Chapter 4


Box 4.7: Institutional Reforms in Agriculture: Approaches and Problems

In many countries substantial steps have been taken to reduce the role of the government in marketing
agricultural output and inputs. In Nigeria, for example, all six commodity boards were abolished in 1986
whereas other countries such as Guinea, Madagascar, Niger, Tanzania and Uganda have decontrolled prices for
some or all staple food crops. In other countries the major thrust of reform has been to reduce inefficiency. In
Ghana, this was done by reducing the overstaffing which characterized many parastatals, whereas in Colombia
responsibilities for credit and input supplies were separated. In Malawi, private traders were allowed to
compete with the parastatal marketing agency in the purchase and sale of certain crops.

In Malawi the liberalization of marketing for a number of crops in 1987 and the closing of a number of
government buying centres coincided with a lower than normal maize crop. Over the course of the year a
number of weaknesses became apparent in the private marketing system as private traders were generally
active in the central and southern region but much less so in the northern region due to high transport costs and
a poor road network. Also, the private traders were unwilling to supply information on their activities and the
government was unable to plan its import requirements. the general shortage of maize in that year resulted in
high consumer prices and traders, who had bought before the existence of a shortage had become clear, made
large windfall gains. There has been much concern about the impact of this on small farmers who often sell
food after harvest to meet cash needs but repurchase food later in the year. A number of technical problems
also arose, especially as regards to inadequacy of storage facilities with the private traders.

from: FAO, Effects of Stabilization..., 1989, op.cit.




There are, however, also some problems and risks involved in institutional reform policies.
Simple solutions, such as rapid privatization, will not yield the expected efficiency gains, if,
as is often the case:

1) after long periods of government marketing monopolies, private traders lack the
 managerial skills, the financial capacities and/or the physical infrastructure to take on
 the marketing functions which the government has performed so far.

 2) privatization would mean a mere transfer of government marketing monopolies into
 private ones. The number of potential traders with the necessary skills and capacities to
 step into large-scale food marketing operations may be quite limited, and often there is
 little difference between the organised private sector and the state.

 These problems call for a careful sequencing of the reform measures, to allocate sufficient
 time to built up competitive market structures and to give the private sector the opportunity
 to grow into its new role.

 A major approach to institutional reforms of any type (within the governmental institutional
 setting or through privatization) consists in a substantial reduction of (over-)staffing. As
 alternative job opportunities may be rare, this may push those who are set off under the
 poverty line and make them vulnerable to food insecurity.


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