African farmers reap little benefit from oil price drop

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NAIROBI: 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. “If it’s true fuel prices are falling, it is possible these traders will increase what they’re paying us,” said 73-year-old Ugandan Gladys Kavuma, who has been farming two acres of coffee in Buloba, 15 km west of Kampala, for four decades. “But I doubt prices will ever improve.

They will simply come up with another reason to keep prices low,” she said, with a resigned shrug. A typical Ugandan smallholder who has brought up five children on the back of her meagre coffee earnings, Kavuma’s plight is replicated across sub-Saharan Africa, which relies on small farmers for 80 per cent 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 Jack Kneppers, a Dutch florist who employs 500 people at his Maridadi farm in Naivasha, northwest of Nairobi, Kenya.

Dramatic decline “The price of fuel has dropped by a few shillings and this has very little if any effect on our cost of production.” In countries such as Zambia, Africa’s number two copper producer, 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. In its first price adjustment since April last year, Zambia dropped pump prices by 2.5 per cent at the end of November based on fuel shipments bought in August, when crude was only just beginning its slump. The kwacha weakened 8 per cent, eroding much of the impact of the oil price decline. “The drop in global oil prices has not been felt in Zambia. The reduction in prices has been negligible and means nothing to the farmers,” said 62-year-old Request Muntanga, who owns a 500-hectare maize farm south of Lusaka.