An Urban-Rural Focus on Food Markets in Africa

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Abstract

Africa's cities purchase much more food domestically than the continent imports or exports; they represent economic hope if rural and peri-urban producers learn to meet their particular food demands, including more meat, dairy, and processed foods. Increased efficiency will come with more onsite processing, contract enforcement, and distribution centers. Best practices from South Africa include the Johannesburg Fresh Produce Market and Thohoyandou Spar Supermarket requiring their agents to purchase a share of their fresh vegetables from small growers. Efforts to strengthen regulation and raise standards must remember that the urban poor depend on public markets, the informal sector and "inferior" products.

Introduction

This paper takes an urban-rural focus on sub-Saharan Africa (hereafter: Africa) food markets, arguing that the structure of food demand is changing with urbanization and that policies and programs should focus on what will help both the very poor rural producers and the large number of very poor urban consumers in African cities. Aside from migration, improved access to markets is the most likely way for poor rural populations to improve their livelihoods. The growing numbers of very poor urban dwellers mean that policymakers need to consider how to keep food prices affordable without recreating the subsidies that stifled economic growth in the past. Experts on economic growth in Africa note that among all regions of the world, Africa trades the least within its region. Increasing access to domestic and regional markets is seen as key to poverty reduction, food security, and economic growth, as well as a necessary step to improve the continent’s capacity to trade with the rest of the world (USAID 2005).

The growing urban population represents huge demand for African agriculture. Although some African city dwellers produce food, both for their own consumption and commercial sale, most purchase their food. This urban market is much more accessible than export markets to rural and periurban producers. In most cases, especially nonprocessed food, domestic producers can compete with imported products. Urban dwellers do not follow the same consumption diet as their rural counterparts, preferring greater amounts of meat, dairy, oils and fats, and fruit and vegetables such as tomatoes and potatoes, and they increasingly demand a year-round supply of these items. Rural producers need to first understand what is in demand, then how to supply it year round. This applies to intermediate goods as well—for example, greater demand for meat and dairy will also imply a greater demand for grains as feed for animals.

Africa has high wholesale and retail marketing margins relative to other parts of the world, and high price differentials across time and geography, indicating that marketing of African agriculture can be improved through greater vertical integration. This might include providing better market information to producers and processors; strengthening contract enforcement between producers, traders, processors, or distributors; or improving physical markets or market bureaus where commodities are bought and sold. Establishing a reliable telecommunication network can help reduce transaction costs by making it easier for producers to know when to go to market for the best price, and by keeping traders in contact with producers and retailers. Farmer associations can create economies of scale that can, for example, make it possible to purchase a truck or contract with a driver to get produce to market. Contract growing formally connects buyers to producers, for whom the buyers are willing to provide financing and technical assistance to improve the yield.

Policies and actions to improve the marketing channels that bring goods to market must not lose sight of how these affect smallgrowers and poor urban consumers. For example, supermarkets and agents/traders in fresh produce markets can be obligated to purchase a share of their produce from smallgrowers. Poor urban dwellers should be allowed to practice urban agriculture if it does not create health and safety risks. For the medium term, governments should not preclude the informal sector from continuing to provide “inferior” products because, although the urban market collectively has huge buying power, it is comprised of many households who have very limited buying power.

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The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

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