Low oil prices bringing little benefits to African farmers

 

coffee

Oil prices slump not giving African farmers a break

 

From the coffee plantations of Uganda to the maize fields of Zambia, the collapse in world oil prices has so far brought few benefits for African farmers, with stubbornly high pump prices and voracious middle-men maintaining a squeeze on margins.
Only in South Africa, the continent’s most sophisticated economy and one of its top agricultural producers, have fuel prices – tightly regulated by the government – come down enough to make a difference.

Elsewhere, many smallholders are unaware of the near-halving of crude oil prices on world markets since July, and even the better informed doubt any savings will filter through the web of agents and brokers that dominates much of African farming.

Oil prices have been falling since June 2014 when a barrel of Brent fetched $107.48 and WTI $105.00, but it is now selling at $57.11 and $49.37 respectively.

This is the lowest point prices have dropped since April 2009. On average, prices have been falling at least ten percent each month since June 2014. “If its true fuel prices are falling, it is possible these traders will increase what they’re paying us,” asserts Erias Nyanzi, a coffee farmer in Buloba, 15km west of Kampala.”But I doubt prices will ever improve.They will simply come up with another reason to keep prices low,” he said, with a resigned shrug.

A typical Ugandan smallholder who has brought up five children on the back of his meagre coffee earnings, Nyanzi’s plight is replicated across sub-Saharan Africa, which relies on small farmers for 80% of its food.

In essence, weak government regulation means fuel importers and distributors can raise pump prices as crude oil rises, but drag their feet when it drops.

“We have heard and read that the cost of oil has dropped globally but unfortunately we are yet to feel the effects,” said Moses Sahabu Gateja, the Senior Business Advisor Techno Serve-Uganda. The drop in global oil prices has not been felt in Uganda .

dairy

Dairy farmers still face high transport costs as they fetch their products to urban markets

 

The reduction in prices has been extremely negligible and means nothing to the dairy farming community. Since most of the cooperatives are in the countryside, they bear the burden of the high transport costs that are as a result of the high fuel prices,” adds Gateja

Delayed drop

In countries such as Uganda, oil’s dramatic decline has been offset by currency weakness as foreign investors have retreated from frontier market debt and stocks due to concerns about global growth.

Furthermore, fuel imports are often paid for months in advance, meaning any benefit from the collapse in oil prices is delayed.

Only in South Africa, where fuel price changes filter through faster and the government is stricter about ensuring reductions are passed on, have farmers seen major savings.

Experts say a drop in oil should encourage governments to rather invest in Agriculture thereby guarding against oil prices shocks as well as providing a much needed boon to agro-based businesses.