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Impact of Globalization on Small-Scale Farmers In

Africa: case of importation of Agricultural

produces

James O. Akibon

Term paper for Special Topic in InternationalDevelopment

Graduate School of International StudiesKorea University

Fall 2011



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1. Abstract

The primary aim of bringing Globalization into Africa is to broadening and deepening and

probably integrate African economic into global market. The promoters envision, an Africa

where business will be conducted without any barriers to trade with the rest of the world.

Many world biggest Economy and agencies has put up many programs in assisting Africanfarmer to be able to integrate into world systems but it has not had much impact on small-

scale farming communities due to several barriers. These include transparency in

implementations of those policies and method of carrying out those reforms programs.

These barriers has only led to a situation where many of these small-scale community lost

their livelihood as a result of importation of cheaper agricultural produces from EU and

United State.

There are many factors that are responsible for or contributed to the increasing in

importation into many African countries. After independence many of these countries are

faced with civil war, economic mismanagement, limited access to capital for

infrastructures, unfavorable weather and lack of good government. But beside these

limitation there are other external factors that have hinder the development of many African

countries, they are subsidies, food Aid, Changes in policies of state trading enterprises

(STE), Depreciation, devaluation of the currency and so on for example, the subsidies

given by many developed countries, will lead to lower international prices of that

commodity, make import attractive and often time lead to increase in importation in

developing countries. In addition, the unfair trading by developed countries like EU and US

have contributed to the challenges facing by many African countries to compete in the

world stage. And again, for many of these countries to be qualified for international

Aid, they were forced to follow unfavorable economic policy by World Bank, IMF

and regional development agencies, which have impacted negatively on their

economy.



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The aims and objectives of this paper is to identify the various internal and external factors

that has contributed to the emergence of agricultural import surges in Africa countries, the

paper would use Ghana, West and Central African countries, Swaziland and Mozambique

as a case studies. The objective will be to look at how small-scale farmers fear well inline

with the external and the internal factors affecting agricultural sectors in their countries.

And after that, I would make a conclusion and recommendation for future consideration.

The information and cases presented in this paper were derived from FAO, Third World

Network, academics, and articles in newspapers.

2. Introduction

The promoters of Globalization in Africa aims at bringing the world closer to Africa people

in general and equally liberalize African market. Where business will be conducted without

any barriers to trade with the rest of the world. Another reason given for Globalizing of

African market is that, it will increase the volume of international trade and create or

encourage Foreign Direct investment into the continent, as it will also encourage

specialization of production, and there will be an increase in the volume of goods and

services exchange between these nations but unfortunately, many powerful states continue

to dominate international trade, though developed countries has help through programs and

Aids in assisting African farmer to be able to integrate into world systems but it has not had

much impact on small-scale farming communities due to several barriers. These include

transparency in implementations of those policies and method of carrying out those reforms

programs

Africa‟s agricultural sector is quite unique to each country as its economic contribution isimportant to the development and eradication of poverty in the region. The sector

contribution to GDP is between 50% and above depending on the country. In some

countries, agricultural sector employs more than 70% of the work force and generate more

than 30% of their GDP. Many African countries are still facing many economics challenges

which include rising food price and even energy price, but then a high numbers of these

countries are also facing armed conflict and now the financial crisis both in EU countries

and US who are the major trade partners, this together will have an impact in both foodsecurity and sustainable rural development. Over the last decades, few were able to



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diversify their market like South Africa and few other are endowed with natural resources

like Nigeria but many were not able to diversify and depend on mainly agricultural

produce. But subsidies from developing countries are making things more impossible for

these countries.

Many European Countries, US and even China continue to heavily subsidies their cotton

sectors, which has lead to overproduction. This practices by these countries, tends to lower

global commodities price, leading to substantial market losses for developing countries.

This practice is making many small farm owners to loose their livelihood and have affected

the agricultural export of these countries. Since the introduction of Doha round in 2001, In

a reaction to this subsidies issue, Brazil in 2002, appealed to World Trade Organization

(WTO) on subsidies by developed countries to their farmers and in 2003, the countries

submitted a set of proposal through African Group of WTO negotiators to WTO. They are

urging the international community to take specific steps toward full liberalization of cotton

market and removal of domestic and export subsidies. WTO responded by ordered US and

other countries to remove their subsidies as it‟s violating international trade agreement its

then form „cotton Sub-Committee‟ which would address issues related to international

cotton market. The World Bank estimates that the full removal of cotton subsidies and

tariffs would raise the price of cotton in international markets by an average of 12.9

percent.

According to ActionAid, “farm subsidies in the European Union and United state are

increasing the gap between rich and poor, they have undermined the lively hood of poor

and small-scale farmers, encourage overproduction, distorted trade and depressed price,

made US and EU farm goods artificially more competitive on world markets and resulted

in dumping of cheap subsidies in poor countries. The international community has

recognized some of these difficulties and has made some effort to assist these countries to

overcome them. Much remains to be done by these countries themselves, however, to take

advantage of the opportunities offered by globalization and to ameliorate the negative

impacts of the process.

Beside the subsidies issues, the internal reforms carried out by these countries have mostly

benefited the importers who see importation as more lucrative. And the exporters see thelowering of tariff barriers by consuming countries as opportunities to export their goods



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into developing countries. The exposure of agricultural production to foreign competition

has forced some producers to become more efficient. The dismantling of government-

controlled marketing boards has stimulated the evolution of the private sector trading

networks needed in a modern economy. It is likely that, in the long-term, these changes will

encourage inward investment to improve the agricultural infrastructure and to increase

production of added value goods. At present, however, most developing countries have yet

to see any tangible evidence of improvement.

However, In order to benefit from globalization, many countries in Africa are signatories to

General Agreement of World Bank and IMF to be able to have access to international

Loans and other financial opportunities but joining has lead many developing nation to debt

and poverty partly due to IMF and World Bank institutional policies. Over the year their

program has been highly criticized for resulting poverty and has increased dependency of

African nation on richer nation. For many of this nation to be qualified for a loan or debt

reduction, they have to follow stiff rules required by this international institution even

though they know it might affect their domestic economic.

3.Potential Causes of Importation in Africa

In order to suggest any meaningful recommendation for implementation, one must

understand why importation is increasing in the last 3 decades in Africa. This section will

investigate both external and internal factors that would impact or contributes to the

increase in importation in many Africa countries.

3.1. External Causes of Importation

External factors are those things that can lead to increase in importation outside the border

of the domestic market. Some of the external factors that can lead to increase in import for

a country are; Export subsidies, food Aid, Changes in policies of state trading enterprises

(STE), Depreciation, devaluation of the currency and many other more but this paper will

concentrate mainly on the subsidies issue. The create an artificially competitive on world

markets and resulted in dumping of cheap subsidies in poor countries, as it lower the price,

make import more attractive and at the end lead to more importation. Many of thesedeveloped countries involve in this unfair trading practice because they want to keep the



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market price low as low as possible and again protect their domestic agricultural sector

from competition. Unfortunately, many of these countries cannot protect their small-scale

farmers either because they are unable or because of the policies set by international

financial institutions that restrict from doing such a thing.

Agricultural or farm subsidies and other domestic support given to farmer by EU and other

developed countries amounted to more than $300 billion a year (FAO). This practice has

made the program of poverty eradication unattainable in the next few years to come unless

these countries remove and eliminate any barrier to trade in those countries. Recent

evidence suggests that the elimination of trade barriers in the United States (US), the

European Union (EU), Japan, and Canada would result in a 14 percent increase in non-oil

exports and a 1.2 percent increase in welfare in sub-Saharan Africa (SSA). It also suggests

that although the removal of these barriers would yield significant benefits to Sub-Sahara

Africa (SSA), the costs to the developed countries would be insignificant because of

Africans low share of international trade. (ECA report). There are some cases that have

shown that agricultural subsidies in developed countries hurt small-scale farmers in

developing countries let take a look at the following cases:

Case 1. The impact of US Subsidies on Cotton in West and Central African Countries

The WAC small-scale Cotton farmers, apart from the fact that they are among the lowest

cost producers in the world, cotton play major roles in their economic growth and poverty

reduction. The 24 countries of this region has a population of 333 millions of which more

than 60% of the population leave in rural area. And again among these countries 13 of them

are at the bottom of the Human Development Index. Which means, majority of the

population is living under a dollar a day and most of this region depends on Agriculture for

their day-to-day leaving. The World Bank estimated that about 2 millions farmers in the

region produce cotton and another 10 to 16 are also estimated to be involve in cotton sub-

sectors. According to data from the United Nations Food and Agriculture Organization

(FAO), cotton production accounts for 5% to 10% of the gross domestic product (GDP) in

Benin, Burkina Faso, Chad, and Mali. Cotton accounts for around 30% of total export

earnings of WCA counties and more than 60% of earnings from agricultural exports The

World Bank reports that over 2 million farmers in the region produce cotton.



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In recent years most Africa countries is growing at the rate of 5% or more but the WAC

region is still facing many economics challenges which include rising food price and even

energy price, but then a high numbers of these countries are also facing armed conflict

though is getting better this days compare to the past and now the fallout of the financial

crisis both in EU countries and US this together will have an impact in both food security

and sustainable rural development. With all these problems in mind, one would have

thought, establishing a workable ways in which to add to increase incomes from cottons

and increase poverty reduction through cotton and other agricultural production would have

been options but the fall in world price of cotton in the last few years due to subsidies from

the west has made it difficult for this countries.

Many European Countries, US and even China continue to heavily subsidies their cotton

sectors, which has lead to overproduction. This practices by these countries, tends to lower

global cotton price, leading to substantial market losses for developing countries especially

WAC countries as they cannot protect their farmers through subsidies, this resulted in a

situation where a number of WAC farmers are driven out of business because cotton

production is no longer profitable for many of them without government help. In a reaction

to this subsidies issue, Brazil in 2002, appealed to World Trade Organization (WTO) on

subsidies by developed countries to their farmers and in 2003, WAC countries submitted a

set of proposal through African Group of WTO negotiators to WTO. They are urging the

international community to take specific steps toward full liberalization of cotton market

and removal of domestic and export subsidies. WTO responded by ordered US and other

countries to remove their subsidies as it‟s violating international trade agreement its then

form „cotton Sub-Committee‟ which would address issues related to international cotton

market. The World Bank estimates that the full removal of cotton subsidies and tariffs

would raise the price of cotton in international markets by an average of 12.9 percent.

In the last two decades, going by the FOA figures, WAC is the third largest exporter of

cotton fiber after United State and Uzbekistan. The increase in production was attributed to

the liberalization of agricultural sectors, as most of these countries has implemented

Structural adjustment policies as recommended by IMF and World Bank, many of these

economics reforms have not made much impact on price, as producers price in developing

countries, especially WAC stayed on average compared to the world.



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A good example would be a village in Burkina Faso called Logokourani, like any rural area

in WAC countries; cotton is their source of livelihood, and according to FOA, “cotton is the

major source of income for many inhabitants, its help build their school and help keep

children at schools. Due to large percentage fall in world cotton price, the villagers are

moving to other part of the countries as cotton production is becoming less lucrative”.

Case 2. Subsidized Italian Tomato into Ghana Market

Like any other Sub-Sahara Africa countries, Agricultural sector remains source of revenue

for Ghanaian government and according to TWN report, “Agricultural accounts for over

40% of GDP and employs most of the labor workforce”, the sector employing more than

half of the working population either formal or informal basis and equally accounted for

more than half of the export earning, the country produces a variety of agricultural crops

which includes, yams, grains, cocoa, oil palms, kola nuts and timber forming major source

of income for the government. Following up with the recommendation of the IMF, and the

World Bank, the government began economic reforms in 1983, the reforms that saw

removal of government price control, raised price of cocoa and the removal of subsidies

from fertilizers and other inputs. According to Khor M, 2006 “ the removal of subsidies

from fertilizers and other inputs has resulted in dramatic decline, particularly fertilizer use”

with this development many farmers are faced with fewer incentives to produce as well as

with general lack of good infrastructure and services.

In the 1960s, in order to develop the Upper Ester region of Ghana, the poorest region, the

government assisted farmers by building a tomato cannery, which is a tomato processing

plant, establishment of Dams and irrigation for projects that facilitated water supply to

tomato subsectors and other agricultural sectors, this idea was met to generate more

demand for surplus tomato of the farmers and equally make tomato cultivation more

attractive. According to TWN report, the Ghanaian government found itself in a dilemma

as its has to complied with the IMF conditionality‟s in order to be qualified for the HIPC

programme for debt reduction. So during 1980s and 1990s, the government embarked on

serious privatization, deregulation and liberalization, selling the government owned three

tomato-canning factories and then reduce tariff on importation of tomato,



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The market liberalization by the government resulted into surge in importation of processed

tomato from European Union, „Ghana importation from EU increase by 628% between

1993 and 2003‟ Khor M, 2006. The major reason for increase in importation was mainly

due to subsidized processed tomato from Europe, which guarantee exporter cheapest price

and according to TMN, processed tomato in EU receive approximately c.300 millions per

year in direct subsidies and several million more indirectly. These increase in importation

greatly affected the livelihood of common farmers, traders and industry employee in the

region. As the domestic processing plant collapse, there was a drastically reduction in

tomato production in the region

In an effort to save the local tomato sector, in 2005, the government embarked on several

measures to curb the surge of importation and to be able to help the farmers to get back on

their feet but with no avail, all effort by the government didn‟t yield any tangible result. In

another effort, the government promised to facilitate farmer access to loan for seed and

fertilizer and to be able to rent extra land for production, many farmer applied for loans and

when production started they soon found out that the lack of electricity, good roads was

going to hurt local production. “ failure to secure market for their farm produce by many

farmers lead to frustration and attempt on suicide through self- poisoning” Francisco J. Mari

Roeline K, 2007.

Case 3. The effect of EU Subsidies on Swaziland Sugar Industries

For many developing countries like Swaziland, Sugar is an important crop for their key

export earning, sugar is one of the agricultural sector where they have a unique cost

advantage over European Union. In Swaziland, Sugar accounted for 59% of agricultural

output, 35% of agricultural wage employment, contributes 18% to the country‟s GDP, 58%

of Swaziland to EU and created about 100,000 jobs but due to EU subsidies that limit the

significant export potential of Swaziland sugar producers, the aim of this subsidies is to

price out potential competitors and to protect EU market. And again, most European

countries produce more than their primary market so they are dumping the rest at a cheaper

price to African market. The Swaziland was further damage with EU introduction of new

trade rules by placing high tariff on sugar produce outside Europe. This show that, the rules

and policies of the WTO, the IMF, the world Bank and other regional development banks

has only encourage developing countries to open up their market, eliminate subsidies to



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their agricultural sectors but support developed countries to close their agricultural market

and subsidies it.

Since the inception of the EU as a union, ACP and EU countries have unique trade

relationship with each other. The EU has been allowing ACP countries to supply a fixed

quantity of sugar to the EU at the price which match those European producers, but as

many may know the price of African is three and half higher than those of EU producers,

which put them into unfair disadvantage. As an 18 countries of ACP countries enjoying the

preferential treatment under EU, Swaziland has an annual import quota into the EU of

approximately 117,000 tonnes and relatively little EU sugar is exported to the country

(FAO)

The subsidized sugar from EU flooding Africa and Swaziland Neighboring countries has

contributed to Swaziland export of sugar to EU and other countries declining as EU and

British companies are capturing those markets. The effect is that Domestic companies are

forced to unplanned liquidation and loss of jobs

3.2. Internal Causes of Importation

As narrated above, increase in Agricultural produces in developing countries are usually

attributed to external factors, especially export subsidies and highly concessional export

credits from high income countries, disruptive surplus disposal in the form of food aid

shipments, However, many evidence has shown that, in some instances, the underlying

causes of increase in importation are found within the countries themselves. Some of the

internal factors are: Production shortfalls are one of the most likely causes of short-term

import surges, Measures taken by government to liberalize the domestic market may also

lead to import surge, Reductions in tariff and non-tariff barriers to trade, particularly

following the launch of the Uruguay Round Agreements, may have increased the frequency

of import surges especially in developing countries and so on. As conditionality for Loan

assistance, the World Bank often require these government to liberalize their market so that

they can enjoy the benefit of free market but manner and method in which this policies or

reforms are carry out often lead to more hardship rather than benefits. Some of the

requirements to be able to get IMF and World Bank loans are; liberalization of the



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economy, which entails export, oriented open market and privatization of the domestic

industries to minimize state roles and to be attractive to foreign investors various regulation

and standard are required to remove or reduce. And when these governments embark on

these reforms, without full knowledge of implementation, the result is not always favorable.

Let take a look at the following case;

Case 4. Mozambique and the Cashew Nut Sector

For Mozambique, Cashew has always been the major cash crop, though they equally have

timber, copra, cotton and so on. The potential is very high as agriculture employs more than

80% of the workforce and provide livelihood to the vast majority of Mozambique

population. Agriculture sector contributed 31.5% of the GDP in 2009. “Cashew production

has been really important to Mozambique throughout much of the twentieth century”

(McMillan, 02), the country at the time became the first African country to process cashew

on the large scale. During the colonial period the Portuguese promoted cashew cultivation

and Mozambique established itself as the world leader in cashew production but after

independence, cashew production went into long decline, which was partly due to

government policies, civil war that affected both production and processing

According to McMillan, 02, even during Mozambique most successful years, the cashew

industries has been highly regulated as Portuguese established a producers prices and

marketing margin throughout the cashew marketing chain and after the independence the

government continue to regulate cashew industry. In the 80s government started what they

called Economic Rehabilitation Program (ERP), it was a structural adjustment program

with the World Bank, “the aimed of the program was to decrease overall government

control of the cashew industry along with other products, in relation to the Portuguese

during the colonial era, the government established producer price and minimum producer

price system which started implementation in early 1990s. As a conditionality for Loan

assistance, the World Bank required the government to further liberalize cashew marketing

and exporting, while World Bank and government agreed that liberalization and

privatization were appropriate, but both didn‟t agreed on the time and extent of the reforms,

The Bank favored an immediate and complete elimination of the tax, while the industry

favored a gradual and partial reduction. (McMillan, 02). Even though government

recognized the impact of privatization and liberalization on the industry they ignored



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domestic opposition and followed World Bank requirement as it‟s depend on continue

support from the institution. As one of the poorest countries in the world, international Aid

accounted for 60% of its GDP; in addition, they complied with World Bank liberalization

policy to be qualified for HIPC debt relief.

At the end of the 1990s, the liberalization has resulted into many factory been closed down

and more than 10,000 jobs been lost, in a small town of Angoche, the three factories that

employed more than 3000 workers was closed and with privatization, worker lost their

social service, such as health care and child-care for workers.

4. Conclusions and Recommendation

This paper has shown that experience of African countries toward Globalization has not

been favorable. The concept has become more of a threat to the poor than an opportunity

for global action to eradicate poverty. the initial promise that Globalization will bring the

world closer to people of the region especially small- scale farmers who thought

liberalization of the market by government would increase their international market share

but later found out that their livelihood has been lost in the process. We have seen caseswhere farmers made an attempt on suicides as a result of failure on the part of government

to shield them from cheap importation from the international market. Arguably,

Globalization has many benefits of its own but it‟s create few winners and many losers as

many countries is now witness a surge in poverty level within their countries.

As mentioned above, there are many factors that are responsible for or contributed to the

increasing in importation into many African countries. There issues of external factors such

as subsidies for example, the subsidies given by many developed countries, which has

resulted into lower international price of that particular commodity and then make import

more attractive and often times lead to increase in importation in developing countries. In

addition, the unfair trading by developed countries like EU and US have contributed to the

challenges facing by many African countries to compete in the world stage. And again,

there are some internal factors also that have contributed to the reasons why African

nations end up importing rather than exporting, some of these internal factors are;

Production shortfalls in those countries, Measures taken by government to liberalize the



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domestic market has led to more import and reductions in tariff and non-tariff barriers to

trade.

So the question is whether if trade barriers, protectionism, agricultural subsidies and

dumping went away, would Africa be the one to benefit? The answer would still be No, as

many African countries would still be producing few primary commodities, and have

problems with processing, market information, and lack of infrastructures. In other words,

it would lack capacity to trade. So the international community needs to continue special

arrangements for the poorest countries while they develop the capacity to trade.

If international community really cares about African development as they claimed, they

must get rid of all the problems they are causing by reducing barriers and protectionism,

subsidies and dumping. Removing or reducing subsidies and barriers would increase export

for these countries, which would improve their GDP. So that the local factories that are

currently short down due to high import competitions can be revive.

It is easy to blame international community by African government for Africa woe and

problems, African governments needs to invest heavily in designing its own trade

strategies, ensure that its capacity needs are included in any international negotiation in

order to attain greater benefit for its people. They must analyze for itself the antipoverty

benefits of trade increases, and reform when necessary.

Many other research has shown that, African countries trade with each other is very low

compare with trade with EU, US and other countries so they need to open their market for

each other so that they can increase trade with one another. Since most African has

similarity in most issues, trading with each other more will solve most of their problems.

Since they understand each other more than outsiders.



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References;

Alvin Powell - http://news.harvard.edu/gazette/2003/03.06/01-cashews.html

Farmgate: the developmental impact of agricultural subsidies, ActionAid

FAO (2003). - Some Trade Policy Issues Relating to Trends in Agricultural Imports in

the Context of Food Security. Committee on Commodity Problems: Sixty-fourth

Session. Rome, 18-21March, 2003.

FAO; WTO Agreement on Agriculture: The Implementation Experience - Developing

Country Case Studies, Rome, 2003

Francisco J. Mari R, Knottnerus, The struggle of tomato farmers in Northern Ghana

Importance of the Sugar sector to Swaziland economy -

http://www.ssa.co.sz/index.php?option=com_content&task=view&id=110&Itemid=84

Kevin M C, and Graeme D W, (1995) Agriculture Poverty and Policy Reform in Sub-

Saharan Africa World Bank discussion papers Africa Technical Department Series 280

World Bank Washington, D.C.

Khor M, (2006) The impact of Globalization and Liberalization on Agriculture andSmall Farmers in Developing Countries; the Experience of Ghana, Third WorldNetwork (TWN)

McMillan et al (2003): When economic reform goes wrong: cashews in Mozambique,

Brookings Trade Forum, pp. 97-151

http://news.harvard.edu/gazette/2003/03.06/01-cashews.html









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The Doha Round and African Development ,

ECA Position Paper Series, September 2003

The reform of EU sugar sector; implementation for ACP countries and EPA

negotiations: SOUTH CENTRE

Mohamed A. Chemingui, Mohamed H. Bchir, Hakim B Hammouda: Multilateral

Agricultural liberalization: What‟s in it for Africa?

impact of globalization on small

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