Improving the Impact of Market Reform on Agricultural Productivity in Africa: How Institutional Design Makes a Difference

research support to result in massive losses in human and physical capital that requires painful and
expensive new investments to rebuild (Laker-Ojok 1996). And despite claims that fertilizer/seed
technologies are on the shelf that can double or triple farm yields in Africa, there remains a dearth
of research on the profitability and riskiness of those technologies under farmers’ actual control,
and under current input and output market conditions or those foreseeable under alternative
sustainable input and output marketing arrangements.

The boundaries between production and marketing activities are becoming increasingly blurred as
the agricultural product specification becomes more complex. For example, the rising importance
of biotechnology will create a variety of new functions in the vertical system for applying new
scientific discoveries toward practical use in the food and fiber system and working out
intellectual property rights for the product (Zilberman, Yarkin, and Heiman 1997). An
increasingly important role of the interrelated research, marketing, and legal systems is to work
out the details of use and exchange of information and knowledge.

5.3 Modify the State Marketing Boards’ Pricing Policies and Change External Trade
Policies to Promote Regional Trade

Pan-territorial and pan-seasonal prices, still continued in some African countries, clearly depress
private investment in transport and storage that could over the long-run play an important role in
improving market integration and mitigating food price fluctuations. And several states continue
to ban private import and/or export of grain, which impedes the potential to stabilize food
supplies and prices through intra regional trade. But beyond the elimination of obvious regulatory
barriers to trade, cross-border trade will be enhanced by the state taking an active role in
developing the marketing institutions that reduce risks and transaction costs of contracting,
including the development of commodity exchanges to generate market information and allow for
contingent contracting and reputable fora for resolving contract disputes. Infrastructural
development between countries would also facilitate incentives for regional trade, thereby
reducing the need for large national grain stockpiles that impose additional costs on the marketing
system.

5.4 Invest More to Nurture the Political, Legal and Economic Foundations of Private
Marketing Systems

A well-functioning legal and political framework for market activity reduces the risks and
transaction costs of private trade. Strengthened mechanisms for specifying and enforcing
contracts, raising the costs of contract noncompliance, and more pluralistic procedures for
developing the rules governing market activity are important adjuncts to developing reliable
markets, and inherently involve strengthening the regulatory abilities of the state rather than
“getting the state out of market regulation.” In general, this means a reorientation of the state
from “control” activities to “facilitation” activities designed to reduce farmers’ and traders’ costs
of transacting across inputs, credit, and commodities. Such an approach includes investing more
public resources to improve public market information and related market extension capabilities.

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