Choice of Optimal Instruments for Boosting Food
Sufficiency – the case of agricultural input
subsidies in Senegal
CABRI SECTOR DIALOGUE: SENEGAL CASE STUDY
CABRI SECTOR DIALOGUE
Dakar, Senegal
July, 2013
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Presentation
Outline
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 Introduction
 Overview of Senegal’s Agricultural Sector
 Government and Development Partner Spending on Agriculture
between 2002 - 2009
 Government Instruments of Agricultural Support along the
Production Chain
 Implementation of Agriculture Subsidies
 Impact of Agriculture Subsidies: Micro Evidence from Sample
Survey
AFRICAN CENTER FOR ECONOMIC TRANSFORMATION
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Introduction
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 Senegal’s Food Insecurity led to an unprecedented food crisis in 2007
 Government of Senegal (GoS) Response in 2008: GOANA or Grande Offensive Agricole pour la Nourriture
et l’Abondance (Great Agricultural Offensive for Food and Abundance) with an estimated total cost of
FCFA345 billion ($803.85 million)
Aim of GOANA:
To put Senegal on a pathway to attain food sufficiency by 2015
3 Broad Measures
 the expansion of the cultivated areas with a particular focus on irrigated land,
 the diversification of staples, namely corn, cassava, rice, and
 greater access to agricultural inputs and equipment.
CASE STUDY FOCUS: Access to agricultural inputs and equipment
Specifically 3 questions:
 Are input subsidies fiscally sustainable as an instrument for food sufficiency?
 Is the subsidy program well structured (design, targeting, risk etc)?
 Do the observed results/impact justify the cost (value for money)?
AFRICAN CENTER FOR ECONOMIC TRANSFORMATION
Title of Slide
Overview
of Senegal’s
to go HereAgricultural Sector
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 Plays a Crucial Role in economic and social
context; Employs a large majority of the labor
force
 Dominated (95%) by subsistence farming
 Only 5% agribusiness (horticulture and
arboriculture) and industrial agriculture
(groundnut and cotton), for urban market Dakar
and export markets
 Heavily dependent on Sahelien region rain and
climatic conditions
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High Food Insecurity
 Chronic deficits of the commodity trade
balance
 Heavily reliant on foreign supply thus
vulnerable to external market shock, price
hikes
 Malnutrition affects 21% of total
population (3 mill)
 Absolute rise in the # of malnourished
Title of of
Profile
Slide
Senegal’s
to go Here
Agricultural Sector
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 Main Agricultural Commodities: Groundnuts, rice and
millet made up 40% total agri produce in 2011
 But declining production of cash crops
 Agricultural Growth very volatile: Between 2001 and 2011
range -22% (2002) and 20.5% (2003) 2011 was the most
Production (in $1,000)
recent contraction of agriculture
Production (in MT)
 Low productivity
600000
500000
400000
300000
200000
100000
0
70.00
60.00
Source: FAO Stat (online)
50.00
Agricultural value added
(% of GDP)
40.00
Manufacturing value
added (% of GDP)
30.00
Economic growth fueled mostly by growth
in the service sector vs. mainly stagnant
agric sector
20.00
Services etc value added
(% of GDP)
10.00
0.00
Source: World Development Indicators (Online)
AFRICAN CENTER FOR ECONOMIC TRANSFORMATION
Government
andto
Development
Title of Slide
go Here Partner Spending on
Agriculture
have risen significantly 2002 - 2009
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180000
GoS Spending
 Spending has risen significantly 2002-09
 3 fold increase FCFA 55.1bn – 170.2bn
160000
140000
120000
Donors
100000
Investment
80000

Non-salary
60000
Salary
40000
20000
0
2002 2003 2004 2005 2006 2007 2008 2009
Source: DAPS, Ministry of Agriculture, Senegal
Development Partner Spending
 Spending has risen significantly 2002 – 09
 74% increase FCFA 40.7bn – 70bn
 41% of total agric spending
 More reliable source even during the financial
crises; only marginal effects, rising since 2005
AFRICAN CENTER FOR ECONOMIC TRANSFORMATION

Structural shift towards more pro-cyclical capital
spending since 2004
 During budget crisis, capital spending
decreased by 40% while non-captial spending
continued to rise
BUT
Spending falls short of Maputo Declaration
 GoS has only slightly crossed the threshold in
two years (2007 and 2009)
 Between 2002 – 2009 – Avg share was lower
than commitment 9.7%
Instruments
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to Agricultural
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Support along
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the Production Chain (1)
Pre-Production Stage
Objectives
Instruments
Production Stage
Post Production
 Improved accessibility to
inputs
 Expand growing capacity
 Encourage adoption of
new technology
 Improved food security




Expand output
Minimize cost,
Improved quality,
Enhance production
technology
 Improved incomes,
 Improve food
availability and
access




Disease control
Extension services
Technological
services
Quality control
Farmers Associations
– unions,
cooperatives






Land availability (land
banks)
Targeted input subsidy
(voucher) programs
o Seeds
o Fertilizer
o Equipment
Subsidized credit
scheme
Common infrastructure
o
Roads, Irrigation
Farmers Association –
unions and cooperatives.
Private sector –
wholesalers and retailers,
dealers network
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





Post- harvest
services
Storage facilities
Transportation
(access to markets)
Price support
Food supply
programs
Instruments
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to Agricultural
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Support along
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the Production Chain (2)
Pre-Production Stage
Fiscal Needs



Incentives


Production Stage
Recurrent government
support through budget
by way of subsidies
needs to be funded on
annual basis.
Risk of expenditure
substitution by farmers
who apply same amount
of seeds and fertilizers
but enjoy cost-saving.
Administrative cost of
managing and monitoring
subsidy programs

Input subsidy can be
targeted to individual
farmers on the basis of
years of experience,
acreage or landholding
size, household assets,
location, crop type.
Incentive compatible for
farmers to encourage
use of inputs to boost
productivity, especially
for those who otherwise
cannot afford the desired
amount of inputs

AFRICAN CENTER FOR ECONOMIC TRANSFORMATION


Post Production
Recurrent expenditure
for disease control
and extension
services largely
through payroll and
administrative
spending in managing
program
Manpower and skills
development costs
Cost sharing may
compromise program
effectiveness

Incentive compatible
for farmers because
of the positive
externalities in the
provision of these
services with high
lump-sum fixed costs
for individual farmers.
Disease control is a
beneficial public good.


Storage facilities and
transportation may
be one-time capital
expenditures
Price support
schemes may
require income
buffers
All farmers benefit
proportionate to size
of harvest and
productivity
Instruments
Title
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to Agricultural
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Support along
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the Production Chain (3)
Pre-Production Stage
Risks



Borne largely by
government depending
on the nature of the
subsidy schemes
Inputs may be
transferable or re-sold in
different markets while
applying less than
desired amount,
especially in the case of
fertilizers
Susceptible to “leakage”
– inputs may be diverted
and sold to farmers and
traders in different
location or for different
crops not covered by
subsidy scheme
Production Stage

Minimum risks to both
farmers and
government since
program is centrally
delivered in kind and
is non-transferable
BUT PROBLEM OF LEAKAGES
AFRICAN CENTER FOR ECONOMIC TRANSFORMATION
Post Production



Minimum risks to
farmers and
government since
program is centrally
delivered in kind,
non-transferable.
May share
maintenance costs.
Price support risk is
borne solely by
government
The Implementation
Title
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of Agriculture
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Subsidies in Senegal
Major reforms to reach food sufficiency
 Great Push Forward for Agriculture, Food and Abundance or Grande Offensive pour l’Agriculture, la
Nutrition et l’Abondance (GOANA)
 Return to Agriculture or Retour vers l’Agriculture (REVA) –designed to promote agriculture and tackle
rural migration and emigration
Main Instruments for Agricultural Support: Based on assumption that these are the major constraints to
production
 Supply of more agricultural equipment
 Subsidized seeds to farmers
 Making additional land available to farmers at no charge
But subsidies have been the main component of GoS support to agriculture 2001 - 2011
 Subsidies increased from a meager FCFA 75 million in 2001 to FCFA 36.3 billion in 2011, a 484-fold
nominal increase in this 10-year period
 Fertilizers were the main target (30%) of the total subsidy amounts
 2011/2012 campaign FCFA 30.9 billion was necessary to subsidize various agricultural inputs
AFRICAN CENTER FOR ECONOMIC TRANSFORMATION
Impact
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Subsidies:
to go Here
Micro-evidence from
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Sample Survey
In June 2013, a team of surveyors interviewed 183 farmers who received the fertilizer subsidy and those that did not
in the agricultural area of the Senegalese River valley.
Characteristics of Sample
 Scattered over three rural communities
 Mostly small-scale, subsistent farmers who were owners of the land for three decades
 Access to some form of irrigation, low access to finance, limited access to storage facilities
 Diversified Farming Activity (Rice (mostly 66%), onions and tomatoes)
 Mostly limited education (53.3%) (barely attained primary or secondary level education (48.9%)
 Mostly part of farmers unions (85.5%)
Extent of Government Support
Subsidy beneficiaries
Subsidy on price (FCFA)
Price (FCFA)
Subsidy: share of price (%)
Count
183
92
179
92
Average
0.5
117.6
245.4
82.1
Focus on Rice producers
AFRICAN CENTER FOR ECONOMIC TRANSFORMATION
Min
0
10
26
5
Max
1
500
500
100
Relationship
Title
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between
go HereSubsidy and Rice
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Farmer Productivity
Variables
Years of education
% of FBO member
Productivity (t/ha)
Quantity of fertilizer used
Land size
Subsidy as share of price
No Fertilizer
5
100
3.2
0
0.7
Fertilizer and No
Subsidy
3.5
94
3
411
1.2
 Similar profiles but
 Notable difference between the quantity of
fertilizers used and productivity.
 Farmers who used fertilizers and
received a subsidy are associated with
higher use of fertilizers and have
higher rice yield.
BUT RELATIONSHIP IS NOT CAUSALITY
BUT PROBLEM OF LEAKAGES
AFRICAN CENTER FOR ECONOMIC TRANSFORMATION
0
-2
Productivity
A comparison between the share of fertilizer subsidy
recipients and the natural logarithm of rice
productivity suggests that:
 the difference in productivity between producers
who receive 100% subsidy and those that receive
10% is negligible
2
4
6
Source: Survey data, June 2013
Fertilizer and
Subsidy
3.4
92
4.1
572
1.4
60%
0
20
40
60
Subsidy_share
80
100
Title of Slide
Discussion
Questions
to go Here
Subtitle to go here
Are input subsidies fiscally sustainable as an instrument
for food sufficiency?
Is the subsidy program well structured (design,
targeting, risk etc)?
Do the observed results/impact justify the cost (value
for money)?
Leakages/Spillovers????
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Title of Slide to go Here
Subtitle to go here
www.acetforafrica.org
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