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Rising world food prices may soon hit Africa hard, but could be a future boon

The World Bank warned Tuesday that global food prices are reaching 'dangerous' levels. Africa is bracing for short-term trouble, but sustained high prices could spark agribusiness investment across the continent.

By Scott BaldaufStaff writer / February 16, 2011

Damaged rice is seen in a paddy field destroyed by flood- waters near a village in Manmunai West in Batticaloa district, about 199 miles east of Colombo, Sri Lanka, on Jan. 26. The floods inundated rice paddies, and according to the UN Food and Agriculture Organization, at least 15.5 percent of the main annual rice harvest could be lost.

Andrew Caballero-Reynolds/Reuters

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Johannesburg, South Africa

Global food prices reached a historic high last month, a fact that may cause even the most comfortable of Americans to cinch in their belts and cut back on spending.

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But what about the world's poor?

"Global food prices are rising to dangerous levels and threaten tens of millions of poor people around the world," World Bank Group President Robert Zoellick said Tuesday as he announced the bank's findings that about 44 million people in developing countries have been pushed into poverty since last June because of rising food prices.

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Here in Africa, where many people spend as much as 60 to 80 percent of their income on food, higher food prices don’t mean cutting costs. They mean spending the same amount for less food. In a word: hunger. But that's the short term.

In the longer term, a sustained global trend of rising food prices – caused in part by growing demand from China and in part by crop failures in Russia, Pakistan, Australia, and Sri Lanka – may have generated more investment in the poor but agriculturally rich nations of Africa, spurring on better food production and better food security for both Africa and the West.

“Over the long term, it’s going to be a period of high prices,” says Yvonne Mhango, an economist for the Renaissance Capital economic forecasting firm in Johannesburg, South Africa. “With the growth of the middle class in China, and growing consumption, that trend is going to encourage investment in food production, especially in Africa, which is more sparsely populated and with access to water sources.”

In theory, more investment in African agriculture is a good thing, because it creates jobs and increases the amount of food available in the global market, thereby lowering prices. But there are good land deals that ensure a portion of the food grown in a country remains in that country, and there are bad deals that don’t, says Ms. Mhango.

“Whether or not [new agribusiness investment] benefits Africa depends on leadership and the deals that are struck between countries and the investors,” says Mhango.

Short-term challenges

For the short term, however, higher food prices are likely to mean suffering for the world’s poor.

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