Ex-ante Evaluation of the Impact of a Structural Change in Fertilizer Procurement Method in Sub-Saharan Africa

Abstract

In June 2006, the African Heads of State made a declaration to support increase in use of fertilizers in the farming systems of sub-Saharan Africa from the present average of about 8 kg ha–1 to about 50 kg ha–1. One route to attain this goal is to engender regional joint fertilizer procurement to reduce farm gate price and increase fertilizer demand and use. A review of fertilizer use in Africa has shown that structural changes in fertilizer procurement can reduce farm gate price by 11–18%. Using an average of these figures (15%), this study compares the effect of structural changes in fertilizer market (reducing farm gate price by 15%) on total fertilizer demand, total farm income, and additional farm income with the base situation (using FAO data) under three own fertilizer price elasticity of demand scenarios (low –0.38; medium –1.43; and high –2.24) for 11 sub-Saharan Africa countries. Data were analyzed using Microsoft Excel. Result shows that compared with the base level, structural change in fertilizer procurement arrangement (reducing farm gate price by 15%) led to 6% additional farm income (US $125 million) under low elasticity; 22% (US $472 million) under medium elasticity; and 34% (US $730 million) under high elasticity. Switching from one scenario to another indicates the potential to further increase farm income from 20 to 32%. The chapter concludes with the support for structural interventions that reduce farm gate price of fertilizers and other inputs. Such interventions increase farmer productivity, total production, and total farm income and lead to improved livelihoods.