Friday, March 7, 2014

Farmers have lost confidence in their government

Mid way into the 2013/14 groundnut buying season, the official government target of 40,000 tons appears as elusive today as it was at the start of the season last December.  You will recall that the season started in the midst of a huge confusion when the then Agribusiness Services and Producer Association (ASPA) announced a producer price and the start-up date of the season which did not sit well with Jammeh who ended up refusing to renew its Agreement with the association.

This move effectively barred ASPA from further involvement in a buying that was few days from starting thus sending the wrong message to the farming community, and thus putting additional pressure on the Gambian Groundnut Corporation that is tethering on bankruptcy as the sole actor this season.

Last year, private buyers were allowed to buy groundnuts only after GGC failed to cope which immediately resulted in higher prices to the farmers.  The private buyers were willing to pay more for the farmers' produce.  With the monopoly position given to the GGC again this year, there are indications that farmers have not been selling their produce, expecting that private buyers will be allowed in before the end of the season in few weeks time.

The withholding of their produce has resulted in a government press release advising farmers against the practice, and warning them that government will not be held responsible for the farmers' "self-inflicted predicament" should the end of season find them still with groundnuts in their custody.  Government sees the rational economic decision of the Gambian farmers as "hoarding" rather than farmers exercising their basic right to withhold their produce should they feel they are not being paid the right price.  As one observer noted recently, this government is trying to govern by press release.  We've seen the same when the Office of The President meddled in the foreign exchange market with daily issuance of press release to fix foreign exchange rates which failed miserably, leaving the forex market is disarray to this day.

In addition to the withholding of groundnuts from the market, GGC is cash-strapped which has led to extensive credit buying.  In short, farmers have already surrender their nuts to the GGC without a penny being paid to them as yet because of the insolvency of the organization charged with the buying and marketing of Gambia's premier foreign exchange earner.

These factors have contributed to the current predicament facing the Gambian farmer who has been exploited by a government that claimed to have seized power illegally almost twenty years ago, in order to protect and promote the welfare of the rural population that Jammeh and his minions claimed were being exploited by the previous government.  The prices on offer by the government monopoly is what is driving the farmers to the local markets and, perhaps, across the border to Senegal where they can be guaranteed cash for their produce.  There is. however, little evidence that groundnuts are moving across the border.

Our visits to selected buying points have revealed extensive cash shortage in secco after secco.  So even if farmers were to selling all of the nuts in their possession, the GGC will be unable to buy them without resorting to credit buying.

The Gambian farmer seems to be exercising one of its options by releasing some of its produce in the local markets or "lummos" for local consumption.  This retail option will be the most attractive closer to the end of the season and as it becomes evident that GGC can no longer access cash fro its bankers.  Why deliver to GGC on credit when the produce can be sold retail and locally over time to provide needed cash to the farmer to maintain the family.  In fact, there are seccos managers who will refuse to accept groundnuts from farmers even on credit.  They are advising framers to return when cash is available, signalling that secco clerks do not have confidence in the whole groundnut marketing arrangement this year.

Based on our findings thus far, and given all the pre-season marketing arrangements, the projected 40,000 tons target of the government is unlikely to be met.  The total crop may not exceed 30,000 tons which the amount purchased last year when the farmer enjoyed a higher price than the price on offer this year.

Regardless of the final outcome of the buying season, the economy will continue to perform poorly as a result of the under-performance of the two biggest foreign exchange earning sectors - agriculture and tourism.   With less foreign exchange, Gambia's fiscal and current account deficit will continue to widen. Restoring macroeconomic stability will not take place in an under-performing environment of the agriculture sector.