The Market Systems in Libya assessment aims to provide humanitarian organisations with a better understanding of market dynamics in Libya, information on key supply chains and how they have been impacted by ongoing conflict, and the necessary foundation to examine the potential of scaling up market and cash-based interventions.
The Libya Cash & Markets Working Group (CMWG)1 identified information gaps in how humanitarian actors understand local markets in Libya and consequently initiated the Joint Market Analysis Initiative, led by REACH in close collaboration with the CMWG, for the purpose of producing this assessment.
Qualitative data was collected during August and September 2017 in Tripoli, Benghazi and Sebha through 234 key informant interviews with producers, importers, wholesalers, retailers, and other stakeholders in the wheat flour, insulin, tomato and soap supply chains, as well as 12 focus group discussions with Libyan and migrant consumers. These supply chains were selected to reflect different market sectors of interest to humanitarian actors.
Overall, the assessment found that in spite of disruptions following the renewal of the Libyan conflict in 2014, the wheat flour, insulin, tomato and soap supply chains are functional. Given the general market functionality and overall market access for vulnerable populations, the CMWG recommends that cash and market-based responses be prioritized where appropriate in Tripoli, Benghazi and Sebha.
Since 2011, Libya has continued to experience violent conflict, political upheaval and deteriorating living conditions. Renewed conflict between armed groups since April 2014 has resulted in large-scale displacement and humanitarian need within Libya, with OCHA reporting an estimated 1.1 million people affected by the crisis, including 370,000 IDPs and returnees.2 Refugees and migrants, from those seeking aslyum in Europe to those looking for economic opportunity in north Africa, continue to enter the country and face detention, abuse and exploitation.
In addition, the country has tumbled into a severe economic crisis, which is amplified by the devaluation of the Libyan dinar and the dwindling funds of Libya’s multiple governments to provide subsidies and services to its population. As a result, access to basic goods and services has become a challenge in some parts of the country as many households struggle with meeting their basic needs due to their decreasing purchasing power and a lack of access to cash.
Though local markets and supply chains have been resilient throughout these crises, they have not remained unaffected, as conflict dynamics have hampered domestic production and subsidy regimes for certain items. Even so, basic food items and NFIs have been reported to be consistently available throughout Libya. While the availability of commodities in shops is indicative of overall market functionality, it is crucial to analyse developments further up the supply chain in order to correctly interpret changes on the markets and to respond in an appropriate manner. In light of the protracted crisis, supply chains may have been severely affected, potentially limiting the impact and effectiveness of market-based interventions by humanitarian organisations. As there is ample potential for more evidence-based programming, local data on the current state of markets is required.
On the whole, consumers (including refugees and migrants) in Tripoli, Benghazi and Sebha have physical access to markets, with temporary access issues related to insecurity affecting smaller segments of the population as conflict peaks. The lack of access to cash is a major access issue that hinders consumers from acquiring basic commodities in quantities required to meet basic needs.
Since 2014, food subsidies have been cut or suspended in large parts of the country. Due to the conflict and the fiscal crisis, subsidies have been abolished in Tripoli and Sebha, which has further reduced the purchasing power of consumers. The system remains partly functional in Benghazi.
In general, different population groups—non-displaced, internally displaced (IDPs), migrants and refugees—interact with markets in similar ways, frequenting the same shops and deriving commodities through the same channels. However, some access limitations were found, especially for non-Libyans (migrants and refugees) who are not eligible to access food subsidies and free insulin from the local authorities.
The Libyan economy is heavily dependent on imports. Macro-economic developments since 2014, namely the authorities’ decreasing revenue and the depreciation of the Libyan dinar, have impacted the wheat flour, tomato, soap and insulin supply chains by hampering increasingly expensive imports of supplies from abroad.
Wheat Flour Supply Chain
The wheat flour supply chain has undergone substantial changes since 2014. As a result of the authorities’ inability to provide adequate funds, wheat flour subsidies for bakeries have been abolished throughout Libya. As a result, the distribution of subsidized wheat flour through jam’iyat (consumer associations) came to a halt in 2014 in both Tripoli and Sebha; in Benghazi, subsidized wheat flour can still be accessed sporadically. The disruptions have lowered consumption of wheat flour and led to an estimated 50% decrease in demand since 2014, although it is also important to note that previous high subsidies resulted in overconsumption of wheat in many areas in Libya.
Additionally, due to the authorities’ fiscal challenges and their inability to provide foreign currency for imports, mills have been facing substantial difficulties in importing raw wheat for local production at the official exchange rate. This has led to shortages of locally produced wheat flour on markets and a shift towards the import of already ground wheat flour, the price of which has increased as the Libyan dinar has depreciated on the parallel market.
Insulin Supply Chain
The insulin supply chain is characterized by heavy influence on the part of the authorities.
With limited funds, the state importer (Medical Supply Organisation) has been struggling to import insulin in sufficient amounts, and has thus not been able to meet the needs of the entire population. Private companies have filled this void and gained a larger share of this market since 2014. The shortages in the insulin supply chain have had serious implications for patients. Instead of obtaining insulin at health centres for free (exclusive to Libyan nationals, as migrants and refugees are not eligible to register), patients have increasingly had to rely on private channels, where its price has dramatically increased (500-600%) since 2014. More recently, insulin has been consistently available at private pharmacies, but concerns about quality and rising prices remain.
Tomato Supply Chain
The tomato supply chain differs from others as it is mainly sustained by local production. The supply chain has maintained its capacity to satisfy the demand of the population. However, domestic producers have been facing a number of challenges, ranging from increasing prices of farming inputs to a lack of labour, water and electricity. Such challenges have been particularly prevalent in the south, where production has decreased significantly in the past 3 years. Tomatoes remain continuously available although prices have risen by 50% across Libya since 2014.
Soap Supply Chain
The soap supply chain has only been marginally affected by the conflict since 2014. Since most soap and all raw materials are imported from abroad by private companies, the devaluation of the Libyan dinar has led to substantial cost increases for soap importers as well as producers. Consequently, the price of both imported and domestically produced soap in shops has tripled since 2014. The supply chain remains fully functional, although the full effect of rising prices on households’ access is not known.
Overall, the assessment found that in spite of disruptions following the renewal of the Libyan conflict in 2014, the assessed supply chains are functional and have the capacity to meet demand from consumers in Libya. This is particularly the case for wheat flour, tomatoes and soap and to a lesser extent for insulin. While in some of the assessed supply chains the channels through which consumers access goods have changed due in part to decreased government subsidy and support (wheat flour and insulin), others have merely been affected by increasing prices (tomatoes and soap). Rising prices and a lack of access to cash are affecting market access for vulnerable consumer groups, including migrants and refugees.
Given the specificities of the Libyan context, the impact of the liquidity crisis is of particular interest. Actors in the analysed supply chains are heavily dependent on cash to handle their business dealings. However, the vast majority of supply chain actors have ample access to cash, since they themselves receive payments in cash. The overall functionality of the supply chains has not been affected by the lack of cash. The liquidity crisis is felt on the demand side: Consumers cannot access cash at the required amounts and therefore struggle to purchase key household goods.
Given that key commodity supply chains are functioning in Libya, and household access to key goods is consistent, the CMWG concludes that market-based responses are appropriate in Tripoli, Benghazi and Sebha. At a minimum, the CMWG recommends that in-kind humanitarian aid should be procured locally when possible in Libya, as many local markets are able to meet current and increased demand for key commodities. New in-kind humanitarian responses within Libya should answer the question “why not procure through local markets?” when considering the cost-effectiveness and local effects of aid options. Responding organisations should also answer the question “why not cash assistance?” when analyzing response options; broad liquidity issues within Libya have not translated into significant market disruptions for many key goods, and thus cash assistance has the potential to support local economies. Responding organisations should work with financial institutions to address household liquidity issues that limit access to local goods.
The findings detailed above only apply to the assessed locations and supply chains. The conclusions can be generalized neither to all of Libya, nor to other supply chains that were not investigated. Furthermore, due to the challenges posed by the remote context as well as the limited availability of baseline information, some aspects of the supply chains in question may not have been captured. This report aims to provide a foundation for humanitarian programming in Libya and the level of market information needed to provide aid, and should therefore be understood as an effort at closing the wide information gaps that exist and identifying areas for further investigation.