Keywords Food aid; EEC; Mauritania

MarkMiliaa lWearchof8cerat the Centm for European 4ricultural Studies,WyeCoUege(Univedyof Lwtdon), Ashfod, Kent lN2!5 5AH, UK (Tel: 0233 812181). Christopher StevenshoklsajointappMmmt . thehtihJteof~

-wg andttleovmeas tute.HemaybetxmtacW atcml, lo- ll PercyStreet,LondonW1POJB,UK (Tel: 01580-7683).

‘InswuteofDevekpmentBtudies,centre fOfElJmp9fillk4@CUkUd-.The Community’s Cost of Food Aid Study: an economk repwton fhe 7978pmgramme of food aid through Canmuniry Action, Sri&ton, 1982.

The cost-effectiveness of EEC food aid

Mark Mitchell and Christopher Stevens

This article is based upon research which had a very specific objective: to estimate the cost to the EEC and the value to Mauritania of providing the commodities supplied under the Community’s 1978 food aid programme. It shares, therefore, the characteristics inherent in narrowly-focused studies. On the ‘one hand, there are clear limits to the extent to which general implications can be drawn but, on the other hand, it does high- light those features picked up in its narrow but intense beam. This article adds little to the debate on many of the issues that are normally to the fore when food aid is under discussion, notably whether it acts as a dis- incentive to the recipient’s agriculture. The issue on which it does make a contribution is the cost-effectiveness of food aid. Here the message is clear: with the possible exception of skimmed milk powder (SMP), EEC food aid appears to be an inefficient way of transferring resources. If it wished to do so, the Community could have transferred resources of the same value to Mauritania much more cheaply by other means. By the same token, the use of alternative means could have meant a transfer of much greater value to Mauritania at the same cost to the EEC.

Characteristics of Mauritania

The conclusions from any single country case study have only a limited potential for generalization. In this instance, however, the case for as- suming that the conclusions have a more general validity is strengthened both because they are supported by other research (see elsewhere in this volume) and because some of the most important characteristics unique to Mauritania actually tend to increase the cost-effectiveness of EEC fqod aid rather than the reverse.

The research in Mauritania was done as part of a broader study of the cost and value of EEC food aid which involved a global analysis of the whole 1978 EEC food aid programme, and three other country case studies.’ The results of all of these elements tend to support the same conclusions as the Mauritania example: that EEC food aid often costs the donor more than its value to the recipient.

Mauritania shares many characteristics with its Sahelian neighbours, though they are often in extreme form. Most of the country is desert.

Mauritania

Source:GovenmmntofMaudtania.

TObfOl.EdfllUW af#iamd~1973/74-1979m(tonlmB).

wm ma 1973I74 50000 3000

1974/75 45000 l975f76 36000 :z 1976f77 21000 5000 f977l76 14000 6000 1976/79 35000 4000 1979mO 30000 5000

Dalea 10400 10000 11000 12000 13000 12000 13500

Agriculture and livestock, which sustain approximately 75% of the pop- ulation, are limited to a narrow belt along the northern bank of the Senegal river. Even here, rainfall is irregular and agriculture is a high-risk undertaking. Most of the remaining 25% of the population live in Nouakchott and Nouadhibou, and large areas of the country are virtually uninhabited.

A predominantly agricultural society, Mauritania was affected sev- erely by the series of droughts that hit the Sahel in the early 1970s. Agricultural output, which had increased during the 196Os, fell between 1970 and 1973 and has not yet fully recovered. Losses of livestock (mainly cattle) were so great that thousands of herdsmen lost their livelihood and migrated to sprawling squatter camps on the edge of the towns, prin- cipally the capital. This exodus has been compounded since by the war over the former Spanish Sahara. As a result, the country has a structural food deficit. Arable farming is concentrated in the south, along the banks of the Senegal river. Millet and sorghum are the main dryland crops, and annual production since 1973/74 has been between 14 000 and 50 000 tonnes depending on the level of rainfall (Table 1). The 19fB-71 average was 81 000 tonnes according to the FAO* which would seem to indicate that the drought years have had a long-term effect on the country’s production potential. Even in good years, domestic production falls far short of consumption which is estimated at an annual 180 000-250 000 tonnes.3 The balance comes from food aid and commercial imports. Moreover, there appears little prospect in the medium term of a sub- stantial increase in self-sufficiency.

Despite this barren agricultural background, Mauritania does not fea- ture on the UN list of East developed countries. This is because it has two

li major sources of export revenue: iron ore mines at Zouerate, which account for over 80% of exports; and rich coastal fishing waters that are yxploited largely by foreign-based trawlers (though local inshore fisheries are being developed). Neither revenue source provides many linkages with the rest of the economy, but both have contributed to the country’s ability to increase imports without incurring massive foreign debts (Table 2). Import growth has also been facilitated by Mauritania’s status as a

TAO Pm&&ion Yeerbodc 1980, FAO, Fleme, 1981.

favoured recipient of Arab aid funds. In some cases, balance of payments

Xommission des Communautb Eum- aid from these sources has had the appearance of an e_r post exercise to

@annea, Situahn Ecmmique en Islam- balance the books. This relatively unconstrained ability to import has ique de Mautiianie, 31 Mats 1981. implications for the valuation of food aid.

Tdlie2.Maurftmian~lncrof~1~79(uY169).

souroe:wmBank.

FOOD POLICY August 1983

1973 1974 1976 1976 1w 1976 1979 6.5 9.2 6.0 9.1 6.2 5.5 6.6

Imports 6.9 11.1 13.3 16.1 17.7 13.6 14.5 Netfactorsewica -1.0 -0.9 -1.1 -1.5 -1.6 -1.5 -1.6 incolna cunentbansfers curmltbalance

A:: 3.0 0.2

capitalaccwnt -0.1 1.6

Mauritania

Another feature of Mauritania with implications for food aid valuation is the pattern of consumption which, in turn, is linked to ethnic dif- ferences. The main ethnic distinction is between those people of Moorish and those of African extraction. The former (the dominant political group) tend to be pastoralists and to consume dairy products. Those of African extraction tend to be cultivators and to have a cereal-based diet. A consumption survey conducted in 1980 shows the distinctive con- sumption patterns of the sedentary and nomadic populations; the results are summarized in Table 3. A point of particular importance for this study is that there exists a strong demand for milk (which is, in part, supplied by commercial imports) especially amongst those from a pastoralist back- ground subsisting on the urban fringes.

In many respects Mauritania is typical of a large number of food aid recipients. Agriculture is weak, agricultural statistics even weaker, and political instability is draining national resources. Mauritania was in- volved in the dispute over the status of the former colony of Spanish Sahara, which absorbed a significant proportion of government attention and public resources, and contributed to the economic malaise of the second half of the 1970s. It also contributed to a loss of political stability which has continued since the overthrow in July 1978 (in the middle of the period with which this study is concerned) of the government of Moktar Ould Daddah, President since independence. The present incumbent, Lt Co1 Mohamed Khouna Ould Kaydalla, has led the government since January 1980 and is the third head of state since the 1978 coup. Political tension since 1978 has been high, and government ministers in the econ- omic sphere have changed frequently. Government economic policies have often been misdirected and contradictory and this may have con- tributed to the poor agricultural performance, which has had to be made good by imports. Furthermore, records are poor and political priorities relevant to food aid may change.

ECC food aid in relation to need

The food aid supplied by the EEC to Mauritania in 1978 was related only haphazardly to the country’s needs. The estimation of the country’s food aid requirement is a difficult and imprecise undertaking, but an attempt was made by the other major food aid donors. The EEC did not par- ticipate in this undertaking and, indeed, its delivery arrangements were such that any precise attempt to relate food aid to need would have been undermined in execution.

Determining Mauritania’s food aid requirements is done annually by a grand caravan of donors and officials who journey through the main agricultural areas estimating the level of production. The volume of food aid deemed necessary is based (in theory at least) on food aid equalling need, minus domestic production, minus stocks, minus commercial im- ports. The caveat is added for two reasons. First, the data necessary to

FOOD FOLEY August 1983

4E.J. Clay ‘Food aid sea~rity in sub&h- aran Africa’ in The Developmental Efkc- tiveness of Food Aid in Africa, Agricultural Development Council, 1982, New York.

Mauritania

estimate need and production are poor. Second, in a situation where Arab donors appear willing to support the balance of payments ex post, determining the appropriate level of commercial imports presents some methodological problems. In practice, assumptions concerning the ‘nor- mal’ level of commercial imports derive from historical precedent rather than by an estimate of ‘what Mauritania can afford’.

Food imports are substantial. The EEC is the main source for non- commercial imports of wheat and flour, and virtually the exclusive source of commercial imports (Table 4). This is probably due to the country’s proximity to Europe and its traditional trading links with France (which supplied 39% of imports in 1979) and the EEC (63% of 1979 imports). Table 4 underlines the importance of commercial trade, made possible by the high levels of balance of payments support received by Mauritania. In only three of the nine years covered have non-commercial imports ex- ceeded commercial imports. Two of these years (1973/74 and 1974/75) were at the time of the prolonged Sahel drought, but the third, 1977/78, occurred the year before the 1978 EEC food aid programme with which we are concerned, because of a sharp fall in millet/sorghum production (see Table 1).

As can be seen from Table 4, since the drought, and with the exception of 1978/79 when there was an extremely good harvest, food aid has constituted 35-78% of cereal imports. This proportion is not as high as in many other Aliican countries but Mauritania’s overall dependence on cereals food aid, ie the proportion of supplies provided on a con- cessionary basis, is extremely high.

Clay4 estimates (on a calorie equivalent basis) that during the period 1976/77-1978/79 Mauritania depended on cereals imports for 73% of its total supplies of basic food staples (cereals, roots and tubers) and that 40% of cereal imports, 29% of all staple supplies, came in the form of food aid. In fact Clay’s results indicate that during 1976/77-1978/79 Mauritania received a higher proportion of its overall cereals supplies in the form of food aid than any other country on the mainland of Africa.

Unfortunately data on commercial and concessionary imports of dairy products are unreliable, with different sources giving contradictory es- timates. However, it may be said that commercial imports of SMP are substantial while those of butter oil are so small as to be negligible.

For cereals and SMP the assumption that a change in the level of concessionary supplies would be compensated by a corresponding change in commercial supplies would not appear to be unreasonable given the volume of commercial imports and the political importance of having adequate food supplies available. However, this would appear not to be

1971/72 1972/73 1973/74 1974m 1975f76 1976l77 1977/78 1976n9 1979m 1960/61 1961/62

EEC

16771 15966 16063 22167 23613 26795

zz 23622 452m 14642

zlai

TOtA

16771 23006 16063 22167 23613 26795

zz

zti 14642

Non-1

EEd’ TOM

loo00 13901 6749 7434

21751 27957 16346 26443 11500 16056 13699 16699 44700 56476

lZ 632s

19660 24mo 24366 15500 16297

41669 47694 76642

z 69666 31139

Food aid aa%of

45 24 61 56 43

:

2

FOOD POLICY August 1983

Mauritania

Qfflcial Journal of fhe Empean Com- munities, 22 April 1978, L lWll-13. The tendersweratobaintwolots,asraquesW by the Mauritanii (2000 tonnes for lW&#bouand5OOOtonnesforNouak- chott) and the tendering ptucedure was to take place in France. Tha details of the butter oil consig~mants appeamd in W L 214.1978.andfortheSMPinL108/11.the Of&a/ &urn& for 5 August, which also included a tender for 800 hmnas of vit- aminizad SMP (in three kts of 200,300 and 300tonnaa)tobebou@antheCommunity markatandtobeloededby3OSaptember atthelatest. Inthaevant,theSMPwasof French origin. 6ln addWn, Maurhnii received 540 tons ofricainJune1978fromthaRedCrossas hart of tha EEC’s 1978 ah&ion to non-

hant was not inched in ths study. _

the case for butter oil where a change in concessionary supplies would more likely result in changes in the (substantial) imports of vegetable cooking oils.

Determination and delivery of the 1978 progmmme

The EEC’s food aid calendar begins in the middle of the year preceding the approval of country allocations, ie in mid-1977 for the 1978 pro- gramme. Thus, in August 1977 the Commission sought the government of Mauritania’s request for food aid from the 1978 programme. This the government declined to provide on the reasonable grounds that such a request should occur after and not before the multi-donor mission had estimated requirements. This mission took place in October 1977 under the auspices of the FAO representative. The EEC was invited to par- ticpate but as already noted, it declined, so the mission included only the representatives of Germany, UK, USA, France, WFP and FAO. Its recommendations included that:

a

l

there should be food aid in cereals (wheat, flour, sorghum) of 52 500 tonnes in addition to 15 500 tonnes that were then being disbursed; there should be dairy products food aid of 4 000-5 000 tonnes of SMP and butter oil in addition to 4 400 tonnes that were in the course of disbursement.

These ‘global’ figures were then sent to the EEC and were the only basis of Mauritania’s food aid request. No attempt was made to indicate more precisely the proportion of the total food aid requirement that should be sent from the EEC programme. In the event, the EEC did not respond to this request, until February 1978 for the cereals and May 1978 for the dairy products, ie four months and seven months respectively after the request had been made. The offer was for 7 000 tons of wheat (13% of the total estimated cereal requirement), 800 tons of SMP and 900 tons of butter oil (some 34-43% of the total requested).

Delivery of the food aid was delayed slightly in the case of the cereals and substantially in the case of the dairy products. The Mauritanian government requested in March 1978 that all the consignments be de- livered by April or at the latest May to avoid transport problems caused by rains. However, the invitation to tender for wheat was not published in the Official Journal of the European CommunitiesS until 22 April, with the provision that tenders would close on 5 May. The tender for SMP was not published until August. The wheat arrived in three consignments in early June, only just missing the government’s deadline, but the SMP and one third of the butter oil did not arrive until mid-Gctober.6 Mauritania also received in 1978 consignments of food agreed under the 1977 food aid programme, which had been delayed. Hence, all in all, the actual deliveries of EEC food aid during 1978 bore little direct relation to any serious assessment of Mauritania’s needs.

The value of the food aid to Mauritania

Although the initial agreement between the EEC and Mauritania was that the cereals would be for free distribution, it was subsequently agreed that a proportion could be sold to raise domestic revenue to cover the cost of internal transport for the food aid. Reference was made in an EEC communication to 70% being distributed free, and 30% being sold. In fact, because of the way in which the food aid was distributed there are no

FOOOPOLlCYAugust1983

Mauritania

records of the proportion sold, but an EEC semestrial report comments that no more than 15% was distributed free, while the rest was sold at a ‘symbolic’ price. The distribution system hinges on the prt;fets who iden- tify the needy in their area, classifying potential recipients into those who should receive food free of charge, and those who should pay a subsidized price. The food aid is then transported to the various districts on the request of the p&feet by the Office Mauritanien des Cereales and, in theory at least, distributed to the identified needy on payment, where appropriate, to the local tax office.

In valuing the cereals food aid, it was assumed that, in the absence of such aid, there would have been a corresponding rise in commercial imports. Tables 1 and 4 indicate an unusually large shortfall in domestic production made good by both food aid and commercial imports and Table 2 indicates that in 1978 the balance of payments was in surplus, due to a substantial in-flow of capital. The.most likely source of any additional commercial imports is the EEC, given lower shipping costs and the strength of traditional commercial ties. Actual average unit cost of comm- ercial soft wheat imports in 1978 was 5 943 UM (101 EUA/tonne).’

Against the ‘value’ of 101 EUA per tonne, we estimate that the cost to the EEC of providing wheat as food aid was 223 EUA, ie over twice as much. This cost was estimated by subtracting the cost of commercial exportation (the export refund applicable at the time) from the total cost to the EEC budget of the wheat shipments. The cost of transport (the food aid was supplied cif) was approximately 55 EUA per tonne, which is relatively high because of the inadequate port facilities at Nouakchott. This compares with estimatesa of W-204 EUA per tonne for shipments made on a cif basis to Mozambique and Zaire as part of the same 1978 programme. Deliveries of wheat to landlocked Lesotho and Chad incurred higher costs, 246-277 EUA per tonne, as would be expected.

The SMP was distributed in the same way as the cereals, ie through the pdfet system, hence the proportions sold and given away are not available. There is some reason to suppose that, in the absence of food aid, commercial imports of milk powder would have been increased. Milk is an important item in the diet of the politically dominant Moorish community and is also consumed to a certain extent by the sedentary population. Senior government officials emphasized to us their apprec- iation of the dairy products (SMP and butter oil) food aid. If commercial imports were increased they would probably have come from the EEC although some might have come from the USA. The unit cost of com- mercial SMP imports in 1978 was 47 579 UM or 808 EUA per tonne. 9’

The cost of supplying SMP as food aid was estimated by subtracting from the local budget cost (some of which is entered as agricultural expenditure) the likely cost of alternative means of disposal. The sel- ection of the alternative disposal mechanism is crucial since costs vary considerably. On the assumption that the alternative was non-calf animal (pig) feed (the most expensive alternative to food aid in 1978/79), the cost of SMB food aid to the budget of the European Commission is estimated to be 345 EUA per tonne, under half the value of the aid to Mauritania. But, if it is assumed that the food aid would have been used for calf-feed; the least expensive alternative, its cost rises to 827 EUA, which is about the same as its value to Mauritania. During the period when deliveries were made the most likely disposal mechanisms other than food aid were as non-calf animal (pig) feed or exportation through the use of export refunds, the cost of which was about half way between the two extremes.

7Information fnm the Dimtion du Com- merce,(kvemmentdMaudtania. 8lnformatknfmmDiredionducanmerce. 4nformatknfmmDkectionducanmerce. ThSSt3lMlitCOStSW@&SO~hiiiflCUIl- parisonwithfobunitvalwsofEECam- tllMCial8xportsOfSMPtOOother during 1979 or 1979.

FooDPcxlcYAugust1983

Mauritania

Hence we may conclude that the cost of SMP food aid to the budget was probably substantially below its value to Mauritania, under the fav- ourable (for food aid) assumptions that commercial imports would have been substituted in the absence of SMP food aid and of alternative options for disposal which required a very high level of subsidy. It may be noted that the two most likely disposal mechanisms cited above required levels of subsidy equivalent to 40-90% of the intervention price.

And as with wheat, the food aid was supplied cif, the cif component of these costs being estimated at 103 EUA per tone. As already noted, transport costs are relatively high because of the inadequacy of Nouakchott port. By comparison the cif cost component for Mauritania’s neighbour Senegal is only 32-93 EUA.

As with SMP, there exists a consumer preference for butter oil among certain segments of the Mauritanian population. However, our judgment is that in the absence of food aid, commercial imports of butter oil would not have increased. The reason for forming a different judgment for butter oil than for SMP has already been mentioned; commercial imports of butter oil are extremely small and there exist a number of close (if not identical) substitutes for butter oil which are both widely used and cheaper to import.

Figures from the Direction du Commerce indicate that three types of edible oil were imported commercially in 1978: 161 tonnes of soya oil; 1 978 tonnes of groundnut oil; and 670 tonnes of what is described simply as ‘vegetable oil’. In the absence of butter oil food aid, the most likely alternative would appear to be a rise in groundnut oil imports since this is a high quality substitute and is also the dominant type of imported vegetable oil. The unit cost of imported groundnut oil in 1978 was 55 289 or 939 EUA per tonne. As before, this estimate is taken as the value of the aid transfer. Our estimate of the cost to the EEC to be set beside this value figure is 1 342 EUA per tonne. This figure represents the average cost of the butter oil food aid shipments to Mauritania less the export refund applicable at the time. Thus, on the assumption that Mauritania would have imported groundnut oil, the value of the food aid is only some 70% of its cost. If it is assumed that the compensating imports would have been of US soya bean oil, then the discrepancy is even greater since our estimate of the value would fall to 614 EUA. Only on the assumption (unrealistic in our view) that Mauritania would have imported butter oil commercially is there a balance between cost and value.

Once again transport costs were relatively high, the cifcomponent was estimated at 324 EUA per tonne which compares with 113 EUA per tonne for neighbouring Gambia. As with the other food aid products, distribution took place through the prcifet system. Through this system the butter oil was sold at a price of 20 UM per kg or 340 EUA per tonne, ie at a price below that of commercially imported vegetable oils.

Conclusion

Of the three commodities, wheat, SMP and butter oil, supplied as food aid to Mauritania under the 1978 programme only the SMP shipments, under favourable assumptions concerning alternative methods of dis- posal, can be considered cost-effective. Both wheat and butter oil cost the EEC budget more than their value to Mauritania, reckoned in terms of the likely saving in foreign exchange. An alternative policy, such as the provision of credits for commercial importation, could provide the same value to Mauritania at a substantially lower cost to the EEC.

FOODPOUCYAugust1933