29
3.
How to analyse and compare baseline and emergency price, volume flows and gaps
Tables such as Boxes 8.9 to Box 8.15 (EMMATKp146, 150, 153) can be used to assist comparative analysis of
baseline and post emergency volume flows/ prices/ gaps. See Box 8.15 in ANNEX Step 8.
4.
Remembering why we collect data on prices, volumes, number of actors etc…and assess market conduct
Step 8 includes assessing market conduct (i.e. is the market integrated, competitive, suffering from supply or
demand problems etc…). This is difficult without data such as prices, volumes and trader numbers.
See Table: ‘What the numbers tell us’ in ANNEX 8 for an outline of data used and questions answered.
Consider the following steps:
a)
Is it a supply or demand problem? (EMMATKp147 – 149 Boxes 8.11 - 8.13, ANNEX Step 8 Supply and
Demand decision tree)
Market systems work through the interaction between demand – people’s ability to pay for goods or services that
they need – and supply - other people’s capacity to deliver those goods or services. Demand-side and supply-side
constraints have very different impacts on target groups, depending on whether they are affected as consuming
households, producers, or workers: hence there are different implications for (humanitarian) action.
It is vital to understand how the emergency situation has affected this supply–demand dynamic as it can be
related to potential interventions (see Box 8.10 below). Simplistically, in a demand-side problem context a cash
injection could be used to facilitate access to items required; whereas in a supply-side problem, assistance to the
service sector, wholesalers and larger traders may be required while in –kind assistance is provided to the target
population (depending on the time frame for stimulating supply). A table illustrating qualitative indicators of
problems in ‘supply’ and ‘income’ systems is Box 8.13 ANNEX Step 8 (EMMATKp149).
Box 0.1 Demand-side and supply-side constraints compared
Demand-side problems
In emergencies, effective demand (the level of spending by final
consumers) is often affected. Most often, effective demand falls,
because – whatever their urgent needs might be – final consumers
have less money to spend.
Also, demand may fall because people receive sufficient relief
distributions of that particular item, so they have less need to buy.
Occasionally demand may briefly increase: e.g. through a surge in
purchases of food or shelter materials after a hurricane.
Supply-side problems
Emergencies very often disrupt market systems’ capacity to
produce and deliver food, items, or services in response to
demand. This may be due to problems at the production end of
the chain; or it may be due to transaction blockages elsewhere in
the market system.
For example, a crisis may be linked to destruction of crops, or loss
of warehouse stocks, or insecurity, or disruption of transport.
Occasionally, emergencies can also cause a problematic surge in
supply (e.g. livestock sales during a drought).
b)
Is the market integrated? What do you do if it is not integrated? What are the implications?
When markets are integrated, critical items or food stuffs will flow more easily from surplus areas to deficit areas;
from producers to consumers; from ports and border crossings into more remote areas. When markets are
fragmented, in contrast, it is difficult or expensive to move goods, and prices vary widely between locations and
seasons. The degree of market integration is a vital consideration for EMMA’s analysis of appropriate responses.
I.e. if the market is poorly integrated then an increase in purchasing power will not lead to a quick increase in
supply which could result in inflation. In such an instance, cash transfers would be avoided. Supporting market
integration could be an option once the factors limiting integration have been identified and understood (see
EMMATkp141 for more information).
Market integration can ultimately be seen as a measure of market functionality, and therefore it is of critical
relevance to the choice of intervention strategy. In general terms; the higher the level of market integration, the
more efficient and effective a cash-based strategy is expected to be (Sivakumaran S. 2011
4
).
c)
Is there market power (‘monopoly’) or is there competition in the market system?
Competition exists where buyers or sellers have a real choice between alternative market actors, based on who
provides the cheapest or best goods, the highest wages, etc. Market power (‘monopoly’) arises when a single
4
Sivakumaran S, 2011 ‘Market Analysis in Emergencies’ published by the Cash Learning Partnership
http://www.cashlearning.org/
30
market actor – or a group / cartel working in collusion – is able to dictate or strongly influence prices in their own
favour. As well as monopoly over trade, market power can stem from monopolistic control over resources,
services, or knowledge. (see EMMATkp151 for more information)
The presence of market power is generally considered to be a contraindication to market interventions. The
EMMA team (ideally with support from key informants and decision makers) has to assess the extent of market
power and make a decision.
d)
Summarising market conduct and using the response logic decision trees
to better understand if a
cash or in-kind or further analysis should be favoured.
See ANNEX Step 9 Response logic decision trees (EMMATkp164) and Box 9.2 (EMMATkp162)
5.
Can the market respond to the potential increase in demand? Will the target population be able to get the
number/ quantity of items/ goods, when they want, where they want it?
This is an essential and critical step and should not be avoided. Use all the information collected on gap analysis,
seasonality, trader numbers, supplies, stocks, lead times and so forth. The following steps may be of help:
a)
Start by calculating the quantified gap in need (including the non-targeted households), the
‘frequency of need’ (a one off, fortnightly, monthly etc..), the timescale as to when the item/s are
needed and the location (local trader, wholesaler in the district market etc..). This is the calculated
potential increase in demand which the market system would need to supply in addition to what it
supplies already.
E.g. 430,000 mosquito nets within 30 days (a month) in the local shops
70,000kg of wheat flour, within 2 weeks (14 days) every month for 5 months in the district wholesalers
b)
‘Insert’ the calculated total potential demand (within 2 defined time frames) back into the market
map. Review the figures and ask these questions relating to:
-
The capacity of the market to cope without any support for (a) 100%, (b) 75% and (c) 50% of the
demand within (a) the required timeframe (b) a longer time frame (chose a timeframe)
-
The capacity of the market to cope with support (what support would that be, with whom and is it
feasible?) for (a) 100%, (b) 75% and (c) 50% of the demand within (a) the required timeframe (b) a
longer time frame (chose a timeframe)
-
Market function: is there any NGO behaviour that is limiting the market from fully functioning?
(E.g.: NGO use of all warehouses, undermining mosquito net market with in-kind distributions)?
c)
Review and summarise to what extent the market can manage to respond to the projected needs and
brainstorm potential responses ready for Step 9. Refer to Box 9.2 (EMMATkp162 in ANNEX Step 9)
Refer to target population preferences.
Consider options such as: initially implementing in-kind and cash based responses (as the market
cannot respond adequately) with market support (to assist market recovery/ increase capacity),
followed by cash based responses.
Field based advice:
o
Do not underestimate the importance of understanding if the problems are demand or supply related.
o
Triangulate trader responses on re-stocking/ increasing the supply of items with people providing
transportation services. Transportation can be an overlooked limiting factor. Transporters will be able to
validate data, provide information on costs, timing, volumes etc… that can be vital in checking the feasibility
of a response (see Chad case study example in Step 4,5 and 6).
o
When calculating the market’s ability to respond to an increase in demand, be careful not to calculate the
increase in demand based only on your estimated numbers of beneficiaries for any planned interventions!
This calculation should take into account ALL households who rely on the market system, including
households that will not receive assistance because they do not require it – but who will still use the same
market traders to buy the goods being analysed.
o
Make sure you are up to date with the response plans that other agencies have, just in case they will have an
impact on the markets that you are analysing.
o
Use PRA methods in your interviews. Draw maps (using pen and paper/ locally available materials on the
floor/ ground with different items (stones for example) representing a market…) with key informants and
potential beneficiaries and traders etc… Proportional piling can be used to illustrate percentages.