More than Three 'F' Words to Describe the Food, Fuel and Finance Crisis

By Fazila Farouk · 27 Jun 2008

Picture: Eyasu Solomon

The current global crisis is being described to as the triple ‘F’ crisis of food, fuel and finance.

Nowhere is the crisis being felt more than among Africa’s poor. The rising price of food, in particular, is a topic that’s on everybody’s lips.

Even the BBC’s head of world news, Nick Gowing, chaired a session examining the food crisis at the recently held African leg of the World Economic Forum (WEF), where the usual suspects were rounded up to offer their insights into how this crisis should be solved.

Big business, politicians and international aid agencies made up the principle participants in this discussion.

According to Gowing, quoting the head of the World Food Programme (WFP) in Rome, the number of people living in absolute poverty could double as a result of this food crisis.

The WFP has allocated US$1.2 billion to food aid immediately, as an emergency measure. It's worth noting that of this injection of funding, only US$500 million is new money. The rest is just money that was stuck somewhere in the system.

At this point, it is also worth noting that we’re about seven years away from 2015, which is when the world is supposed to be meeting the MDG target of halving poverty. However, it would appear from Gowing’s comment that what we’ve managed to achieve thus far, is to go in the opposite direction - we’re doubling poverty.

I would be laughing at the absurdity of the situation had it not meant that millions more people around the world, including children, are dying horrible deaths from hunger.

Gowing’s panel was strongly arguing that the solution to Africa’s food crisis is the development and support of intensive small-scale farming. Pointing out that firstly, farming is what most Africans do anyway, albeit at a subsistence level; and secondly that Africa has the potential to become the breadbasket of the world, presumably due to the large amounts of land on the continent.

However, the question that seemed to escape all, was: will the world’s Western powers allow Africa to develop its agricultural markets without interference?

Obiageli Ezekwesili, vice president of the African region of the World Bank was on the panel peddling yet another World Bank package; and waxing lyrically about Malawi’s miracle maize harvest last year, which saw the country yield a bumper crop as a result of targeted subsidies to small-scale farmers - achieved with the help of the Bank.

Ironically, both Ezekwesili and Sheila Sisulu of the WFP, who was also on the panel, neglected to highlight the ‘paradox of development aid’ when the Malawian example came up.

With her heart in the right place, Sisulu argued that women farmers on the continent should be given top priority.

Its too bad that Sisulu's programmes and budgets are unable to locate that warm and fuzzy place, because just as Malawi was producing mountains of mealies last year, surplus American maize was being dumped onto the Malawian market by none other than the WFP, which after receiving a conditional grant from the United States was obliged to distribute American maize through its school feeding programme in Malawi, driving the price of maize down in the country and rendering its bumper harvest useless.

Heavily subsidised American and European farmers remain the biggest obstacle to Africa’s agricultural development. At least on this point, both African civil society and governments agree. Nevertheless, the easy capitulation of African governments to the demands of Western powers is a story that we are all familiar with.

Surprisingly congenial towards each other, Jacob Zuma and Trevor Manuel were also on the WEF panel, supporting each other throughout the discussion and suggesting somewhat vaguely, some may argue disingenuously, that the answer to the food crisis lies in multilateral solutions.

It will be interesting to see how they can get their multilateral solutions to stick in a world where superpowers act with unilateral impunity. After all, the United States has point-blank refused to sign the Kyoto Protocol, which is a multilateral agreement.

And from all accounts, the West doesn't appear to be ready, any time soon, to scrap subsidising its farmers, because as Giles Bolton points out in his book "Poor Story: An insider uncovers how globalisation and good intentions have failed the world's poor", the bulk of the agricultural subsidies provided by Western governments go to a powerful political lobby - agribusiness.

In America, for example, 60 percent of ordinary farmers receive absolutely no financial support from Washington. In the last decade, 10 percent of the richest farming enterprises secured 72 percent of Washington's agricultural subsidies.

According to Bolton, when we talk about rich farmers in America, we are talking about Fortune 500 companies like Chevron and Caterpillar that have been attracted to the business of farming because of the guaranteed incomes provided by the subsidies. Incidentally, says Bolton, agribusiness spent US$15 million on campaign contributions during the American presidential elections in 2004.

Going back to the WEF panel discussion, Thorleif Enger, CEO of Norwegian fertiliser giant, Yara International, stressed the importance of getting the right inputs into the food production chain, referring to fertilisers and seeds. It was hard not to notice the dollar signs flashing in his eyes, as he urged governments to create credit schemes for small-scale farmers for the purchase of fertilisers.

Manuel on the other hand was highlighting another input cost, fuel, as a key factor driving up the price of food. He argued that 34 percent of the bread price is based on wheat, of which 36 percent depends on the logistics chain where transport plays a big role.

At a global level, the food import bill is one trillion dollars, up by US$215 billion from last year. From these figures we can see that there is a lot of food travelling around the world, highlighting the important role that the price of oil is playing in driving food costs up.

But why are South Africans being held hostage to global oil prices? Sasol produces an enormous amount of fuel way cheaper than it is available on the international market.

As you may already know, we pay top dollar for fuel in South Africa because our government allows Sasol to charge international rates for locally produced oil.

They call it import-parity pricing. As far back as 2005, Ann Crotty, writing in Business Report, clarified how it works. "You enjoy no advantage if you live on the doorstep of the world's primary source of a particular commodity … you will be charged the international market price for that commodity plus the cost of schlepping it from the international marketplace back to your doorstep".

South African consumers are paying for activities that don't even exist, just so that Sasol can increase its profits for its shareholders.

More recently, writing in Media 24, Chris Moerdyk, argued, "bearing in mind that Sasol was established and funded using South African taxpayers' money, why on earth is its oil not being used to lower the price of petrol and diesel in this country instead of simply profiting so handsomely? After all, in a lot of oil producing countries automotive fuel is cheaper and in some Arab states it's even free".

It doesn’t matter that Manuel tried to introduce a windfall tax last year to deal with this unjust situation because he caved in, withdrawing the tax when Sasol threatened disinvestment.

I am staggered by the weakness displayed by our political leaders when faced with the power of capital. The scale of the problems we face today, demands tougher action from our government to curb corporate greed.

We are certainly living in an era that has become the new 'gilded age' for the rich.

I wasn't really surprised to hear this, but the point about the excesses of the wealthy was really driven home for me while watching a television insert about the impact of the high interest rates on the property market in South Africa.

I forget the name of the show and of the woman on it, both were largely uninspiring, but for the part when the woman opened her mouth, and with words dripping with adulation for the rich, she announced that they - the rich - are unaffected by the interest rates challenging most other South Africans, because they pay cash when purchasing their homes, on the upper end of the market, where houses are valued at nothing less than six million Rand.

Are we middle class mortgage-bound plebs supposed to sleep easier at night knowing that the upper end of the housing market is stable?

So whether we are talking about the crisis of food, fuel or finances, one thing remains consistent, the rich are not affected. Still they are allowed unmatched access to and influence over our political leaders, guaranteeing that they maintain the status quo.

It really didn’t seem to occur to anyone that day that the people discussing the food crisis on the WEF panel, or rather the institutions they represent, are the ones that have been leading our world through this epoch. It is their handling of public issues from distant heights that has brought us to this juncture, this place where we find ourselves facing the triple 'F' crisis, which if you ask me, is a crisis better described as a 'F-up' of mammoth proportions - and which could have been avoided if our governments were made of stronger stuff.

Unless we start addressing the issue of wealth redistribution at all levels in our society, nationally, continentally and internationally, we will continue to deceive ourselves with ineffective and piecemeal programmes that have little impact on the structural drivers of poverty and inequality. Just ask the people who have the inside track on the MDGs.

Farouk is founder and executive director of The South African Civil Society Information Service.

Read more articles by Fazila Farouk.

Should you wish to republish this SACSIS article, please attribute the author and cite The South African Civil Society Information Service as its source.

All of SACSIS' originally produced articles, videos, podcasts and transcripts are licensed under a Creative Commons license. For more information about our Copyright Policy, please click here.

To receive an email notification when a new SACSIS article is published, please click here.

For regular and timely updates of new SACSIS articles, you can also follow us on Twitter @SACSIS_News and/or become a SACSIS fan on Facebook.