Mena needs policies to secure ready food supply

Region should ensure that strategic commodities are available, affordable, healthy and nutritious. A resilient supply chain, subsidies will go a long way. (GETTY IMAGES)

Securing ready access to food supply despite potentially disruptive global events is a major concern for governments, according to a new research by Booz & Company.

In this context, the Middle East and North Africa (Mena) governments can implement food security policies to mitigate the threat.

"Such policies should ensure that strategic commodities are available, affordable, healthy and nutritious and safe for consumption," said the research report, adding, "these aims can be achieved through measures such as food subsidies, reliable imports, and a resilient supply chain. Finally, orchestrating the right mix of public and private involvement can help ensure that a nation has a steady, safe supply of food for its citizens, in good times and in bad. Countries that are able to stabilise their food supply in this way are performing a vital service for their citizens."

The report highlights that several Mena governments have begun taking steps either to establish or bolster a comprehensive food security policy as concern about food security is growing.

The report cites the recent case of 2008, when high oil prices added to the demand for certain crops, including corn, (which is used to produce ethanol), driving up food prices. "Last year in Egypt, for example, the consumer price index increased more than 20 per cent as some food prices quadrupled.

"Those sudden, steep price gains triggered mass domestic protests and unrest and strained the government's finances as the cost of food subsidies (one of Egypt's single greatest expenditures) soared," it said.

Moreover, the problems are aggravated if limited arable land and water supply are dragging factors. Quoting United Nations figures, the researchers at Booz & Company said that much of Mena falls below the standard for water poverty (measured as 1,000 cubic metres of water per person per year). Given the problem, most countries in the region have to import food and are thus vulnerable to a raft of supply and demand issues.

With such problems plaguing the region, governments are designing a comprehensive food security policy. In this regard, the report talks about some important steps that can be taken for self-sufficiency as far as food demands are concerned.

"With any such programme, the first step is to determine which food categories are strategic enough to merit inclusion in any policy, as it is simply not feasible to provide food security for all consumable products.

"Next, countries [should] focus on four critical policy parameters around food: availability, affordability, nutritional and health value, and safety.

"Governments are also considering the proper balance of public and private industry involvement in the entire supply process. In addition, governments are placing emphasis on distribution – because having the right amount of affordable and healthy food isn't enough if it can't systematically reach people's kitchens," said the report.

Booz & Company in its report helps in identifying strategic commodities to secure ample supply of essential food in a country.

Elaborating on its strategy, it said that its approach is based on eating habits, consumer quantities, and nutritional significance, and accounts for the effect of potential income disparity.

"Our process determined which food items should be considered strategic commodities by: [firstly], starting with a complete list of all the produced and imported food items (whether processed or in raw format) consumed by the country.

"[Secondly by] filtering the list to focus on the most consumed foodstuffs, such as grains and oils. These items should represent about 75 per cent of locally produced food items and 75 per cent of the value of imported items.

"[Thirdly by] winnowing further by identifying products that have nutritional value or those that contribute to a particular preferred diet, and discarding items that contribute a low share of daily caloric intake.

"[Fourthly by] selecting food items that constitute 75 per cent of the caloric intakes of the poorest consumers."

The report also points out the importance of three variables – quantity, timing and reach – that play a critical role in designing and implementing any effective national strategy to ensure the availability of stable food commodities.

Booz & Company's approach to developing an appropriate food security strategy relies on maximising the efficiency of these three levers.

"The first element of food availability that policymakers must consider is ensuring that there is an ample amount of food within the country.

"Governments have two main sourcing options to supply enough food to their population: domestic production and imports. A third, small but emerging alternative is contract or offshore farming, which involves growing strategic reserves in another country and then importing the output."

"Second, timing – ensuring the availability of food is critical for a successful food programme. To ensure the availability of strategic commodities at the right time, policymakers have typically employed a blend of two alternatives: stockpiling and reducing lead times to speed [up] delivery. In times of crisis, policymakers can rely on these methods to meet any supply gaps."

Reach, the last of the above-mentioned levers, is the third key component in securing food availability.

"There is no point in maintaining wheat stocks if a country does not have the milling capacity and bakeries to transform the wheat into flour and the flour into bread. Policy can help ensure that the right distribution infrastructure is in place to deliver food to the population in a market-ready form," the report said.

"Reach involves an assessment of the supporting in-country supply chain logistics associated with each commodity. In order to ensure that food can be delivered smoothly and efficiently across an entire country, several pieces of a logistical value chain – from storage to production capacities to distribution – should be considered," it said.

The report also pointed out that affordability is an important tool in the entire programme.

"After availability, food affordability is the second of the four important considerations in a food security policy," the report said.

"Countries can employ a wide range of tools to help ensure that strategic commodities and food products remain affordable for all segments of society. The application of these tools and their associated costs are dependent on the country's broader macroeconomic policies."

Targeted price controls and subsidies help ensure food security but it is equally important that such programmes have clear objectives if the purpose is to be served.

"Untargeted subsidy programme without clear set objectives have proven to result in the highest levels of waste and leakage to those who are not in need," it said, adding, "there are three considerations in designing targeted programmes. Targeting – determine and define groups to be targeted by subsidies by taking into account poverty levels and which groups are socially vulnerable.

"Form – design the subsidy in a way that achieves the subsidy objectives. In the past, some subsidies have not been properly aligned with the objectives. For example, programmes that subsidise the entire supply chain often result in leakage and excessive waste. A better solution would be to subsidise the final product.

"Effectiveness – a strong monitoring and control programme needs to be established to ensure the effectiveness of the subsidy programme. The main objective is to ensure the subsidised product reaches the intended users, minimising leakage. Regular market dynamics should ideally set prices, while governments liberalise existing laws that have historically distorted these markets. Countries should resort to price controls only in extreme situations, such as crises or food shortages, and then only in a targeted approach," said the report.

"Mena governments can consider implementing targeted welfare programmes. In addition, they can consider establishing subsidies for certain healthy foods to increase the likelihood that their citizens will buy goods that make up a balanced and nutritious diet," the report said.

 

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