GLOBAL: Millions wasted on shipping food aid

Photo: Chuck Simmins/Flickr
Aid has many hidden costs

JOHANNESBURG, 13 July 2010 (IRIN) – US taxpayers spend about US$140 million every year on non-emergency food aid in Africa, and roughly the same amount to ship food aid to global destinations on US vessels; money that could have been used to feed more people says a new study by researchers at Cornell University in the US.

The US Agency for International Development (USAID) has accounted for more than half of the world’s food aid every year for decades, but has been “the last and slowest donor to reform its food aid policies”, noted Christopher Barrett, a leading food aid expert, and his colleagues, Elizabeth Bageant and Erin Lentz.

Their study, Food Aid and Agricultural Cargo Preference, has come up with the numbers to back a long-standing call for reforms, and goes a step further in showing that the policy designed to “nurture” or subsidise the US shipping industry “under the guise of humanitarian assistance” is not doing either effectively.

Most donors have moved towards cash transfers or vouchers to buy food, instead of providing food as aid, but the paper points out that most countries only had agribusiness and some NGO interests to contend with while reforming their food aid policy.

Reforms in the US have faced much tougher opposition from “a uniquely effective lobby”, referred to as the “iron triangle”, comprising agribusiness, the shipping sector and some NGOs.

Barrett and Daniel Maxwell, an associate professor at Tufts University, Boston, in the US, who wrote at length about the “iron triangle” in their 2005 book, Food Aid After Fifty Years: Recasting Its Role, estimated that it cost more than two dollars of US taxpayers’ money to deliver one dollar’s worth of food procured as in-kind aid.

''If our objective is to generate US jobs, why do so through a humanitarian food aid programme, rather than focusing on generating jobs directly''

Little known shipping subsidy

Little has been written about the costs and effects of a policy called the Agricultural Cargo Preference (ACP), which affects the shipping sector of the “iron triangle”, and USAID, the world’s largest food aid programme.

The ACP requires that 75 percent of US food aid be shipped on privately owned, US registered vessels, even if they do not offer the most competitive rates. Some of these costs are reimbursed by the Department of Transportation’s Maritime Administration, but ultimately the US taxpayer foots the entire bill.

The Cornell researchers used data available for every USAID food aid shipment in 2006, when ACP cost US taxpayers $140 million, “The amount paid above the regular cost of ocean freight on the competitive market,” said Barrett.

ACP was calculated by taking into account the costs of transporting the food aid on competing foreign vessels plying the same waters, after deducting the ACP costs borne by US Department of Agriculture food aid programmes, and reimbursements.

The un-reimbursed cost of ACP to food aid agencies was almost the same as what USAID spent on non-emergency food aid to Africa, which benefited 1.2 million people and was “widely deemed important to preventing food emergencies”. USAID declined to comment on the findings of the study, saying the research “spoke for itself”.

About 20 years ago the US Government Accountability Office (GAO), an independent investigative arm of Congress, looked at the costs of shipping food aid in US-flag vessels rather than using cheaper foreign ships, and estimated that it cost $150 million each year. Another report in 1994 put the cost as high as $200 million a year.
Failing shipping as well

The ACP was put in place to achieve four objectives: ensure that US vessels remained seaworthy and prepared should a war break out; maintain skilled jobs for American seafarers; maintain the financial viability of US ships; protect US ocean commerce from foreign domination.

Barrett, Bageant and Lentz found that “contrary to its national security and ‘buy American’ objectives”, ACP used vessels which were not useful to the military, and most of the vessels used were ultimately owned by foreign corporations.

They recommended that the US administration revisit the ACP, and suggested separating security objectives from humanitarian ones, with direct support for the Maritime Security Program.

But shipping industry says

The US shipping industry, which produced its own study – Impacts on the US Economy of Shipping International Food Aid – around the same time as the Cornell researchers, argues that eliminating the ACP would shrink the US-flag merchant fleet by 15 percent to 30 percent, with the loss of between 16,500 and 33,000 jobs.

Barrett said the shipping industry’s study had used “very crude multipliers not developed for this application, and seem to use the total ocean freight costs, not the marginal cost of cargo preference, thereby assuming that every maritime job would disappear. That’s a highly questionable assumption that they then inflate, using highly questionable multipliers”.

The Cornell study’s calculations showed that US taxpayers were paying a subsidy of almost $100,000 every year per mariner on an ACP vessel shipping food aid. “That’s a pretty handsome subsidy,” he commented.

“One would hope there would be some economic multiplier. The question is whether that’s the best use of those funds, if our objective is to generate US jobs; and if the objective is to generate US jobs, why do so through a humanitarian food aid programme, rather than focusing on generating jobs directly?”

Copyright © IRIN 2010. All rights reserved.

KENYA: Wilbroda Wandera, “We won’t sleep hungry when I have 40 shillings”

KENYA: Wilbroda Wandera, “We won’t sleep hungry when I have 40 shillings”

Photo: Jane Some/IRIN
Wilbroda Wandera

KIBERA, 14 May 2010 (IRIN) – Widowed 16 years ago, Wilbroda Aoko Wandera, 48, has had to become creative with the little she has, at times spending just 40 shillings (US$0.50) to feed her family of 10. She has no steady job and sells spinach, plaits hair and washes clothes for a fee. She spoke to IRIN on 13 May:

“My husband had been sick for a long time, but his relatives chased me away with my children and demolished our house upcountry when he died, saying I had something to do with his death. Since then life has been one long struggle.

“My mother sent me bus fare when she learnt I had been chased away and I returned to Nairobi where we had been living before my husband died.

“I have tried many things to feed my family and to put the children into school; right now two boys are in secondary school.

“I have sold [donuts] and worked as a cleaner at the Catholic Church nearby. One time I got lucky when the local chief allowed me to build a kiosk near the road; I used the front part as a salon where I plaited people’s hair and lived in the back with my children. However, this was demolished in 2007 to pave way for the Kibera slum upgrading programme. Now I live near the river, where I have built a mud structure.

“We mostly live on one meal a day. This is hard, especially on the children. I have learnt to make meals for the whole family even when I have only 40 shillings [$0.50]. With this, I buy maize flour for 20 shillings, sugar for five, paraffin for 10, a lemon for two and water for three. This will make a [pot] of porridge and everybody can get a cup. That takes us to the next day.

“When I have 50 shillings, I buy sukuma wiki [kales] for 10 shillings, maize flour for 30, cooking oil for five and paraffin for five. With this, I cook ugali and the sukuma wiki and everyone will at least have a hot meal.

“On a good day, when I make at least 100 shillings, the diet is better; I buy maize flour for 45, omena [sardines] for 20, tomatoes for 10, paraffin for 10 and cooking oil for 10. This is enough for two meals for the whole family. But the days I make 100 are rare. Besides, when I make more than 100, I put away some money for school fees and rent.

“I feel blessed that I have the support of other widows. We formed a self-help group in 2007. We are there for each other, we skip meals together, we help each other in merry-go-round donations of 20 shillings a week and struggle to bring up our children. Life in Kibera is hard but it is 10 times harder for a widow with children.”

Source: IRIN News

AFRICA: Plugging the technology gap with help from India

Photo: LCD International
Harnessing the power of technology

DAR-ES-SALAAM, 14 May 2010 (IRIN) – Investment in information technology can help Africa to improve governance, overcome poverty and deal with critical infrastructure gaps, taking India as an example, the co-chair of the World Economic Forum on Africa 2010 (WEF) said.

“There is no need to reinvent the wheel,” Ajai Chowdhry, also chairman and chief executive officer of HCL Infosystems in India, told IRIN on the sidelines of a recent WEF conference in Tanzania. “India and Africa have similar problems so we can apply similar solutions. It’s all been tried and tested in India, and the software is readily available to transfer knowledge and experience.”

While mobile phone usage in Africa has ballooned – by almost 550 percent between 2003 and 2008, according to the UN Conference on Trade and Development (UNCTAD) – and Kenya, for example, has led the way with the M-Pesa payment system and Ushahidi information-sharing platform, the continent has been lagging behind other developing regions in internet use and broadband connectivity, according to UNCTAD. Financing fast broadband networks will require cooperation between national governments, donors and the private sector.

One example is Rwanda, which is working with donors, UN bodies and private companies to realize its “Vision 2020” with ICT at its heart. Ten years ago, only one school had a computer; by 2006 more than half of primary and secondary schools were equipped with computers, and over 2,000 teachers had been trained in ICT, according to a World Bank report.

Enabling computer use, especially in far-flung areas, requires creative financing, says Chowdhry; the government of India provided a subsidy of $100 per computer from donor funding, thereby “taking computers to the village”.

Catalyst for change

In the early 1990s, India’s government had only US$1 billion left in the kitty. The International Monetary Fund proposed deregulation and opening up the economy. On the plus side the country enjoyed a strong financial system, which took banking to the unbanked, building urban infrastructure in rural areas.

In addition, knowledge centres were created in the villages, focusing on health, agriculture and education, thereby creating inclusive growth and discouraging rural-urban migration. While there have been a few hiccups, notably the global financial crisis of 2008-2009, the country is on target for 10 percent growth in 2011, a rate that should eradicate absolute poverty.

At the same time, the government was focusing on building effective institutions, and improving transparency by harnessing the power of technology. The result is every person’s fundamental right to information, whereby every citizen can question every facet of government. After initial, strong opposition, officialdom and government ministers alike are adapting to the scrutiny.

“Information is key to overcoming poverty,” Chowdhry said. “Effective governance means electronic governance in India; our goal is internet access for all, we should make it as much a right as we now have the right to education for all.”

Investing in the future

Broadband penetration is only 3 percent in Africa but recent investment in undersea cables should boost that, bringing easier access to information on agriculture, healthcare, education and banking. The challenge of increasing access in homes and businesses will require massive investment, says Chowdhry, but the $5 billion low-interest rate credit line extended by the Indian government through the Export-Import Bank of India (EXIM) to Africa has hardly been tapped in the past 18 months.

Only large projects need apply, preferably for developing ICT in schools and universities to boost capacity, as tertiary education in particular is vital for the continent’s development and stemming the brain drain. Given that almost half the continent’s population is younger than 15, providing education and entrepreneurial opportunities is imperative.

“E-technology entrepreneurship will make as big a difference in Africa as in India,” he told IRIN. All the investment coming from India was private, he added, and private-public partnerships were a key element to investment that India could bring to the continent. India already offers more scholarships to African students than any other country while the EXIM Bank runs several policy initiatives, including the Pan-African E-Network, India-Africa Partnership Conclaves and the annual India-Africa Summit, to encourage closer ties.

At this year’s summit held in New Delhi in March, $9 billion-worth of projects were under discussion, focusing on infrastructure development and IT.

Source: IRIN News