University of the Witwatersrand Johannesburg

Faculty of Commerce Law and Management

Corporate Strategy and Industrial Development

The Impacts of Program and Project Food Aid on Third World Economies.

By Gillian Pedzisai Chigumira

334479
This research paper is submitted for the degree of Honors in Development Theory and Policy
October 2012

Declaration
I declare this research report is my unaided work. It is submitted in partial fulfillment of the
requirement of the degree of Honours in Development Theory and Policy, Faculty of Commerce
Law and Management at the University of the Witwatersrand, Johannesburg. It has never been
submitted before for any degree or examination in any other University. This research report is
8300 words excluding the references and all cover pages.

Gillian Pedzisai Chigumira

Student Number: 334479
0ctober 2012

Acknowledgements
My heartfelt thanks, appreciation and gratitude go to the following:
All members of the Corporate Strategy Industrial Development Unit.

Table of Contents
Chapter 1 ....................................................................................................................................................... 7
Research Proposal ......................................................................................................................................... 7
Chapter Two................................................................................................................................................ 13
Misconceptions and debates against Food Aid in Third World Countries-Evidence and Arguments ........ 14
Chapter Three.............................................................................................................................................. 19
Evidence and Arguments in support of Food Aid to Third World Countries. ........................................... 19
Chapter Four ............................................................................................................................................... 23
Should Third World Countries continue to receive Food Aid? .................................................................. 23
Chapter Five ................................................................................................................................................ 26
How best can we make Food Aid a useful Developmental Tool? .............................................................. 26

List of Acronyms
DAC

Development Assistance Committee

FFW

Food For Work

EEC

European Economic Community

GFAC

Global Food Aid Compact

OECD

Organization for Economic Co-operation and Development

OPEC

Organization of the Petroleum Exporting Countries

PL480

Public Law 480

USDA

United States Department of Agriculture

USAID

United States Agency for International Development

WPF

World Food Program

WVI

World Vision International

List of figures
Figure 1: Donor Distribution in Recent Decades ....................................................................................... 13
Figure 2: Donor Distribution in Recent Decades ....................................................................................... 13

Chapter 1
Research Proposal
Introduction - Over the last six decades, Food Aid has been used as part of development
assistance to the Third World. The Cartel of Good Intentions has certainly served a virtuous
purpose when it comes to Humanitarian concerns. One can think of the vulnerable globally, who
have benefited from Food Aid during drought and natural disasters.
questions have emerged from

Despite the above,

Scholars, economists, development practitioners and policy

makers, whether the invisible hand of program and project Food Aid, has influenced positively
or negatively the economies of its recipients. In 2010 the World Food Program reported that 5, 7
million metric ton of Food Aid was distributed globally, a drastic decline from previous years. In
addition it was discovered that Countries in sub-Saharan Africa suffered the largest decline in
food aid, receiving12 percent or 450,000 mt less than in 2009 (WFP,2011:3). Although a
myriad of reasons can account for such declines, the widely perceived disincentive effects of
Food Aid may play a role. It is the objective of this research report, to explore and examine
whether Food Aid, is still an essential development mechanism. To accomplish this, this paper
will be divided into four main sections: chapter two will provide deliberations on the disincentive
effects of Food Aid, the third will concentrate on arguments in support of Food Aid, the fourth
section will attempt to answer whether Third World countries should continue receiving Food
Aid and the last chapter will provide suggestions of making Food Aid a useful developmental
tool.
Some of the contestations of Food Aid which will be discussed include: effects of dampened
prices, labor disincentives, production disincentives at the micro and macro level, dependency
issues as well as donor strategies to create markets. Arguments in support will explore the
ability of Food Aid to ease foreign exchange constraints, ameliorate balance of payments,
improve agricultural productions and provide essential skills such as practicing crop
diversification. Several of the suggestions will embrace: efficient timing of aid, triangular
provision, correct pricing and improving recipient states policies on Food Aid.

Rationale - Since the Second World War, Food Aid has been transferred from more
economically developed countries to the Third World. In recent decades, Food Aid to Third
7

World countries has drastically reduced. Such declines can be detrimental for the development
objectives of countless poor states. Owing to the fact that, there have been moves worldwide, to
embrace global initiatives for development such as the Millennium Development Goals, it is
hence important for this research is to provide an assessment of Food Aid and explore how it is a
useful development mechanism as well as how to improve its effectiveness.
Research Question the research question for this paper was: Global Food Aid to Third World
Countries maybe declining due to perceived disincentive effects of Food Aid is Food Aid still a
necessary developmental instrument for poor countries?
Hypothesis- the hypothesis for this paper was that: program and project Food Aid is a useful
developmental tool.
Independent Variables- the independent variables in this research were program and project
Food Aid.
Dependent Variables-the dependant variables in this research were the impacts of program and
project Food Aid on the micro and macro economies of Third World countries i.e. agricultural
production capacities, availability of labor and liquidity constraints
Literature Review- The concept of Food Aid has different connotations for different individuals.
In most circumstances, the purpose and form of Food Aid is regarded as homogeneous.
According to Owokuse (2006), the usual perception, is for humanitarian purposes, either in
natural disasters or in conflict situations. The reality is that Food Aid serves more purposes either
than its humanitarian form. Other major purposes or rather categories are for: program and
project requirements. Barrett and Maxwell (2005) define food aid as, the international sourcing
of concessional resources in the form of, or for the provision of food.According to Barret and
Maxwell (2005), program Food Aid is foreign assistance in the form of food normally provided
by one government to the other as a loan , grant or concessional sale. Owokuse (2006), notes that
program aid is often monetized, that it is sold on the market for extra revenue, for the
government to use for any developmental purpose.
Project Food Aid on the other hand, is principally provided or given on a grant basis as support
for specific social and economic development projects (e.g., food-for-work programs (FFW), and
food for education programs) (Owokuse, 2006: 4). Project Food Aid can be given to a

multilateral development agency, recipient government, or to international and local nongovernmental organizations (NGOs) (Owokuse 2006).

The foundations of modern Food Aid began in the USA in 1954. The US congress in that year
under President Dwight Eisenhower passed the Agricultural Trade Development and Assistance
Act, often referred to as the Public Law 480(PL480) or Food for Peace. The PL480 became the
first law globally institutionalizing international Food Aid. The PL480 was divided into four
main sections Uvin (1992).The first section known as Title One presents concessional sales to
governments of low developed countries, for resale back in their local markets. The earnings or
rather counter funds, are to be used for agricultural development or in a manner thought best by
the United States Department of Agriculture (USDA). Title Two, often run by USAID-US
Agency For International Development, contributes aid in the form of food to the United
Nations World Food Program (WPF) and many US non-governmental organizations. Title Two
chiefly targets aid needed for humanitarian purposes. The third section of the PL480,Title Three
aims to meet the food security needs of poor countries. The last part Title Four farmer to farmer
aid links farmers in the Third World with farmers in the US for advice and technical assistance.
In the late 1960s, the European Economic Community (EEC) began to provide assistance to
other countries. The Directorate General of Development

of the Commission controlled

allocations. It can be observed that after the 1960s there was a proliferation of Food Aid as other
Organization for Economic Co-operation and Development (OECD) countries began providing
Food Aid. In the 1980s Organization of the Petroleum Exporting Countries (OPEC)- countries
along with China donated Food Aid too. In recent decades global Food Aid has declined.
Literature on Food Aid as written by Fitzpatrick and Storey (1989), Tschirley, Donovan and
Weber(1996), Abdulai,

Barret and Hoddinot (2005)

notes that Food Aid distributed for

emergency purposes is by large uncontroversial. The above authors all agree that when hunger or
starvation becomes a reality, due to disasters or conflict, such threats will always warrant people,
organizations and states to act, through providing Food Aid. Even all the members in the World
Trade Organization, Doha Work Program, Draft Ministerial Declaration, and Ministerial
Conference in 2005 acknowledge in a general consensus, that emergency Food Aid is essential,
and its provision should not be deterred by any state Clay (2006). Although Food Aid for
9

humanitarian purposes is an essential arena for study, especially with reference to nutrition and
health, this paper will not dwell too much on this aspect. It may be conversed were appropriate to
explain certain ideas or show some effect. This papers discussions will be more in line with the
economic and agricultural effects of Program and Project Food Aid on the macro and micro level
of Third World countries.
From the time when, T Schultz in the 1960s, conversed theoretically about the possibility of
Food Aid triggering disincentives, mostly towards the price mechanism, immense debates or
discussions in the literature over the years have focused much on its negative impact or sought to
discredit it. Isenman and Singer (1977) in Bezu and Holden (2008) have long since argued that
Food Aid is harmful because it depresses the price of food, hinders food production and diverts
government policies on agriculture. In other studies such as that by Lentz (2005), Food Aid has
been associated with creating labor disincentives. As people become comfortable getting food
they are noted to become lazy and refuse to work. Labor disincentives have been attributed to
Food For Work (FFW) programs as labor shifts away from agricultural production. It is asserted
by Bezu and Holden (2008) that not enough empirical research has been established over the
years to discredit Food Aid on the economic and agricultural impact it has in developing
countries. Bezu and Holden (2008: 542) write that Most studies and reports that claim that there
are disincentive effects of food aid are based on anecdotal evidences. Vast Studies done by
Lavy (1990) and Abdulai et al. (2005) in Sub Saharan Africa have shown that Food Aid did not
have disincentive effects especially on food production. Lentz (2003) in Barret, Abdulai and
Hoddinot (2005:5) is described as having assessed annotated bibliographies encompassing
papers on the dependency and disincentive of Food Aid published in the last 25 years. Barret,
Abdulai and Hoddinot (2005) address that Lentz findings note a lot of work and publications
have been based on anecdotal evidences.

Looking at some the literature on Food Aid, decisions or certain perspectives have been based on
theoretical and anecdotal considerations. It is this papers objective, to unpack some of the major
debates over the years on disincentives whilst providing as much evidence as possible. In order
to assess whether Third World Countries should continue to receive Food Aid, understanding
these debates in detail is significant. Providing an in-depth analysis of long held debates and
10

ideologies relating to the disadvantages of Food Aid and bringing to light evidence and research
supporting Food Aid in the current global era is one aspect which needs to be continuously
written upon for future policy making in both donor and recipient countries.

The literature on Food Aid, this paper believes has not been acknowledged fully, that the
percentage of Food Aid flowing to Third World Countries is decreasing globally especially that
for Program and Project Food Aid. This could have detrimental effects on development. The fact
that worldwide development global initiatives are being embraced to meet the Third World
countries, the literature on Food Aid should try as much as it can to focus on the truth and
evidence of disincentives, the positive aspects of Food Aid and by large the how best Food Aid
can be made a useful developmental tool.
This paper made use of qualitative and quantitative methods. Qualitatively it used a small
number (small n) of cases. Using a small number of cases allowed for the measurement of
causality, George and Bennett, (2005). The cases selected were states and regions that received
program or project Food Aid. Most of the cases or evidence used was drawn from Third World
countries such as Ethiopia, Kenya, Mozambique and India. Cases were chosen because they were
instrumental (give an insight into important issues affecting the global village).

The methodology which was employed by this paper sought to establish a causal relationship
between program (Food Aid in its monetary form) and project (Food Aid in the form of projects
such as Food For Work or Cash For Work) Food Aid, and its impact on government policies
towards agriculture, incentives upon farmers to produce, dependency upon aid, food prices,
liquidity constraints, balance of payments constraints etc. Qualitative methods were utilized
because they allowed for the simple understanding of concepts and ideas, thorough engagement
with the interested phenomena.
This paper made use of Document analysis was utilized. Secondary, official documents, media
reports, scholarly articles, journals and books were used. Data was collected from existing
knowledge on all cases, no primary information was collected.
Limitations; Due to time constraints and finance, interviews with donor states and communities
which received program and project Food Aid could not be carried out, to corroborate
11

information. Further limitations of evaluations of phenomena such as the impacts of Food Aid
will be discussed in chapter four.
Contributions - This research is important, because as noted before, Food Aid to Third World
countries is declining. If the decline has anything to do with misconceptions of Food Aid, poor
countries may suffer in the long run. A few years ago misconceptions of ante retroviral drugs
saw many innocent people suffer. Fallacies about Food Aid may lead us in the same direction.
Research needs to constantly engage with the path food aid is taking in order to make inferences
for future policies and guidelines. The targeted audience for this paper is not only academics but
potentially for donor states and organizations such as USAID / FAO/CARE/WVI/ and
government. This paper hopes to contribute to the truth about program and project Food Aid.

12

Figure 1: Donor Distribution in Recent Decades

Figure 2: Donor Distribution in Recent Decades

13

Chapter Two
Misconceptions and debates against Food Aid in Third World Countries-Evidence and
Arguments
Price Disincentive - Fitzpatrick and Storey (1989), write that one of the most unrelenting
features of non emergency Food Aid lies in its ability to act as impediment towards local
production in the country that it is distributed. Fitzpatrick and Storey (1989) articulate that
economists, development practitioners and economists often worry, Food Aid may exacerbate
the very problem or quandary that it meant to deter. The first disincentive effect often blamed
upon Food Aid is the price disincentive effect. In theory, food markets work more or less the
same ways as do traditional market models. Hypothetically if one disregards any exports or
imports or Food Aid, an abrupt bumper harvest can possibly result in a surplus, except if
consumers/ the general population are somehow influenced to purchase more food. Again,
theoretically for the consumer to purchase more food, farmers may have to lower down their
prices to get rid of surplus. They may also have to accept a market price probably lower than that
before the harvest or consumers will have to accept the price of food at whatever cost not lower
than the market price.
Individual production disincentive- Similarly, the result or consequence of Food Aid mirrors that
of a bumper harvest. Reasoning in simple economic theory would suggest that if a communitys
demand is unaltered at the prevailing price, and then the additional food supply will only be
consumed if the average price is lowered Fitzpatrick and Storey (1989:242). In a market
economy where food aid is present, the above can possibly have effects on famers productivity
levels. In this sense, the typical link between price and production may influence farmers to
decrease produce they grow and put up for sale. Economists and scholars alike would, term the
above the price disincentive effect of Food Aid. Such a disincentive, Fitzpatrick and Storey
(1989) note, will lead to the reduction of local production because of depressed market prices
and perhaps too reduced self sufficiency. In addition, producers have been known to invest
[little] in improved technologies or for marketing intermediaries to invest in storage and
transport capacity due to the price disincentive effect (Barret, Abdulai and Hoddinot; 2005:4).
Lind and Jalleta (2005) in FAO (2006) observed that most farmers encountered falling grain
prices during allocations of food aid in Delanta Dawunt in Ethiopia. Even in Southern Somalia,
14

2000 dampened prices were observed on sorghum, (Barret and Maxwell 2005). In both cases the
FAO (2006) asserts that timing of aid was the main factor behind the disincentives as it came
near harvest times, in a number of cases the FAO has reported that Food Aid is in itself not a
necessary evil but other human errors.

The founder for price disincentives effects of Food Aid was Schultz in the early 1960s. Some of
his major original propositions and assumptions were that: i. the recipient state is based in a close
market economy and prices are determined domestically without any influence from either
international trade or local government, ii the Food Aid basket is identical to the domestically
produced food basket, iii food aid is non targeted to the most food insecure and poor segment of
the population and Food aid is also assumed to be additional to regular food imports (i.e., no
commercial food import displacement) (Owokuse 2006:19 ). As Owokuse (2006) states, if all the
above assumptions hold, the production and price disincentive would certainly be expected.
However, Owokuse (2006) articulates that the sum of Schultz propositions are unrealistic,
making his arguments on disincentives frail. He notes that in the current global era, it would be
unrealistic to assume closed economies for recipient states, for the reason that a good number of
Food Aid recipients partake in international trade and certainly experience in one form or the
other, government interventions in the food market. Mohapatra et al (1999) in Owokuse (2006)
found

Schultz propositions were unclear, in that net effect of food aid on the recipients

economy is analytically ambiguous because the outcome depends upon diversity in the recipient
countries investigated and specific food aid program characteristics.

Labor Disincentive- In conjunction with the above argument on price disincentives, policy
makers and development practitioners alike often blame Food Aid for decreasing agricultural
output. Many Third World countries and particularly those in Sub Saharan Africa, subsistence
farming is a common practice. Project Food Aid, predominantly FFW has been held responsible
for labor disincentives. Labour disincentives, are believed to be initiated through : leisure from
free food or labor being diverted to other FFW projects such as building roads and insufficient
investment in farming machinery in the long run, Barret, Abdulai and Hoddinot (2005). In a
large empirical study of Sub Saharan Africa, Barret, Abdulai and Hoddinot (2005) found that
15

labor disincentives indeed occurred, but it was among the disabled who received free food.
Barret, Abdulai and Hoddinot (2005), stress that at times distinctions linking causality and
correlation is critically important. Abdulai et al. (2005) in Bezu and Holden (2008) traversed
that in a household survey in Ethiopia, the labor disincentive effect was not plausible owing to
the fact that production levels were not disturbed.

Government Policies-At a macroeconomic level, advocates against Food Aid assert that it
discourages or reduces the incentive for recipient governments to invest in agriculture, hence
undermining overall production of that state. Agricultural policies such as investment in inputs is
said to suffer in the presence of Food Aid. Owing to the fact that much of the disincentive effects
are reported to occur in Africa, it is only fair for this paper to argue using evidences from the
continent. Barret, Abdulai and Hoddinot (2005) studied a sum of forty -two 42 sub-Saharan
African countries that received Food Aid. They used data from the FAO, WFP and many other
data sets from organizations both local and international including their own findings, they
observed that food production in the presence of aid, saw a one kilogram per capita increase in
food aid shipments yield[ing] an expected net increase of about a one-third of a kilogram per
capita in the subsequent years food production (Barret, Abdulai and Hoddinot 2005 : 20). In
their paper entitled Does food aid really have disincentive effects? New evidence from subSaharan Africa* Barret, Abdulai and Hoddinot (2005:23) are quoted saying If anything, food
aid appears to have been mildly stimulative to, rather than a drag on, African agricultural
productivity. The stimulative effect has been attributed to Food Aids ability to ameliorate
financial constraints. More will be discussed in chapter three on this aspect. Lowder (2004) using
a cross country panel data analysis found that irrespective of program or targeted aid, no
significant disincentive effect was found upon local agricultural production in recipient state
economies. His hypothesis of lack of disincentives, came to the same conclusion as that of
(Maxwell, 1991; Arndt and Tarp, 2001).

In 2007 the United Nations Economic Commission for Africa in Ethiopia, ECA published a
paper entitled Impact of Food Aid and Developing Countries Agricultural Subsidies on Long16

term Sustainability of Food Security in Southern Africa. The paper was based on a
comprehensive region-wide econometric model. It included eight Southern African countries
namely Zimbabwe, Zambia, Swaziland and Malawi with data drawn over 25 years from the
period of (1980 to 2005). The Economic Commission for Africa (2007) found and reported that
in their overall case analysis, that there was not enough convincing evidence showing Food Aid
used in emergency , program or project affected food production in a negative manner. The
ECA, boldly highlighted that food aid [was] not a major cause of agricultural stagnation or the
governments inadequate investment in agriculture in the sub region (ECA 2007:42). Levy and
Barahona (2002) in ECA (2007), aver that in Malawi, production levels were not really disturbed
by Food Aid and price disincentives, but rather by weather conditions.

Donor market creation Another held belief of Food Aid, is that it has the ability to selfishly
create market for the donor country due to newly acquired tastes. In essence it is believed that,
the recipient state will neglect local production as people stop buying local produce and import
more foreign food in the future. Uvin (1992) asserts that some of the hefty commercial food
imports of several of the purported triumphant stories of early food aid, South Korea ,West
Germany Japan, Portugal and Taiwan, were due to their sharp rises in incomes ,than that of the
PL480 Aid. More evidence, Uvin (1992) notes, shows that some of the top recipients of US Food
Aid from the 1960s to 1980s: Spain, India, Vietnam and Poland are not even significant
importers of cereal grains from America. In fact he notes that most the above became strong
competitors on the global market. Barrett et al (1999) in a decisive empirical study, used data
from 18 recipient states. They tested the hypothesis that a J-curve effect existed between US PL
480 food aid consignments and commercial food trade volumes. Barrett et al (1999) found
backing for the J-curve effect. He noted commercial imports fell in the short run as it is primarily
displaced by food aid, in conjunction it was observed that commercial food imports by recipients
increased in the long run due to the dynamic income multiplier effect.
Dependency and the poor-Advocates against Food Aid, often complain that assistance provided
in the form of cash to recipients may have negative effects. Cash transfers it is said, expands or
increases local food demand. Demand in turn either initiates more commercial purchases abroad
17

or the need for food Aid. According to FAO (2006) the result of increased demand compared to
supply leads to higher prices of food. Higher food prices often affect the poor, who are net
buyers. In another negative consequence, dependency is always mentioned. Advocates against
Food Aid, believe that when dependency occurs when intervention mearnt to meet existing needs
decrease or diminish the capacity of recipients to meet their own needs in the future. Often when
Food Aid it is noted discourages self support or self reliant behaviors such one getting a job, or
farming. Dependency at the micro level, (Bennett, 2001; Harvey and Lind,2005) in FAO (2006)
argue is not always possible, reasons being that individuals are never certain who is being
targeted and the quantity of Food Aid available for projects or handouts, hence they would not
entirely rely on aid for economic safety because it does not provide reliable insurance. Bennett,
2001; Harvey and Lind, 2005 in FAO (2006) also assert that quantities of food given to
households, i.e. in FFW are usually too small to encourage long term reliance.

18

Chapter Three
Evidence and Arguments in support of Food Aid to Third World Countries.
Balance of payments/ relief of foreign exchange constraint -According to Barret (1998) Food
Aid is one mechanism that can be used to meet some of the macroeconomic goals of developing
countries. Program Food Aid in this regard, has been shown to alleviate binding foreign
exchange constraints. Owing to the fact that program Food Aid grants, have a propensity to
replace various commercial imports, Owokuse (2006:17) articulates that it could serve as a form
of balance of payments support when some of the foreign exchange that would have been spent
on food imports is saved. Since program Food Aid is generally monetized through its sale at
market prices, counterpart funds generated by the state can be utilized to invest in and provide
essential public goods, such as agricultural research and extension of physical infrastructure,
rural health and education Barret (1998). The foreign exchange concept has been thoroughly
examined through the Slutsky equation analysis in Tunisia, Bezuneh and Deaton (1997).
Revenues from Program Food Aid in Tunisia were instrumental in promoting national
agricultural production.

Ease liquidity constraints-Food For Work (FFW) projects according to Bezu and Holden (2008)
have been considered to be significant and important especially at the micro level. FFW projects
are commonly public work projects in which a community or individuals supply their labor in
exchange for Food Aid. Either than providing an increase in overall food availability, FFW has
been praised for its effect on relaxing liquidity constraints. It has been widely accepted or agreed
upon that rural economies of developing countries are affected by pervasive market
imperfections (Bezu and Holden, 2008: 541). The lack of credit or insurance markets has been
noted globally, as disabling already liquid constrained individuals and families from investing in
agriculture. Bezu and Holden (2008: 541) assert that a FFW job has the possibility of easing the
liquidity constraint henceforth allowing farm households, who are both producers and
consumers, to purchase more inputs.

In depth studies by Abdulai et al (2005) in Bezu and Holden (2008), provides evidence, that
easing of the liquidity constraint, can actually increase agricultural development. The study of 42
19

countries in Sub Saharan Africa done,, by Abdulai (2005) in Bezu and Holden (2008) through a
vector autoregressive model, illustrated that Food Aid had constructive effects on food
production with up to two years of lag. Agricultural development it was noted was boosted by
the contribution of income emanating from Food Aid, in easing factor market constraints
precisely that of the financial liquidity constraint, which has often plagued production in Africa.
Another study done by Barret et al (2001) in Bezu and Holden (2008),

involved evaluating

mean incomes, from diverse activities for people participating and not participating in FFW
programs. The results of this study in the Baringo District of Kenya, suggested positively that
participants in the lower half of the income distribution who participated in FFW, did not have to
sell their livestock or any other assets they owned to an extent as those not involved in the
program. In addition, those in the lower income distribution also saw an increase in both crop
income and non-farm income. In an earlier research in Baringo Kenya, Bezuneh and Deaton
(1997) found that participants in FFW had increased capital investments, which helped eradicate
financial constraints in the opening year of production. Overall, a 52% rise in net farm income
was achieved. Even more welcoming, Bezuneh and Deaton (1997) observed that net incomes,
managed to create employment as local households hired more labor to aid in their productions.

Supports Agricultural Production -One of the most comprehensive studies done on Food Aid
and its effect on agricultural production and individual welfare was that done by Holden et al in
the four zones of Tigray Ethiopia in 2001, covering 16 villages. Ethiopia, in the last few years
and even up to now, sits as one of the top countries, receiving Food Aid. Around 2006 to 2007,
the state received at least 24% of Food Aid from the World Food Programs in conjunction to
roughly 27% of other global Food Aid directly to Sub Saharan Africa. A large percentage of this
aid was disseminated through FFW projects, Bezu and Holden (2008). The study had a sample
size of 400 including 234 households who participated in FFW projects. The results showed that
at least 60% of households in Tigray made use of fertilizer, which encouraged better agricultural
production. Of the 60% it was noted that two thirds were participants in FFW programs. Either
than an increase in the use of fertilizer, most households were able to buy farm equipment
necessary for production. In a market with poor credit, Food Aid proved to encourage
agricultural production. What is more credible about the study, was that the weaknesses of
20

econometric testing using the Heckman model was bolstered by the same

results when

interviews were conducted upon the same households Bezu and Holden (2008). Singer ( 1987)
writes that Food Aid, was one of the mechanisms that helped India finance the Green
Revolution. Singer (1987) notes that even in the days when most European countries received
aid from the Marshall Plan, their agricultural output and domestic production of food was not
deterred but actually improved drastically.

Skills development - Referring to an earlier case study, which was conducted by the ECA (2007)
in Southern Africa, Food Aid in the form of project aid, was responsible for a number of benefits
both to the people and environment. Project Food Aid, advocates note, has the ability to create
platforms in which skills and expertise can be shared. In Zambia, through the through World
Vision International (WVI) , CARE and Catholic Reserve Services CRS, Consortium for
Southern Africa Food Security Emergency C-SAFE, Food For Work programs, beneficiaries
and participants

developed skills on vegetable gardening, conservation farming, crop

diversification, water harvesting and grain storage. All of the above skills which were developed
are extremely essential for improved agricultural production which will ensure the future food
security, ECA (2007).

The FAO (2006) illustrated that Food Aid can be a good tool in promoting local market
development. The promotion it was observed was that Food Aid helped to cultivate competitive
efficient channels by which food could drift from producers to consumers. The (FAO 2006: 43)
suggested that Market-mediated food-aid operations whether on the supply side through
monetization of in-kind food aid, or on the demand side through local and regional purchases
using donor cash resources sometimes have an explicit goal of helping to develop food
marketing channels in low-income areas where markets perform rather poorly. In an example
from (Abdulai, Barrett and Hazell, 2004; USDA, 2001) in FAO (2006), market stimulation could
be brought forth is Food Aid was put up for sale through small village or community based
processors and traders. One of the most frequently cited example by many economists and
advocates is the Indian experience. Operation Flood which was initiated from 1970 to 1995,

21

helped create milk producers cooperatives and endorsed current dairy production along with
processing technologies in many Indian rural villages, (Candler and Kumar, 1998; Doornbos
et al., 1990) in FAO (2006). Further monitoring of the operation revealed that instead of the
program linking 18 milk sheds with milk markets of Mumbai, Delhi, Madras and Calcutta, by
1985, 136 milk sheds had been linked to more than 290 markets in urban areas around the four
major cities. In Southern Africa, Mozambique Food Aid program since its operation in 1992,
helped create and facilitate the expansion of informal marketing systems and small scale
milling industries, Tschirley, Donavan and Weber(1996). (Tschirley, Donavan and
Weber1996:206) indicated that [informal markets and milling industries] play[ed] key roles in
linking Mozambican producers and consumers and providing consumers with affordable maize
prices.

22

Chapter Four
Should Third World Countries continue to receive Food Aid?
In order for scholars, policy makers, economists, and development practitioners to reach a
decision as to whether or not Third World countries should continue receiving Food Aid
(program or project), evidence of its impacts is essential. According to Owokuse (2006) whether
evidence is gathered empirically, molded theoretically or drawn from ethnographies it will
always be questionable. Empirical studies for example may face problems in data collection due
to insufficient socioeconomic institutions or a lack of physical infrastructures such as roads
which are crucial for data collection in a number of the recipient states. At times political unrest
or conflict may deter adequate data collection or even its high costs. The methodology which
researchers use can also be constrained. While qualitative work may be subjective or bias,
quantitative work may fail to quantify certain aspects which are unobservable or suffer from
omitted variables in empirical model specifications. Owing to the fact that evidence to support
impacts of Food Aid will always be riddled with inaccuracies, decisions can only still be made
with research that is available.
One cannot dispute, the need for emergency Food Aid in humanitarian situations or for the
purpose of eradicating food insecurity. Although not necessarily the focus of this paper, it is
worthwhile noting how helpful Food Aid has been in disaster prone areas. One can relate to the
tsunami and earthquakes which devastated Japan in 2011 or the East Asian Tsunami in 2004
which affected over nine countries. Even in non emergency situations, Food Aid is imperative in
improving the well-being of millions of people, especially in the Third World in terms of
livelihoods and meeting both health and nutritional means. According to (Bezuneh and Deaton
1997 : 676 ) [undertaking] investments today that diminish higher social costs in the future is
the pathway to better lives.
Chapter Two of this paper, discussed the common disincentive effects of Program and Project
Food Aid. The first disincentive effect of the price mechanism, certainly possess a conundrum to
producers and sellers, as both may face increased losses. Although dampened price effects do
exist and more so soon after an injection of Food Aid, disincentive effects have been attributed
more to a lack of appropriate timing. This illustrates that such negative effects are human errors
23

and not necessarily the direct fault of Food Aid itself. The labor disincentive effect theoretically
could be hazardous to production. However owing to the fact that Food Aid be it FFW, or food
handouts, quantities are never so large so as to make people lazy. Again, the uncertainties of
food insurance do not dissuade one from continuing with agricultural practices. FFW noted to
divert labor is simply a problem of timing. When it comes to government policies neglecting
agricultural production due to Food Aid, available evidence has shown this hypothesis not to be
so true. Other factors such as the weather and finance and political issues have been more to
blame. An analysis of the disincentive effects leaves this paper to believe that Food Aid is not an
evil within itself. Though hiccups may occur here and there like any other development
mechanism, its provision as long as it is developmental oriented should be continued.
An evaluation of the literature and evidence in chapter three, suggests that Food Aid, can be a
useful tool for development both at the micro and macro level. Certainly developing countries
can benefit from program Food Aid, in easing foreign exchange constraints and balance of
payments. Surplus revenue can be essential for meeting other developmental objectives such as
purchasing fertilizer for agricultural purposes. The evidence provided by Bezuneh and Deaton
(1997) of Tunisia managing to meet some of its macroeconomic goals, cannot be used to
generalize and say recipient states will do the same. Often instability, turmoil and corruption in
many Third World countries results in the diversion of funds. What is common in many
developing countries is the lack of microfinance and credit markets more so for farmers in rural
areas. Owing to the fact that cattle and other assets such as ploughs are essential for day to day
living, the liquidity constraint eased by Food Aid can only be praised. For years Food Aid has
been held responsible for being a disincentive to agricultural production. The fact that some
extensive research such as that by Bezu and Holden (2008) in Ethiopia shows FFW increases
fertilizer use and allows more labor to be hired increasing agricultural outputs deserves an
applaud. Since quite a lot of useful skills such as conservation farming and crop diversification
are gained by recipient countries, can one dispute Food Aids continuance? From the above
angles, it is this papers standpoint like many other scholars, development practitioners,
economists and philanthropists that many Third World countries across the globe should
continue to receive Food Aid. In order to make it more efficient and prevent any disincentives

24

the last chapter of this paper will discuss ways in which Food Aid can be made a useful
developmental tool.

25

Chapter Five
How best can we make Food Aid a useful Developmental Tool?
Supply and Demand -One of Food Aid disincentives discussed earlier was that of prices. Food
Aid has been noted to dampen market prices if supply exceeds demand. According to Fitzpatrick
and Storey (1989), there are three main ways in which the price disincentive effect can be either
avoided or lowered. These three revolve around the nature of food markets in Third World
countries, the supply side of Food Aid and the demand side. On the supply side, for as long as
Food Aid does not increase the overall food supply, the problem of dampened prices can be
deterred. If Food Aid simply replaces or substitutes

commercial imports that a country

receiving Food Aid ought to have purchased in normal circumstances, for example its Usual
Requirement Market (URM), then Food Aid ought not raise the net quantity of food on hand.
The above is commonly known as Import Replacement. Import Replacement, economists and
international organizations such as the World Food Program note, is imperative for development
in many Third World countries especially in Africa ie (saving revenue to pay balance of
payments).
With regard to demand, Fitzpatrick and Storey (1989) explain that an increase in demand may
deter the price disincentive effect. By carefully targeting the populace which would to a greater
extent consume Food Aid, despite existing levels or lower prices, demand may be increased. For
as long as the Food Aid can ensure higher levels of consumption, the price disincentive effect
can be deterred. According to Fitzpatrick and Storey (1989), targeting can be accomplished in
several ways. For starters, a system of food stamps may be introduced. Fair price shops can also
be established, which permit the disadvantaged or poor to get food at subsidized prices.
Secondly, there can be the allotment of self-targeting commodities which particularly, are often
more than not consumed by people in a lower income group. Evidence provided by Fitzpatrick
and Storey (1989:244), shows that subsidized fair price shops were ways which offset the
expected detrimental price impact of food aid on Indian agriculture in the 1960s and 1970s.

It is important to note that Import Replacement, like any other viable solution may create or
exacerbate other problems. For example donors may want to provide Food Aid, solely for the
purpose of increasing the overall food supply. This maybe so, if increasing food supply is meant
26

for nutritional purposes. Another concern mainly originating from trade exporting countries is
that Food Aid may distort trade. If Food Aid is provided to substitute imports, then those who
export maybe at a loss. In order for the above to happen, one would have to prove which imports
would have been seen through, in the presence of Food Aid. Fitzpatrick and Storey (1989).
Correct Pricing-Program Food Aid has been blamed for bringing about the price disincentive
effects which in turn affects production levels domestically. According to Hopkins (1982) Food
Aid, despite the fact that it was donated, linked to a project or even sold concessional, ought to
be sold in the recipient state at a moderate to reasonable price. If it is sold way too much below
the import parity, price disincentives may crop up. On the same token, if it is sold way above
normal prices, its purpose of creating extra revenue maybe deterred.
Triangular procurement - Barret and Maxwell in Clay (2006), note that Food Aid can become a
useful developmental tool for Third World countries if donor states change their policies and
legislative rules in its procurement. Clay (2006) writes that members of the Development
Assistance Committee (DAC) of the OECD should reach an agreement or consensus on the
untying of Food Aid. Untying Clay(2006) recommends, means to a greater extent , donors
abolishing policies that Food Aid should be procured in their market only, but that it should and
by large be open to procurement in developing countries globally. Through such acts, Third
World countries not only become active in the development progression or humanitarian
assistance of the fellow peers, but they also increase their market base, allowing for extra
revenue from sales. This idea or recommendation was put forward in 2005 at the Doha Work
Program , in Hong Kong after it was realized that the USA, one of the worlds leading donors in
Food Aid (provides almost 50%), approximately procured 99% of its food from its market.
Canada, Denmark and France have shifted their procurement and buy more food in Third World
states,Clay (2006). Procurement from developing countries is often known as triangular
procurement. Triangular purchasing also has the advantage of cutting down costs. Were as Food
Aid would cost more to ship from the USA to Zambia, the USA could easily cut down such costs
by purchasing from South Africa or Namibia.
Service Provision-Another way, in which program Food Aid can best be used as a developmental
tool, is through donors providing employment opportunities for locals with milling stations.
27

Instead of delivering processed grain, donors could grant Food Aid in the form of cereal which is
unprocessed and pay local milling plants for that particular job. Tschirley, Donovan and Weber
(1996) proposed similar ideas in Mozambique, which used to rank among African states
receiving Food Aid. Tschirley et al (1996) observed that during the years Mozambique received
Program Food Aid, from USAID, small milling plants began to grow because of the nature of the
food which was sometimes delivered unprocessed.
Long term commitments- Hopkins (1984) notes that long term commitments are essential for
program or project Food Aid to accomplish its developmental purpose. If long term flexible
commitments become standard procedures between donors and recipients, as was proposed by
Hopkins (1984), assessing progress, impacts and improving program or project Aid will be much
easier. One can think of a FFW Project in which Food Aid is exchanged for labor for building a
dam or road beneficial to the community. If the project should suddenly cease or end before the
developmental objective was realized, Food Aid would indeed become a failure or rather a
nuisance. For the success of long term commitments, both donor and recipient, would be
required to extensively map out common objectives and goals, reach a consensus on the timing
each year so as not to disturb or divert labor from agricultural production. More beneficial to
Project Food Aid, would be providing technical assistance and expertise to train local officials to
be effective managers. It is this papers belief that long term commitments allow for communities
to become engaged at a personal level with donors, which boosts morale and assurance. It is
important to note that long term commitments are often plagued with regime changes in many
Third World countries making it difficult to achieve goals. Even with donors, commitments are
often deterred for example Food Aid being diverted to fight the war on terror.

Knowledge- One way of making project or program Food Aid even at times emergency aid work
better to achieve developmental purposes, is for donors to acquire as much knowledge or data
about the area, region or country. Learning from some of the failures of structural adjustment
programs, a one size fits all approach could be detrimental. Instead of coming with a set of
policies in a carrot and stick approach, donors may achieve more, learning about the food policy
frameworks already existent, the type of food consumed in different regions, the interplay of
markets, amounts produced in different areas and when they are produced.
28

Timing - In terms of FFW projects, timing is of the essence. Labor disincentives, can be
altogether reduced, if jobs are offered ay in the slack season, as was done in the region of Tigray
in Ethiopia, Bezu and Holden (2008). It cannot be stressed enough how knowledge and timing
are essential. Research conducted by (Tadese and Shively 2010:4), in Ethiopia suggests that
production-sensitive targeting could improve the logic of food aid and avoid creating
disincentives for domestic producers. In particular, Tadese and Shively (2010), assert that
efficient planning and distribution is not likely to threaten production. Knowledge of the
absorption capacity of markets of recipients can also deter disincentives. Owing to the fact that
late arrivals are often culprits of disincentive effects, as mentioned before, procurement from
neighboring countries can be helpful. Acquiring knowledge about any aspect i.e. absorption
capacity will always be intricate, especially for donors. One way which may ease the
difficultness of obtaining information, is for donors to work hand in hand in local authority i.e.
municipalities, ministry of agriculture and even universities and other organizations possessing
such information. Information can never be accurate, but it is worthwhile getting close data.

GFAC-Barret and Maxwell (2006) suggested that there should be a Global Food Aid Compact
(GFAC). The Global Food Aid Compact, they recommended would incorporate recipient
country governments, major operational agencies that distributed Food Aid as well as the donor
countries. The logic of the GFAC, (Barret and Maxwell 2006:109) pointed out was that [as]
long as international governance of food aid remain[ed] a donors-only club, downstream
distributors and recipients of food aid fe[lt] little ownership of and responsibility for the food aid
system. In addition, to the above this paper believes if a GFAC were to succeed, it would make
the sharing of information as mentioned in the above paragraph much easier.

A GFAC

comprising all parties to Food Aid shipments would certainly progress the coherence of
multilateral and bilateral Food Aid programs.
Policies of Recipient Countries -The ECA (2007:48) noted in its report [that] national food aid
policies or comprehensive food security policies is one of the issues commonly recognized by all
countries in the region [as lacking].In order to make Food Aid a useful developmental tool,
29

recipient countries need to coordinate their agricultural food policies with those responsible for
receiving or allowing aid to come into the state. Malawi for example has the National Safety Net
Strategy, which deals with all Food Aid, the extent to which its National Safety Net Strategy
policies are inline with department of agriculture is not known. If a merging were to occur,
knowledge and data concerning issues of capacity absorption or market prices of grain, can be
shared so that project or program aid will not cause disincentive effects such as dampened prices.
Zimbabwe has two sectors dealing with Food Aid, the National Policy on Drought Management
and Policy on the Operations of Non-Governmental Organizations in Humanitarian and
Development Assistance which offer guidance on Food Aid. For as long as both streamline their
efforts and harmonize approaches, disincentive effects again such as dependency can be deterred.
The fact that Swaziland Food Aid management is incorporated into the Ministry of Agriculture
and Cooperatives may be something other states can follow.

Nature of Food Aid- program or project Food Aid can become a useful developmental tool if it
reduces some of its price disincentive effects as noted by many scholars and advocates against it.
One way observed by Tadese and Shively (2010), is providing Food Aid which does not
necessarily displace local staple foods. Tadese and Shively undertook a study in Ethiopia in the
regions of Addis Ababa, Debre-Markos, and Dessie from1994 to 2006. They discovered that
Teff, a highly regarded indigenous cereal rarely faced price disincentives. This was because all
imported cereals were normally viewed as poor substitutes. Maize and wheat it was observed
were the only cereals found to be close substitutes of Teff among the extremely poor. The nature
of food could help local production in that producers incentives to produce and sell would not
be affected. Wherever possible donors could procure food different form the staple food.
Skills-In Zambia, through the Through World Vision International , CARE and Catholic Reserve
Services CRS, Consortium for Southern African Food Security Emergency (C-SAFE) , and
Food For Work programs, beneficiaries and participants

developed skills on vegetable

gardening, conservation farming, crop diversification, water harvesting and grain storage. ECA
(2007). As noted before, such skills are essential for improved production and long term food
security initiatives. Project Food Aid, should aim to continue with such specific initiatives. In
30

addition, Food Aid to developing should continue with the USA PL 480 Title Four initiative.
This initiative links US farmers with farmers in developing countries for reasons ranging from
sharing experiences, to sharing information and technical assistance. If other donor countries can
adopt similar schemes, agricultural development can be improved.
Conclusion- in conclusion, it is this papers position that Third World countries should continue
to receive program and project Food Aid. More Food Aid should actually be made available for
Food Aid as a developmental mechanism. Food Aid within itself is not an evil at all. Any
disincentives are by large human errors and can be avoided. From the evaluations on its
misconceptions, its positive and useful impact and ways in which it can be improved; Food Aid
is indeed a useful developmental tool.
This paper in sum, explored the misconceptions of Food Aid. Some of the misconceptions
include: the impact of Food Aid on damped prices, is disincentive effect on micro and macro
levels of agricultural production, its dependency effect, its donor market creation tool and is
labor disincentive effect, especially when it come to FFW projects. Arguments in support of
Food Aid assert that: it eases foreign exchange constraints, helps in balance of payments, helps
realize certain development objectives (program aid), offers essential skills such as skills on crop
diversification and grain storage, eases the liquidity constraint, boosts agriculture produce and
though not dealt into much, provides humanitarian relief and food security. Lastly, this research
report provided several ways to make Food Aid a useful developmental tool. They include:
tradeoffs between supply and demand, triangular purchasing, effective timing, and increased
knowledge base of recipient countries by donors, long term commitments by donors, effective
recipient government policies and nature of aid.

31

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