Foreign Aid & Civil Society
WFP’s Purchase for Progress: How Far Should It Go?
Global Envision is reporting on a large cash infusion into the WFP’s Purchase for Progress program. The Gates Foundation, Howard Buffet (son of The man), and the Belgiun government have committed USD 76 million to this pioneering program to help it expand to 21 countries within 5 years.
I had previously argued that this program, that bypasses traditionally inefficient and government controlled food markets, could significantly enhance productivity by providing poor farmers with long-term incentives to do so. This commitment shows how and how not:
The Bill & Melinda Gates Foundation committed US$66 million to fund pilot projects in 10 countries in Africa, and the Howard G. Buffett Foundation committed US$9.1 million to support pilot projects in seven countries. The government of Belgium contributed $750,000 for the project in the Democratic Republic of Congo. Three other countries have not yet been funded.
With the support of the foundations, and in close cooperation with governments, UN agencies, nongovernmental organizations, and private companies, P4P should significantly increase the income of at least 350,000 farmers in the pilot countries alone. The project will also identify and rigorously test practices that can be used to benefit small-scale farmers in other countries. Ultimately, the intention is to not only support farmers to capitalize on the market offered by WFP, but also to connect them to other local and regional food markets.
This illustrates a relative advantage of philanthropic capital - the ability to create parallel structures and modify incentives. But it also shows how the project might not be going far enough, by merely seeking to connect farmers to “local and regional food markets.”
Existing food supply chains in the South are riddled with failures and inefficiencies. One failure, that P4P addresses, is that farmers do not get enough for their produce. But that is a symptom of the inefficient markets that operate in these countries. In turn, these markets provide no incentives for correcting such failures. This is why “connecting to local markets” won’t be enough - because local markets are hardly any use.
P4P helps farmers increase their incomes. But so does another project - the Millenium Villages Project. By providing subsidized inputs the MVP strategy has helped triple corn productivity in Sauri, Kenya. But the MVP provides no direct link to buyers of food, providing no guarantees that the higher production will be sold.
This is where P4P can distinguish itself - it connects sellers to buyers. In other words, P4P can create a market of its own. This, in turn, would provide long-term incentives for farmers to improve productivity. Incomes would rise, but as a byproduct of a better market platform which communicates price and quality signals appropriately.
The true gain of the P4P project in Mozambique will be that 9,500 farmers in a cooperative have now signed a contract which rewards them for producing more and better quality food. If P4P can provide that same incentive in every country all farmers will be clamoring to join, as will buyers. That will be the true success of the project because it can endure even after the Gates Foundation has spent its last dollar.
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[...] My premise is that P4P promises to bypass traditionally inefficient and government controlled food markets, providing farmers the right incentives to improve productivity - with benefits to both consumers and producers. So far so good. [...]