy, led to widespread anger in the months preceding the 2007 elections. Wade therefore responded by launching the Return to Agriculture programme (REVA), which aimed to integrate the youth into pilot farming centres of excellence in order to combat unemployment by creating 300,000 new rural jobs (see Antil 2010).
(p.300) None of these fragmented initiatives amounted to a clear and coherent agricultural and rural development strategy. This was both a result of, and exacerbated by, the institutional landscape. Due to the increasing centralization of power around the presidency under Wade, he frequently shifted his cabinet to prevent the emergence of political competitors or to reflect a new perspective on how his government should be organized (see Mbow 2008). For instance, the portfolio of the Ministry of Agriculture was consistently changing during Wade’s first seven years in office. It shifted from being responsible for agriculture and livestock under Pape Diouf from 2000 until 2003, to agriculture and water under Habib Sy from 2003 until 2006, and then to agriculture, water, and food security under Farba Senghor in 2006. This persistent shift in ministers undermined policy continuity. Furthermore, these circumstances prove highly problematic for the vast donor community in the country concerned with issues of rural development. As noted by an agricultural specialist at the United States Agency for International Development (USAID), ‘the fundamental problem for USAID is that there is no interlocutor to discuss agricultural strategy’ (interview with Badiane 2012). Likewise, the director of the Food and Agricultural Office (FAO) in Senegal noted, ‘There is a lot of instability within the agricultural ministry since 2002, and there have been at least seven ministers over the last six years. These changes are often accompanied by a change in the directors as well and this makes our communication less efficient, and this is honestly a problem’ (interview with Ouattara 2012).
A similar dynamic characterized policy in other important sectors, such as social protection. Between 2001 and 2007, the main ministry in charge of social protection had its main mandate and portfolio of operations changed seven times, shifting from the Ministry of Social Development to the Ministry of Family, National Solidarity, Female Enterprise, and Micro-Finance by the end of 2007. Not surprisingly, this institutional instability prevented the Department of Social Assistance, which has been housed in these various ministries, from implementing durable social protection programmes (Samson and Cherrier 2009). At the same time, a number of other ministries, ranging from education, labour, agriculture, and health, are also involved in social protection activities, leading to challenges with coordination.
Historically, Senegal’s social protection regime has been extremely limited. However, in 2005, the government adopted the National Social Protection Strategy (NSPS), which aimed to extend health insurance coverage from 20 to 50 per cent of the population, and to implement a social protection regime to protect those most vulnerable to shocks. Yet, there has been little ownership of the NSPS, and yearly reviews of the Poverty Reduction Strategy Paper reveal (p.301) that this is the component which has the weakest implementation (interview with Pigois 2012).
14.4 Evolution and Manifestations of a Crisis
The above context, characterized by weak social protection measures, the lack of an agricultural strategy, continued food import dependence, and high levels of ministerial instability, provided the backdrop to the food price crisis in Senegal, which began in 2007 and continued through 2008. The immediate cause of the crisis was twofold. First, Senegal experienced especially poor agricultural yields during both the 2006/7 and 2007/8 production periods. In 2006/7, a shortage in seeds and other inputs and a late start to the rainy season shortened the plant cycle and caused cereal yields to decline. In December 2006, the FAO was already warning of a crisis and noted that net domestic production could only meet 48 per cent of the country’s grain needs (FEWS NET 2006).
Torrential rainfalls in late August and September further limited output from the 2007/8 harvest (EIU 2007). Second, the crisis in domestic production only increased Senegal’s dependence on food imports. High levels of exposure to external markets proved particularly dangerous due to global price increases in 2007 for key commodities that Senegal imports. In fact, food price inflation increased 1.4 to 7.3 per cent between 2006 and 2007 (WFP 2008a).
14.5 Government Responses to the Food Crisis
Senegal therefore faced a crisis for a variety of major consumer products, in addition to rising costs for fuel, kerosene, and butane gas, which are critical for cooking and electricity. Yet, the government’s response to the crisis initially was quite slow, hindered by the priorities of the February and June 2007 presidential and parliamentary elections, respectively.6 Indeed, the director of the FAO office in Senegal observed,
‘Six months before the crisis in 2007, the previous [FAO] director tried to attract the attention of the president and his ministers to the fact that there was a looming crisis by showing them our statistics and early warning system. The former director wrote a communiqué noting that the government needed to be careful (p.302) because a food crisis was looming because we could see that the global food stocks were going down. The government was not very convinced’ (interview with Ouattara 2012).
By mid-2007, radio stations increasingly were emphasizing the implications of rising food prices as the period of Ramadan approached. Due to growing social pressures, the government ultimately responded with a combination of trade and fiscal measures, social protection policies, and production support. The broad and variegated level of interventions reflected the influence of various interest groups, who each in turn convinced the government to support their particular cause. Figures 14.1 and 14.2 elaborate on the chronology of events and policy decisions over 2007 and 2008, which are detailed in the subsequent sub-sections.
Some of the initial impetus for the government’s response to the food crisis emerged from the National Confederation of Senegalese Employers (CNES) who sent a declaration to the Ministry of Economy and Finance in early 2007 demanding the removal of custom duties and VAT taxes on powdered milk. By May 2007, the CNES met with the Ministry of Finance, the Ministry of Commerce, the Ministry of Livestock, importers, and producers of milk-based products affiliated with the Union of Professionals of Industries and Mines (SPIDS). Most stakeholders involved in the meeting disagreed with CNES, and subsequent studies by the Ministry of Finance revealed the negative fiscal impact that such measures would have (Dia et al. 2008).
The following month, a range of important consumers groups and trade unions organized demonstrations in which they accused traders of benefiting from the price rises and the government of failing to care about consumers. In turn, during a meeting of his ministers later that month, President Wade delegated the Ministry of Commerce to find a way to tackle the food crisis (Dia et al. 2008). In July and August, the Ministry of Economy and Finance subsequently announced the suspension of customs duties of 10 per cent for rice, 5 per cent for wheat, and 5 per cent for powdered milk that it typically implements as part of the CET with UEMOA. The 18 per cent VAT under UEMOA was also lifted on powdered milk (IMF 2008). The latter measure was opposed by domestic milk processors and producers who believed that the VAT should be maintained and re-invested into the local dairy sector (Dia et al. 2008).
To compensate for the revenue losses created by these interventions, the government attempted to undergo further fiscal policy changes. In early November 2007, the government announced it would reduce public sector salaries and introduce a progressive tax of between 1 and 30 per cent for both private and public sector salaries. Not surprisingly, these measures were heavily unpopular and ultimately reversed. Yet, it motivated many of the country’s trade unions and opposition parties to announce a march on 22 November to protest against the rising cost of living and to demand higher salaries. The march coincided with a heavily violent riot in Dakar by street vendors, who were forced off the street by police in an effort to gentrify the city centre to prepare for Senegal’s hosting of the eleventh summit of the Organization of the Islamic Conference. The government eventually quelled tensions by focusing more specifically on improving working conditions for vendors (EIU 2007) rather than addressing the concern over high food costs. However, it did prompt President Wade to sign an agreement with the Government of India in March 2008 to send approximately 600,000 tons of rice to Senegal annually for the subsequent five years (OBG 2009).
Besides these trade and tax measures, the Ministry of Commerce implemented a series of price ceilings, or implicit consumer subsidies, which tended to have only minimal sustainability. For instance, in November 2006, wheat flour was added to the homologation regime, resulting in a fixed price for both wheat and wheat flour (Ministry of Commerce 2007; Ndiaye 2007a).7 Yet, the world price and import price of wheat slowly increased over the summer of 2007, leading both large-scale importers and millers to demand that the government amend its price ceiling, noting that they were losing money as the price of flour and bread remained fixed. Philippe Steffan, the director of Grands Moulins de Dakar, which is the largest importer of wheat and miller of flour in Senegal, alerted the government in October 2007 that his factory would begin firing millers if the prices were not re-adjusted (see Flipo 2007). Bakers, however, wanted to continue retaining a profit margin from their sale of bread while major consumers’ organizations insisted that the government maintain price stability. Ultimately, the government sided with the millers and bakers by agreeing in late October to raise the price of bread by November, strategically ensuring that this increase occurred after the end of Ramadan.
In July 2007, the price of scented, broken rice was set at CFA 225, down from the CFA 250–75 national average. Yet, due to a lack of enforcement, most rice retailers eventually abandoned the price ceilings (Ndiaye 2007b). The price of milk and milk powder was not fixed until right before the start of Ramadan in September 2007 (Ndiaye 2007b). However, as noted in more detail below, the concentration of milk consumption among wealthier Senegalese meant that this measure did not have a large impact on protecting the poor.
In late March 2008, the government faced even greater pressure to confront the food crisis as a result of a demonstration by the largest and best organized consumer union, the Association of Senegalese Consumers (ASCOSEN), and supported by many key opposition parties. Since many participants wrote on their T-shirts On a faim, ça suffit (We are hungry, that’s enough!), this march was ultimately labelled in the media as the Emeutes de faim (Food riots) (interview with Ndao 2012). Due to the participation of opposition groups, President Wade claimed that the rally was only an attempt by the opposition to gain attention. Instead, he announced publicly ‘There is no famine in Senegal. There are no hunger riots in Senegal’ (cited by Sy 2008).
Subsequently, however, Wade invited the leader of ASCOSEN, Momar Ndao, to explain why he organized the protests. After explaining their concern with (p.305) reducing consumer prices and the organization’s own solutions to this problem, ‘Wade called the prime minister and said “These people have some interesting solutions and I ask you to organize a meeting every week in order to exchange ideas about how to deal with the food prices”. The State organized a type of task force, quasi inter-ministerial, presided over by the prime minister and with all the relevant ministries’ (interview with Ndao 2012).
Consequently, in April 2008, the government stated it would offer a subsidy to rice distributors in order for them to maintain the price at a maximum of CFA 280 a kilogram (WFP 2008a). This, however, led to a rationing of rice supplies because the government could not pay many distributors the subsidies on time. In turn, 200,000 tons of rice were stockpiled in warehouses around Dakar by early May 2008 and caused the retail price in Dakar to inch closer to CFA 300 per kg (Sylla 2008).
Indeed, the powerful National Union of Traders and Industrialists of Senegal (UNACOIS), which includes large-scale rice importers as members, believed the subsidies were a mistake. According to the organization’s secretary general, ‘During the crisis, we [UNACOIS] did tell the Ministry of Commerce that we are in a free market and the government needs to have the courage to say that to the population…We opposed the government’s decision to introduce subsidies but, the government ignored us because it was under so much pressure and protests. But, we didn’t think this was a sustainable policy’ (interview with Lo 2012). The subsidy on rice was discontinued in July 2008 due to budget constraints. In fact, the policy had cost the government CFA 11.5 billion (Daffé, Cissé, and Diène 2011), even as many importers and traders still remained unpaid for this consumer subsidy in the form of tax rebates and direct payments (Ndiaye 2009).
The crisis also demanded a greater role for the Commission for Food Security, which holds the country’s cereal stocks and provides price and supply information on a regular basis for millet, sorghum, rice, maize, peanuts, and beans. The main response of this agency to the crisis occurred in May 2008 through its Assistance au Monde Rural (AMR) programme. The AMR involved the purchase of more than 20,000 metric tons of rice in order to target vulnerable consumers in rural areas. By August 2008, when the annual rains began, the distribution of rice was halted (interview with Sèye 2012).
Arguably, a more developed social protection programme would have represented the best approach for protecting vulnerable Senegalese from food price shocks in the short term. Despite the country’s weak social protection system, a range of donors in the country, including USAID, UNICEF, the World Food Programme, the World Bank, and the FAO have shown an interest in supporting greater protection of the vulnerable. For instance, a school feeding program was established in Dakar in 2008 that assisted approximately 80,000 children between the ages of 3 and 12 (Daffé, Cissé, and Diène 2011). (p.306) Another project, entitled ‘Targeted Child Nutrition and Social Transfers’, has provided vulnerable mothers of children aged 0–5 with a financial subsidy. A programme of food vouchers, costing approximately CFA 1.9 billion, was also established in 2008 for 17,400 households in a suburb of Dakar and in the southern region of Ziguinchor (Daffé, Cissé, and Diène 2011). Probably one of the clearest modes of social protection occurred through overseas remittances, which increased from CFA 400 to 560 billion between 2006 and 2008 before falling in 2009 (see Daffé, Cissé, and Diène 2011).
14.5.3 Production and Commercial Support
The centrepiece of the government’s response to the food crisis was GOANA, which was launched in May 2008. The announcement followed another march on 26 April against the rising cost of living that was organized by the opposition coalition known as Front Siggil Senegal. Food self-sufficiency represented GOANA’s main objective. The mechanisms for doing this included irrigating and cultivating unused land in the River Valley, providing subsidies for seeds, fertilizers and phytosanitary products, assisting with rice commercialization, reinforcing the capacity of producers, and introducing new varieties of rice, such as the New Rice for Africa. Overall, GOANA aimed to create, on an annual basis, 500,000 tons of rice, 2 million tons of maize, 3 million tons of manioc, 2 million tons of other cereals, and 400 million litres of milk (Antil 2010).
The announcement of GOANA received only a lukewarm reception from both domestic stakeholders and international donors. While large-scale investments in the agricultural sector were widely supported, the specific aim of attaining food self-sufficiency was deemed unrealistic. Moreover, like REVA and previous agricultural plans, the initiative reflected Wade’s tendency for short-term, populist projects rather than a long-term agricultural strategy. According to one report, many government ministers were completely surprised by the announcement of GOANA (see Antil 2010).
The CNCR in particular denounced the abandonment of the LOASP, which had involved large-scale stakeholder consultation, while GOANA had involved none. Furthermore, given that the CNCR includes many of the country’s small-scale producers, the organization’s members did not understand how GOANA’s goals could be feasibly achieved: ‘CNCR and its members are surprised by the extremely ambitious quantitative objectives, which they consider impossible to achieve in the given time frame. The experiences and failures of special programmes of production for maize, manioc, sesame, and bissap confirm that these objectives are not realistic’ (CNCR 2008). Indeed, the cost of expanding rice production by the desired 500,000 tons for just one year was estimated by experts to cost US$335 million, which was equivalent (p.307) to the entire total budget for the agricultural sector during the previous four years combined (Ndiaye 2009).
Although the FAO provided US$1.5 million to buy inputs for the most vulnerable smallholders during the crisis, it has had no affiliation with GOANA. In fact, the organization had been working with the government on elaborating a national policy document called the National Programme to Support Food Security, which had a five-year time horizon and involved a diverse range of long-term interventions. Without consulting the FAO, the government abandoned the document and soon thereafter announced GOANA. According to the national FAO director, ‘GOANA is not a sustainable programme. In fact, you see every year GOANA I, II, III. If this was a good programme, it would have been oriented towards the medium and long term rather than changed every year’ (interview with Ouattara 2012). Representatives of USAID felt similarly, noting that GOANA lacked structural support and sustainability and should have instead been embedded within a larger agricultural programme (interview with Badiane 2012).
A second and less controversial initiative undertaken specifically by the Ministry of Commerce was the establishment of Reference Stores. Although originally adopted by the government in July 2001, this project was not implemented until October 2007 after a consultation with the president’s council of ministers. The objectives of this programme were threefold. The first was to better integrate the food distribution network so that retail sellers would be more directly linked with purchasing centres, thereby reducing transaction costs and creating competition among retailers in order to improve prices for consumers. The second was to promote local agricultural production through supporting goods in the Reference Stores such as iodized salt, local rice, milk, sugar, oil, tomatoes, onions, and soap. A final objective was to promote greater employment, particularly among the youth, by creating more retail jobs. Three private promoters (Easy Boutiques, Prista, and Référence Boutique) were responsible for implementing this programme with the support of CFA 3 billion in finance from the Ministry’s Economic Promotion Fund (Ministry of Commerce 2011).
Collectively then, the government encountered a broad range of well-organized and vocal interest groups who each possessed distinct preferences on various policy mechanisms (see Table 14.1). The type and design of the interventions the government ultimately took illustrated three key elements of policy-making under Wade. First, even though a well-targeted social targeting programme combined with a legitimate, long-term agricultural strategy would have been the most appropriate response to the crisis, the government clearly was concerned with attempting to satisfy as many groups as possible. Second, many of these initiatives were reactionary, had short time-horizons, and were not well-planned. Third and relatedly, they (p.308) also were the outcome of presidential interference in the policy process, reflecting the increasing centralization and personalization of power around Wade that already manifested during his first term.
Table 14.1 Identifying key domestic stakeholders and policy preferences
Key Government Interlocutor
Consumers and labour unions
Reduction of customs duties and VAT; Provision of consumer subsidies
Ministry of Commerce, Ministry of Finance
Implementation of LOASP, rejection of GOANA, broader view of the agricultural sector
Ministry of Agriculture
Importers and traders
UNACOIS (including seven rice importers)
Opposed consumer subsidies for rice
Ministry of Commerce
Grands Moulins de Dakar, Nouvelle Minoterie Africaine, and Moulins Sentenac
Opposed price fixing for wheat flour and bread
Ministry of Commerce
SPIDS (Nestlé, Saprolait, Senlait, Mamelles Jabot, etc.)
Opposed removal of VAT for powdered milk
Ministry of Livestock
Front Siggil Senegal
Advocated supporting consumers and producers simultaneously
Source: author’s compilation.
14.6 Impact of the Crisis and Government Responses
By the end of 2008, many of these policies had not quelled social discontent. Nevertheless, the collective impact of both the crisis and the government’s response was increasingly clear in three key domains: (1) macroeconomics and trade; (2) poverty, malnutrition, and household welfare; and (3) production and commerce.
14.6.1 Macroeconomics and Trade
Both the crisis and the government’s reaction placed a huge burden on the country’s public finances. The rising cost of imports resulted in a trade deficit increase from 17.1 to 25.6 per cent of gross domestic product (GDP) between 2006 and 2008. During the same period, the external current account deficit rose from 9.8 to 14.7 per cent (Daffé, Cissé, and Diène. 2011). Some of this burden was alleviated in December 2008 when the International Monetary Fund (IMF) approved a one-year arrangement of US$75.6 million under the (p.309) exogenous shocks facility (ESF) to enable Senegal to finance the balance of payments impact of higher food and energy prices. This allowed Senegal to immediately obtain US$37.8 million from the IMF and to receive an equal amount upon completion of the first review under the ESF arrangement.8
The government’s collective response to the crisis resulted in a tremendous loss of public revenue. According to the IMF (2008), elimination of customs duties on rice, wheat, and milk powder, which were finally re-instated in September 2008, cost the government a total of CFA 12 billion during 2007. Similarly, the removal of the VAT on wheat flour and milk powder resulted in a loss of CFA 5 billion and 12 billion, respectively.9 Collectively, these revenue losses were equivalent to 0.5 per cent of GDP in 2007. During 2008, the cost of the trade and fiscal measures increased to CFA 36 billion (FAO 2009). After considering the cost of other social protection policies as well as subsidies that the government allocated for electricity and gas, the government’s overall response to the crisis amounted to CFA 374 billion (US$748 million) (Diouf 2011).10
Besides causing the government to lose substantial revenue, the reduction of the VAT on rice in particular further augmented the appeal of importing rice, thereby exacerbating one of the main structural weaknesses at the heart of the crisis (David-Benz et al. 2010).
14.6.2 Poverty, Malnutrition, and Household Welfare
The crisis demonstrated notable impacts on incomes and consumption within urban areas, across the rural and urban milieu, and among different rural regions of the country. Households engaged in a variety of strategies to cope with the crisis. In urban areas, households often shifted their diets to cheaper but more affordable goods or reduced their number of daily meals. In rural areas, households often depended on assistance from neighbours and family or bought food on credit (WFP 2011).
The poverty rates of rural households are estimated to have risen slightly between 2005–6 and 2009. In rural areas, Cabral (2008) found that farmers who combined subsistence agriculture with livestock breeding were more protected from the crisis than those who relied on subsistence agriculture alone. Indicators of child malnutrition generally worsened in the years after the crisis, even in urban areas. One of the main exceptions to this trend was in St. Louis where child stunting in particular decreased over time. St. Louis is (p.310) the centre of domestic rice production and as many Senegalese shifted to consuming domestic varieties of rice when imported rice became too expensive, access to such varieties were higher in this region than elsewhere. Moreover, domestic rice production experienced a boost during the 2009 and 2010 seasons.
Within urban areas, informal workers and casual labour were hurt much more than salaried professionals by price rises. A study on urban malnutrition following the crisis revealed that residents in both Pikine, which is the most densely populated area of Dakar, and in Ziguinchor were more likely to be unable to meet their food needs than those in Kaolack, which is the center of millet production (WFP 2008b). Even though it is the second main rice producing region, Ziguinchor had the highest rates of food insecurity during the crisis (WFP 2011), a phenomenon tied to poor infrastructure connecting the region to the rest of the country and continuing low-level civil conflict in the broader region of the Casamance.
The VAT removals and suspension of customs duties by the government had disparate effects on the rural and urban segments of the population depending on the commodity under consideration. Estimates by the IMF (2008) revealed that the use of these measures in 2007 to contain the price of rice benefitted the two poorest quintiles of the population and those in rural areas more, especially given that these commodities comprise a larger share of the food budget for these groups. By contrast, richer Senegalese benefitted from the measures targeted at powdered milk. The tariff removals for bread were most beneficial for the urban poor, who consume a higher share of this commodity than their rural counterparts. Overall, the IMF (2008) concluded that by the end of 2007, almost 55 per cent of the benefits accumulated from the trade and fiscal measures accrued to households within the top 40 per cent of the welfare distribution.
A similar trend emerged with respect to the government’s various social protection policies. According to the Commission for Food Security, its efforts to distribute rice through the AMR were not very successful for numerous reasons. First, the government reduced the Commission for Food Security’s requested budget for the programme, from CFA 10 billion to 7.9 billion, during a series of modifications within the National Assembly. Second, these resources were released to the Commission for Food Security forty-five days behind schedule, delaying the purchase of rice from UNACOIS and the organization of vehicles and technical capacity to deliver the rice. Third, while the Commission for Food Security wanted to target so-called ‘red zones’, which indicate the highest level of vulnerability, the government preferred to target everyone. Above all, the director of the Commission for Food Security argues that his unit’s ability to function has been hindered by high levels of ministerial instability: ‘We’ve been in the office of the president, the office of the (p.311) prime minister, the Ministry of Agriculture, and now in the Ministry of the Family…We are moving all the time, like a suitcase. In the same way, many other agencies and their bosses are moving’ (interview with Sèye 2012). The political disincentive for targeting is exacerbated by a lack of both technical capacity within the government and a database for identifying beneficiaries, the absence of a governmental body in charge of social protection, and little consensus on targeting (e.g., community based vs. means tested) even among the donor community (interview with Pigois 2012).
14.6.3 Production and Commerce
The impact of the main initiative to support production, GOANA, was positive in the short term but with few long-term benefits. On the one hand, Gergely and Baris (2009) estimate that the country achieved its objective of 500,000 tons of rice production during 2008/9, mostly because of favourable rains, the expansion of cultivated land, and planting during the both the dry and wet seasons. Much of these production gains occurred in the River Valley around St. Louis, which accounted for approximately 70 per cent of the increase in production. As a consequence of this increased production as well as a substitution to maize, the average level of dependence on rice imports decreased to 65 per cent in 2010, compared with an average of 82 per cent over the period from 2001–10 (WFP 2011).
On the other hand, rice production fell again to 406,000 tons by the 2010/11 growing season, suggesting that the brief period of production gains was due more to good rains than to the structure of GOANA. Ndiaye (2009) also notes that the political pressures for GOANA to succeed have prevented an objective assessment of crop surveys and the implementation of key famine early warning mechanisms. Furthermore, GOANA does not address processing and commercialization, and therefore increased production does not necessarily translate into increased food security for the broader population (OBG 2009). Therefore, while the intention underlying GOANA was laudable, the plan appears to have been too focused on short-term production goals rather than structural changes critical for ensuring the country’s long-term food security.
REVA has likewise demonstrated ambiguous results in terms of enticing young people to farm. As of 2010, a total of 600 jobs, rather than the anticipated 300,000, have been created within the fruit and vegetables sector (Daffé, Cissé, and Diène 2011). According to a study conducted by Sall (2012), REVA resulted in young people learning new farming techniques, including ways of farming during the typical dry season. However, a number of participants have still complained about the low incomes from agriculture, and some farms experienced noticeable dropout rates by youth from Dakar who found it difficult to adjust to living conditions in rural areas. Most significantly, (p.312) REVA’s focus on horticultural, export-oriented agriculture appears to conflict with the food security objectives embedded within GOANA and previous agricultural plans, such as the LOASP (see OECD 2007).
The Reference Stores created by the Ministry of Commerce resulted in the establishment of 170 stores by 2011, 119 of which were in Dakar. But, this has not proved to be a very sustainable programme due to the inability to retain store managers beyond a year or so. Many have migrated, either to other areas of Senegal or overseas, and some used the money they received from the state for other means than to purchase goods from local markets. The three networks managing the stores complained that part of the reason for the lacklustre success of this programme was the lack of support from the state (interview with Diouf 2012). The continued operation of the programme and its expansion to the rest of the country depends heavily on further investment in resources by the government (Diouf 2010).
14.7 Conclusions: Beyond 2007/8, beyond Wade
The 2007/8 food price crisis dramatically highlighted the unsustainability of Senegal’s longstanding consumption and production patterns. The preference of Senegal’s large urban population for imported rice, powdered milk, and wheat-based bread represented the country’s Achilles heel as such goods became increasingly expensive. Although the preference for imported goods was inherited from the colonial period, successive governments have done little to ameliorate this skewed pattern. Large-scale discontent, particularly in Dakar, manifested in no less than five major protests during the crisis period. For the former president Wade, who rose to power in 2000 by tapping into urban disgruntlement under his predecessor, the food price crisis represented a threat to his presidential legacy. The crisis emerged at a time when he had already increasingly centralized power around the executive, launched a variety of short-term but high-profile plans within the agricultural sector and elsewhere, and reshuffled his cabinet multiple times. The resultant high levels of ministerial instability prevented more long-term strategic planning within the agricultural and social protection sectors as well as closer engagement with the donor community. Simultaneously, however, Senegal’s vibrant democracy resulted in the emergence of a broad range of well-organized interest groups advocating for specific policy mechanisms. In order to satisfy as many groups as possible, the government forfeited the opportunity to devise a well-targeted social protection programme and a long-term agricultural strategy. Instead, the government’s initiatives were reactionary, myopic, and resulted in significant policy volatility, including the retraction of unpopular salary taxes (p.313) and the termination of consumer subsidies only three months after their implementation.
These patterns were not just limited to the 2007/8 period. By 2012, the price of food became heavily politicized due to presidential elections scheduled for February. Wade’s key opponent in those elections, Macky Sall, argued on the campaign trail that food prices would again increase if Wade were re-elected for a third time (Dione 2012). To avoid attracting scorn on his government’s attempts to handle the 2007/8 crisis, Wade failed to respond to growing warnings by the donor community that a second crisis was possible within the Sahel. In late 2011, the FAO noted that a decline in cereal and agro-pastoral production in a number of West African countries, including Senegal, posed a new threat to food security. With a level of cereal production that could meet only 39 per cent of the Senegalese population’s cereal consumption needs, the Commission for Food Security, USAID, the WFP, and the FAO all publicized the possibility of a new crisis but received no response from Wade’s government (interview with Seye 2012). Indeed, for the FAO, electoral motives were clearly a prime reason for this decision: ‘Another crisis is looming but in the electoral period, the government has said nothing and not asked the FAO and WFP to help because if it declares that a famine is possible, the opposition could then blame the government for this’ (interview with Ouattara 2012).
Ultimately, Sall ousted Wade, obtaining almost two-thirds of the national vote. Widely viewed as a technocrat who lacks Wade’s penchant for short-term populist policies, there is the potential for greater bureaucratic decision-making on issues of agriculture, trade, and social protection.11 Thus, if another global crisis occurs, hopefully the impact will not only be less severe but also the policy responses will target the poorest without requiring exorbitant outlays of government revenue or sowing so much discontent among Senegal’s various stakeholders.
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(2) The CFA was devalued from a ratio of 50 CFA francs to 1 French franc to a ratio of 100 CFA francs to 1 French franc. By halving the currency, imports became twice as expensive.
(3) The Casamance civil war began in 1982 when then-President Leopold Senghor reneged on a promise to make the region independent. Subsequently, the Movement of Democratic Forces of Casamance launched a secessionist rebellion, which has now become a low-level conflict.
(4) UEMOA consists of eight francophone, African countries: Benin, Burkina Faso, Côte d’Ivoire, Guinea Bissau, Mali, Niger, Senegal, and Togo.
(5) Senghor paved the way for political liberalization in 1976 by allowing two additional parties besides the PS to compete in elections. However, it was not until constitutional changes in the early 1990s when full restrictions on multi-party competition were lifted.
(6) Wade was re-elected as president in 2007 with 55 per cent of the vote, with strong levels of support from both rural and urban areas. His PDS party also obtained the majority of seats in the 2007 legislative elections.
(7) Homologation is a price setting mechanism that requires the government to consult with relevant stakeholders before taking decisive action and choosing a price.
(11) Since coming to office, Sall’s government has promised to conduct an audit of GOANA to assess whether the programme should continue.