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Cablegate: Response: Impact of Rising Food/Commodity Prices - Sierra

VZCZCXRO2212
RR RUEHMA RUEHPA
DE RUEHFN #0204/01 1211506
ZNR UUUUU ZZH
R 301506Z APR 08
FM AMEMBASSY FREETOWN
TO RUEHC/SECSTATE WASHDC 1884
INFO RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 03 FREETOWN 000204

SIPDIS

SIPDIS

DEPARTMENT FOR AF/W, EEB/TPP/ABT/ATP - JGSPECK

E.O. 12958 N/A
TAGS: PREL PGOV EAGR EAID ETRD ECON SL
SUBJECT: RESPONSE: IMPACT OF RISING FOOD/COMMODITY PRICES - SIERRA
LEONE

Ref: A) STATE 39410, B) FREETOWN 196

1. Please see the following responses keyed to reftel A. Note that
responses reflect currently available information on this situation,
and that not all of the suggested questions posed in reftel A were
answerable at this time or applicable to the Sierra Leone context.

------
DEMAND
------

2. a) Rice is the most important commodity consumed in Sierra Leone,
while tubers (cassava, yams, and potatoes), bread, fruits, and
vegetables also feature prominently in the local diet. Oils, such as
palm and vegetable, are important ingredients in most dishes.

b) Food/commodities prices have increased by roughly 30% over the
past six months.

c) Sierra Leone is, overall, a net importer of the goods listed in
2(a), though rice and cassava are grown here in relatively large
quantities.

d) The national self-sufficiency level in rice was estimated at 69%
for 2007. This implies that the country faces a deficit in rice of
150,000MT per annum. In 2007, 223,000MT was imported to make up for
this shortfall. Cassava is the only other country-wide cultivated
staple food, and similar statistics are not available.

e) There have been some shifts in consumption patterns. Rice, as the
key staple, continues to be purchased at a high level - individuals
and families are changing their purchasing habits to accommodate the
price increase, but some have been forced to purchase cassava
instead. The other staples listed continue to be purchased, though
shopkeepers and bakeries have noticed a decline in the demand for
bread as its cost has risen.

f) Low-income earners have found it difficult to absorb the price
increases, particularly of rice, and impacts are starting to be felt
for middle- and high-income earners. The regional impact of the
price increases seems to be dependent on the production capacity,
commodities produced, and prevailing market conditions on the
locations. The Southern and Eastern Provinces, which produce a
diverse range of cash crops, have been less affected than the
Northern Province, for example.

------
SUPPLY
------

3. a) Between 2005 and 2007, the areas for rice cultivation
increased. The overall area planted with rice increased by 27.5
percent in 2007 compared to the 2005 cropping season. While this is
a positive development for the country, the increase in production
cannot cover the increasing urban population's demand, which largely
depends on imported rice. The infrastructure, such as roads and
transport availability, as well as the price of fuel, impedes
movement of rice to many urban areas. Locally-produced rice is thus
more expensive in Freetown and other urban areas than imported rice.
Given that the significant worldwide rise in commodities prices is
relatively new, and that the planting season for rice is yet to
commence, it is too early to determine the impact of rising prices
on domestic production [NOTE: The planting season begins at the end
of April, and continues through May. Crops are usually harvested in
September. END NOTE].

b) President Koroma and members of his cabinet have discussed the
need for increased self-sufficiency in food production since coming
to power in late 2007, but that has yet to result in actual
investment by the Government of Sierra Leone (GoSL). There has been
little foreign investment in the sector, though an overall increase
in investment interest in Sierra Leone, coupled with Koroma's desire
to encourage a resurgence in agricultural production, could change
this trend over the next few years. Donors are placing emphasis on
the sector, with recent provisions of equipment and technical
assistance by members of the international community. For example,
over the past four years, Food for Peace/USAID Sierra Leone's
development assistance program has focused on revitalizing the
agriculture sector, with good success. This emphasis will continue
as a new USAID umbrella program is put in place this summer.

c) Due to post-war reconstruction programs, there has been a
decrease in land used for agricultural purposes in and around
Freetown. In the provinces, anecdotal evidence suggests that land
use is increasing, due mostly to the President's pro-agriculture
campaign and donor assistance.

d) There have been no drastic shifts in food inventories or stocks.
However, there have been allegations that some rice and flour
importers are holding back old stock to take advantage of future

FREETOWN 00000204 002 OF 003


high prices.

e) Shortages of storage and food processing facilities do contribute
to crop losses. An additional serious problem is the lack of
infrastructure connecting agricultural production areas to urban
centers. Poor roads, coupled with rising fuel prices, are
significant challenges for suppliers attempting to sell their goods.
Weather and government policies have not had an impact on supply to
date.

----------------
POLITICAL IMPACT
----------------

4. a) There have not been any political protests or violence in
Sierra Leone related to the price increases, though, per reftel B,
there is great potential for them to take place if conditions
worsen.

b) The most significant impact is/will be heightened tensions
between Sierra Leoneans and the local Lebanese community, many of
whom are importers. Rumors are already surfacing that importers are
creating artificial shortages to hike prices even further, although
such rumors are vehemently denied. Tension has always existed
between the communities, and the general lack of understanding that
the price increases are a function of global market volatility
rather than market manipulation makes the Lebanese community an easy
target for blame. Contacts within this community have mentioned to
embassy representatives that they are concerned about the
possibility of violence in the future.

---------------
ECONOMIC IMPACT
---------------

5. a) Given that the impacts of rising food prices are only just
being felt in Sierra Leone, correlating impacts on economic
indicators are not yet visible because of the time-lag in collecting
and assessing data here.

--------------------
ENVIRONMENTAL IMPACT
--------------------

6. a) There could be a trend of increased deforestation because
sections of the population who earn their livelihood by using forest
resources (charcoal, timber) will try to gather more resources to
cover the increased cost of food commodities. More "slash and burn"
practices could be used if farmers try to increase their food
production acreage to respond to increased prices. Information on
the potential impact on water availability and quality, and soil
conservation, is not available.

--------------------------
GOVERNMENT POLICY RESPONSE
--------------------------

7. a) The GoSL reduced the duty on imported rice from 17.5 percent
to 10 percent in recent weeks. Otherwise, the policy response to the
rising prices has been negligible to date.

-----------------------
IMPACT ON POST PROGRAMS
-----------------------

8. a) Due to the increased prices of U.S. food commodities and
freight, the Title II program in Sierra Leone will be unable to
provide the total quantity of food initially planned. There will
thus be less food available for the Vulnerable Group Feeding and
Food for Asset activities in FY08 and 09.

----------------
POLICY PROPOSALS
----------------

9. a) In the short-term, the GoSL could consider reducing or
eliminating the tariffs on oil and wheat. It could also further
reduce or eliminate the tariff on rice. Other policy initiatives to
undertake in the short-term are prioritizing road repair to make
urban centers more accessible to agriculture producers, and
renovating and building grain storage facilities. A longer-term
approach could include a policy framework that focuses on increased
production and crop diversification to create alternative staple
foods. Elements of this policy framework might include: (1)
assisting small farmers in procuring good quality seeds, tools; (2)
providing technical assistance on storage and drying techniques to
prevent post-harvest loss; (3) making farming land currently not
under cultivation available to new prospective farmers, including
youths; (4) supporting initiatives that encourage large-scale
industrial farming using modern farming methods and tools; (5)

FREETOWN 00000204 003 OF 003


supporting conservation agriculture programs to ensure that
expansion of the areas under cultivation do not take place at the
expense of forest lands and water.

b) Possible changes to USG policy include: (1) shipping Title II
commodities by less costly foreign flag ships; (2) increasing the
amount of monetized commodities; and, (3) allowing monetization of
rice, which was refused in FY08 under the Title II program.
PERRY

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