THE ROAD TO THE MARKET Small scale farmers and cell phones in developing countries

1. 2nd Market Information Symposium“Marketing Information as a Leverage in National Food Security Planning and Regional Sustainable Trade”September 15th – 16th, 2011 at Silver Springs Hotel, Kampala THE ROAD TO THE MARKET Small scale farmers and cell phones in developing countries Bjorn Van Campenhout, IFPRI-Kampala

2. There IS growth in Africa!

4. Importance of ICT for development “The single most transformative technology for development” – Jeffrey Sachs <-> Africa has problems that need priority (eg. Low productivity of small scale farmers, basic health care, education,...)

5. Framework: technology threadmill • Idea: productivity increasing technology is no solution without a consumer market • Effect of inovations is dependent on price elasticity of demand: • Inelastisc: quantity demanded increases marginally with a given reduction in price • Elastisc: quantity demanded increases substantially with a given reduction in price • > determines effects of innovation on well-being of innovator

6. Framework: technology threadmill • Ag. Commodities, like eg. maize generaly have low price elasticity • Long run: supply increases and prices collapse • Innovating farmer is left worse off than before inovation (<-> consumers) • > condition: sufficiently integrated markets – arbitrage: information is key!

7. Use • In developed countries: social/status symbol • In developing countries: • First real broad based technological innovation • Sector itself has substantial effect on the (informal) economy: • Public phone services • Prepaid selling points, accessories shops,... • Battery charging services,... • Technology adapted to local circumstances (in terms of power supply, ease of use,...)

9. Adapted services • M-pesa • MIS • Health monitoring • Prepaid – very small amounts • Flexiebele systemes to reload • Mobiel internet (tethering)

10. Impact • Lots of anecdotic evidence in popular press (technology quarterly of economist magazine, BBC world,...) • Fishermen in Zanzibar • Taxi drivers in Dar es Salaam • Butchers and producers of various other perishable products • Etc...

11. Impact

12. Impact - macro • Roller and Waverman (AER 2001): impact of telecom infrastructure – only for fixed lines • Fush, Meschi and Waverman (2005): 10 percent increase in cell phone adoption-> 0.6 % increase in growth • Qiang (2009): 10 increase in cell phone adoption -> 0.8 % increase in GDP/capita BUT: direction of causality?

13. Fishermen in India (Jensens 2007 QJE)

14. Fishermen in India

15. The man in the middle • Middlemen are not liked – not productive, parasites, liars,... • BUT: very important function in economy! • Study in Tanzania that focusses on the negotiation process between farmers and middlemen

16. Semi-subsistance farmers in Tanzania • 1100 farmers interviewed, focus on maize marketing • Focus op onderhandelingspositie van de boer • Economic as well as behavioural characteristics: • Attitudes towards risk? • Impatience of farmer? • Knowledge of prices in other markets? • Outcome variable: • Difference between farm gate price and consumer price (arbitrage over space) • Difference between price at time of harvest and time of sales (arbitrage over time)

17. Maize sold?

18. Sold to who?

19. Price expectations

20. Sold to who? Estimate Std. Error t value Pr(>|t|)(Intercept) 25709 5617 4.577 6.14e-06 ***to_soldlocal market 1411 38997 0.036 0.97115to_soldlocal trader 38469 12476 3.083 0.00217 **to_soldexternal trader 25850 9842 2.626 0.00893 **to_soldexternal market 4828 16485 0.293 0.76974

21. Owns mobile phone Estimate Std. Error t value Pr(>|t|)(Intercept) 13920.8 5971.8 2.331 0.02020 *to_soldlocal market -12881.9 38112.6 -0.338 0.73553to_soldlocal trader 34318.2 12186.9 2.816 0.00508 **to_soldexternal trader 26198.9 9591.4 2.731 0.00656 **to_soldexternal market -210.2 16096.8 -0.013 0.98958own_phoneyes 43468.5 8803.6 4.938 1.12e-06 ***

22. Access to mobile phones Estimate Std. Error t value Pr(>|t|) (Intercept) 13519 13068 1.034 0.30148to_soldlocal market 2527 39101 0.065 0.94851to_soldlocal trader 38200 12514 3.053 0.00241 **to_soldexternal trader 25897 9878 2.622 0.00905 **to_soldexternal market 3622 16561 0.219 0.82700access_phoneyes 13843 13255 1.044 0.29688

23. Interactions Estimate Std. Error t value Pr(>|t|)(Intercept) 22138 6342 3.491 0.000531 ***to_soldlocal market -8338 59153 -0.141 0.887964to_soldlocal trader 18825 14908 1.263 0.207377to_soldexternal trader 6996 11071 0.632 0.527805to_soldexternal market -21041 20107 -1.046 0.295943own_phoneyes 13166 12178 1.081 0.280233to_soldlocal market:own_phoneyes 9034 76896 0.117 0.906535to_soldlocal trader:own_phoneyes 50146 25393 1.975 0.048922 *to_soldexternal trader:own_phoneyes 72048 21477 3.355 0.000864 ***to_soldexternal market:own_phoneyes 62886 32998 1.906 0.057339 .

24. Conclusion/discussion Should policy makers encourage marketing cooperatives and empower farmers to organise trade themselves? Or does private price information encourages trade by providing a “first mover advantage” in a competitive market?