Taxi drivers all over the world are renowned for charging extortionate rates to tourists. We’ve all experienced it. We’ve all arrived at an airport and vastly overpaid for a taxi. We’ve all been taken for a ride, figuratively as well as literally. This is probably because we didn’t know how much the going rate was. In stuffy economist speak, this is a problem of asymmetric price information – we know less about what the price should be than the taxi driver, and we must pay dearly for our ignorance. This is why it is usually a good idea to find out a rough price of a taxi ride before you take it – better information, better prices.
That’s great, I hear you say, but what does it have to do with Seed Change? Well, quite a lot actually. It shows that markets function fairly only when we have good information about prices. Here at Seed Change, we want to make sure that our farmers are getting a fair deal, so last week we went to Mahembe village to find out what they knew about the prices they face.
The farmers told us that they sell their produce, such as palm oil and palm nuts, to middlemen who come to the village and then sell it on at a much higher price in other villages and towns in the area. The farmers know much less about the price their produce can fetch outside the village than the middlemen do. If the farmers knew more about the prices, they’d be able to demand more money from the middleman or perhaps they’d find it was worth their while to go to the other places and sell it themselves. Just like when negotiating with a taxi driver at the airport, knowledge is power.
The farmers buy their inputs, such as fertilisers, pest controls, water buckets etc., from Kigoma town. They told me that they don’t know what price they will have to pay until they get there and that, consequently, they often have to come back empty handed because the prices are more than they can afford. If the farmers had some way of knowing the prices in Kigoma from their homes in Mohembe village, it would at least save them a long, bumpy journey every now and then. Greater transparency may even stimulate more competition between suppliers, which would bring prices down.
If we want to find out the rough price of a taxi before we travel to a new place, five minutes sifting through Internet travel forums is usually all that is needed. But, unsurprisingly, there are no Internet forums for local prices of palm oil or fertiliser in western Tanzania and, even if there were, subsistence level farmers don’t have the expensive smart phones or laptops needed to access them. However, what they do have is radios. A ten-minute price report everyday on local radio is something that the farmers I spoke to were very interested in.
When markets don’t function as they should, it is almost always the most isolated and the most vulnerable that suffer. Given our aim of social and economic empowerment of our farmers, Seed Change is always looking for new ways to make sure markets work for them, not against them. And so, a short price report on local radio is an idea that we are hoping to turn into a reality in the near future.