Sunday, August 22, 2010

Market metrics ... livestock prices down 50% in Madagascar

Dear Colleagues

I started a response some weeks back ... the news in the IRIN article is no longer "new news" but the issue remains the same. According to the IRIN article, livestock prices in Madagascar were down 50%. The article almost explains why ... but stops short of connecting all the critical dots! In fact the article merely provides one datapoint!

This is the URL of the article. The text of the article is copied at the end of this post.

I have done considerable work with the private sector in Madagascar. The country ought to be a wealthy ... but it is not. Politics and government are mainly to blame ... they have been dysfunctional for decades.

Though my work in Madagascar was in a different sector and different part of the country ... I have done work with livestock and pastoral communities in other parts of the world, notably in the Horn of Africa. The price of livestock tells you a lot about the state of the economy and the state of the weather. As the IRIN article observes, livestock are not only a component of the agricultural economy, they also represent a store of wealth.
MADAGASCAR: A financial crisis on the hoof ... Zebu prices are plummeting

AMBOHITSAHATAZA, 1 June 2010 (IRIN) - Far from the world's financial centres, isolated from sub-prime mortgages, collateralized debt obligations and collapsing investment banks, Madagascar is going through a financial crisis of its own, and stock prices are plummeting.

As in most of rural Africa, wealth is measured in livestock. Joseph Rabemamamtsoa, leader of Ambohitsahataza village in Amphany district in the southwest of the island, told IRIN that the value of his zebu - sturdy cattle with long horns and a fatty hump on their shoulders - had halved. "Normally, we could get up to 300,000 ariary [US$140] for a good animal; now we are lucky to get 150,000."

Not only has the value of individual animals dropped in the past few years, the average size of herds has also dwindled. "In a good period one rich family will have between 20 and 40 animals, now they have only 10," Rabemamamtsoa said. Poorer families - most of the roughly 1,700 villagers - now had none.

The Malagasy government's Early Warning System (SAP) noted that the average price of a zebu in southern Madagascar had dropped from A221,000 ($103) in March 2008 to A110,000 ($51) in March 2010, which was in line with the 50 percent devaluation experienced in Rabemamamtsoa's community.

Breaking the bank

In local terms this is a financial meltdown: people in the south of Madagascar depend on their zebu for more than just meat, milk and draught power to pull carts and plough the fields; their herd of zebu are their life's savings, insurance, their standing in the community. "It is what we value most," Rabemamamtsoa said.

Lundi Perole, a civil engineer and head of Hiara Hampandroso (Develop Together), a local NGO that helps communities build resilience in the harsh dry conditions of the region, said a large herd of zebu meant social prestige and importance.

They prefer not having water to drink for themselves than having their zebu without water. He has helped build water harvesters with the help of UN World Food Programme (WFP) Food-for-Work projects, in which a community works on projects geared to restoring self-sufficiency in exchange for food aid.

On his desk there is a huge pile of envelopes with requests from communities. "Most are for water catchment basins for cattle," he said. "The decision of what to build is taken by the community. We are in the south, [where] water is the big problem. They prefer not having water to drink for themselves than having their zebu without water."

The importance that Malagasy attach to their zebu cannot be underestimated: "It is their life and their death," Perole commented. Cultural practice dictates that a deceased person's zebu be slaughtered and the skulls set to decorate the tomb - the more skulls on a tomb, the greater the wealth and status - although outsiders often consider the practice destructive.

A buyers market

Drought lay at the heart of this local recession, and the consecutive years of scant rain had pushed families beyond their ability to cope, Perole said.

By the end of April 2010 the government projected that a record 65 communes in the south would face hunger in the coming months - surpassing the 45 of the previous year – and some 866,000 Malagasy would probably need assistance by June 2010.

"Food prices are increasing beyond the purchasing power of the population, reducing their access to food," said Krystyna Bednarska, head of the WFP in Madagascar.

Official figures indicate a rising cost of living in southern Madagascar: the price of one kapoaka (a small tin can) of maize, the staple food, rose from A130 ($0.06) in July 2009 to A230 ($0.11) by February 2010 in some areas.

Alexandre Huynh, Emergency and Rehabilitation Coordinator at the UN Food and Agriculture Organization (FAO), said poor harvests meant families were forced to sell off assets - like their prized zebu - to make ends meet.

"Zebu provide a solution to purchase food during lean seasons and food shortages, but ... as the sale becomes critical to the family, and as numerous households sell their animals at the same time, prices [fall] extremely low," he said.

"When the crisis has passed, [people] try to repurchase animals, but at the normal, and higher, market price, which directly contributes to their increasing destitution and current heavy de-capitalization."

The loss of local wealth is keenly felt. Rabemamamtsoa said the zebu were being bought and trucked to cities, like Tulear on the southwest coast, "But even up to Antananarivo [the capital, in the north]."
One of the perennial questions is why there has been little or no significant investment in the essential infrastructure of the country in decades ... what has been done to invest in water supply so that drought is less of a problem. The problem of water has been an issues for a very long time ... since the 19th century but there was a time when "development" included making big investments in water infrastructure and doing it well. For the past fifty years hardly any water infrastructure has been done to benefit local people, though some major projects have gone forward where rich elites have been major beneficiaries ... the Lesotho Highlands Water Project in Southern Africa and the Three Gorges Project in China come to mind and there are others.

With good development leadership Madagascar could be a reasonably wealthy country ... but this leadership is not coming either from the government nor from the international experts in the multilateral organizations. Madagascar is a big place with all sorts of potential! What a waste!

Peter Burgess

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