# **3. Policy Responses to Rising Food Prices in Sub-Saharan Africa**

# **_3.1 Typology of Policies_**

Countries vary widely in the type of policies or programs they are able to introduce to respond to rising commodity prices. A recent paper based on a survey of 118 country teams and country economists carried out by the World Bank in March 2008 shows that in sub-Saharan Africa, the most common policy response was to reduce foodgrain taxes - either tariffs, VAT, other sales tax or a combination of these measures (Revenga et al. 2008) On the other hand, the most common response outside sub-Saharan Africa was some form of consumer subsidy or price control which over half of countries outside of sub-Saharan Africa used to stabilize domestic prices (see Figure 3). These price controls have a long history in several countries. For instance formal or tacit agreements between producers and the Government on either actual prices or profit margins are common for basic staples in Eastern Europe. In the Middle East and North Africa, subsidies on key items are an important part of the social compact between the State and citizens. In contrast, only 22% of sub-Saharan African countries used some form of price control. This lower share is likely due to the greater fiscal and administrative constraints in Africa relative to non-African countries.

Close to a third of countries outside sub-Saharan Africa used foodgrain stocks to increase domestic supply and curb prices compared with around 20% of African countries. Export restrictions were also slightly more common outside sub-Saharan Africa (28% of countries) compared with countries within Africa (21%). A significantly larger share of sub-Saharan African countries (42%) did not use any of the ‘economy-wide’ policies discussed above, compared with non-African countries. The likely reasons are (i) the greater diversity of diets and import dependence across sub-Saharan Africa has meant that certain countries have insulated themselves from higher global prices than outside Africa and (ii) the smaller and resource-poor countries in Africa have fewer administrative and fiscal means to implement these measures. For instance the reduction in import tariffs and taxes on foodgrains in Benin is equivalent to 9% of its 2008 Budget.

The second broad type of policy response revolves around using existing safety net instruments to either increase benefit levels or increase beneficiary coverage. The authors show that sub-Saharan African countries have a significantly larger share of food based safety net programs relative to non-African countries – school feeding, food for work and food ration programs. However, while many countries in sub-Saharan Africa have food-based transfer programs, the coverage of these programs tends to be very limited (in part due to lack of financing), so that the programs also have a limited impact.

The third type of policy measure involves supporting domestic food production. Free or subsidized input distribution or subsidized agricultural credit schemes are common responses. The use of new technology has contributed to an 8% increase in rice production in sub-Saharan Africa in 2007/08 relative to the previous year. Over the medium run African countries, through the NEPAD mechanism, have