How Competitive are Food Crop Markets in Sub-Saharan Africa?

During the structural adjustment era of the 1980s and 1990s, governments across sub-Saharan Africa generally withdrew from food markets in order to encourage entry by private traders and foster competition. Since that time, the degree to which private crop traders actively compete and pass on price changes to farmers has been a central concern of policymakers, donors, and researchers. In this paper we provide a critical review of the evidence on that topic. We begin by developing an analytical framework to guide the review, and then discuss the empirical evidence from four categories of literature. We have two main findings. First, there is a paucity of empirical evidence on this question, given the importance of the topic. This hinders our ability to draw strong conclusions. Second, that point notwithstanding, the evidence that does exist is broadly supportive of the notion that food markets are competitive. The dominant themes in the literature are that trading profits are highly variable, which is consistent with substantial risk, that trader entry and exit rates are high, and that price co-movements between markets suggest relatively efficient levels of competitive arbitrage. It is possible that the high costs of entry foster non-competitive conditions at the level of large-scale, long-distance subnational trade; but we find no positive evidence to that effect, only the satisfaction of certain necessary conditions