Indirect and Direct Taxation of Agriculture in Sudan: The Role of Government in Agriculture Surplus Extraction: Discussion

D'Silva and El Badawi try to document the taxation of agriculture in Sudan, direct and implicit through exchange rate overvaluation, and to demonstrate the relative neglect of the traditional rainfed sector in favor of the irrigated schemes of Gezira and Rahad as well as the newer nonirrigated mechanized schemes. Despite the large literature on the effects of trade and exchange rate protectionism on economic growth, few such studies are available for sub-Saharan economies (Leith's book on Ghana, and recent papers by Oyejide on Nigeria and Tshibaka on Zaire are exceptions). Thus, this paper and a related one by El Badawi which forms background material, are a welcome addition to the literature. The authors indicate that much of the taxation of agriculture arises from trade and exchange rate policies which raise the domestic price of nontradables relative to tradables and of importables relative to exportables. Agricultural exports such as gum arabic, groundnuts, and livestock have been particularly affected, sorghum somewhat less so. Net protection coefficients indicate that sorghum, a staple food crop, has been encouraged relative to other export crops, similar to other African economies. For most products, taxation arising from direct intervention in marketing activities seems less important than the consequences of trade policies, although cotton may be an exception. One set of prices the authors do not consider is wages. Yet, the set of trade and exchange rate policies has probably raised the returns to migration out of agriculture, as well as out of the country, which would push rural wage rates higher. Indeed, one sees considerable evidence of rising wage rates both in the irrigated and rainfed mechanical sectors. The picture painted by the authors is not uncommon in sub-Sararan Africa (see Lele). One respect in which Sudan differs from other sub-Saharan economies is the existence of a viable irrigated sector, but one in which farmers have little leeway in making acreage allocations or decisions on non-labor inputs for cotton, still the major crop grown under irrigation (farmers are allowed some discretion over inputs for non-cotton crops). Until 1979 cotton revenues were distributed to farmers on the basis of average scheme net returns, not farmlevel net returns (non-cotton revenues were distributed on a per-farm net revenue basis). However, the new per-farm accounting system begun in 1979 was not accompanied by relaxation of controls on non-labor inputs. While a small yield increase is apparent for cotton, it is presumably lower than it might have been. The direct controls on production activities in the irrigated sector raises the issue that trade and exchange rate liberalization will have an inhibited influence without domestic reforms as well. The impact of trade reforms on the traditional rainfed sector, which the authors rightly emphasize, may also be limited without accompanying investments in roads and other physical infrastructure in the short run and investments in rainfed agricultural research and rural education in the longer run. Indeed, the infrastructure is so poor that the net protection coefficients are suspect, since marketing costs from the producing areas have apparently not been substrated from fob world prices. These costs may be quite large, especially for products such as gum arabic, which is grown in the western region of the country. John Strauss is an associate professor of economics, Yale University.