Agricultural Subsidies & Input voucher Program
FANRPAN Partners Meeting
24th June 2009
Pretoria
[email protected]
www.fanrpan.org
www.fanrpan.org
Background
• Agriculture plays a vital role in economic
development and is central to rural
development and alleviation of poverty
amongst the rural people
• Agricultural sector provides
– Raw material to industrial sector
– Creates employment
– Major input in human development and
economic growth
www.fanrpan.org
Slow growth
• By the turn of century Fertilizer use in Africa was
only 8 kg/ha, compared with 96 kg/ha in East
and Southeast Asia and 101 kg/ha in South Asia
• Today, Africa accounts for less than 1% of
global fertilizer consumption.
• The failure to promote fertilizer was attributed to:
– high and unsustainable fiscal and administrative
costs, governments' weak capacity to implement
programs, and governments' inability to take account
of the diversity of production systems and farmers'
needs. (World Bank report)
www.fanrpan.org
Other Reasons for low growth rate
• Poor infrastructure and related high transport
costs (for both inputs and surplus production),
• Inadequate institutional support (credit and
extension),
• Political instability,
• Diverse agroecological complexities,
• Low fertilizer use, and the limited availability of
suitable high-yielding varieties have all
contributed to low agricultural productivity
growth in Africa
www.fanrpan.org
Continued
• The decline in performance lead to
government, donor agencies and NGOs to
initiate a number of interventions to
support smallholder farmer
• The purpose
– To increase agriculture productivity
– Ensure food security
www.fanrpan.org
Interventions
•
•
•
•
•
Emergency relief programs
Subsidies on agricultural inputs
Use of cash
Seed voucher
Food for work
www.fanrpan.org
Policy change
• Donors, led by the World Bank, argued for the abolition
of state-led interventions including subsidies
• As a result, many government input supply agencies
were dissolved or privatized. Under these
circumstances, fertilizer costs rose sharply and
constrained adoption of fertilizer use by small-scale
farmers
• This policy failure caused a serious reassessment
among governments, creating the setting for a return to
subsidies as a potential intervention for promoting food
security and agricultural growth
www.fanrpan.org
The Malawi Input Voucher
• Emerging from the worst harvest in a decade
(2003-2004) creating 43% deficit
• In May 2005, the Malawi Vulnerability
Assessment Committee concluded that over 4.2
million people required food aid.
• The food situation was deteriorating rapidly, and
a major humanitarian relief operation began.
• By November 2005, as the maize prices in local
markets continued to rise, the estimate went up
to 5 million Malawians—38% of the population—
in need of food aid
www.fanrpan.org
Continued
• In response to recurring food deficits, the Government
decided to invest in subsidizing agricultural inputs
• This policy attracted objections from some major donors
who were concerned about the potential cost and the
absence of a clear exit strategy
• At the Africa Summit of the World Economic Forum in
Cape Town, South Africa, referring to the situation in
Malawi in 2005 and his commitment to act and provide
input subsidies, President Bingu wa Mutharika said:
“Enough is enough. I am not going to go on my knees to
beg for food. Let us grow the food ourselves.
www.fanrpan.org
Determination
• Government of Malawi implemented one of the
most ambitious and successful assaults on
hunger in the history of the African continent.
• Through a national input subsidy program,
coinciding with better rainfall conditions, maize
production doubled in 2006 and almost tripled in
2008/09
• Malawi's recent experience may provide
important lessons for achieving food security
through smallholders in Africa
www.fanrpan.org
Results
• Seventy-six percent of farmers opted for the higheryielding hybrids over the less expensive OPVs ,
challenging perceptions among some donors and
nongovernmental organizations that hybrid varieties
were inappropriate for small-scale farmers
• The 2006–2007 harvest was estimated at 3.44 million t,
an all-time national record for Malawi, generating a
surplus of about 1.34 million t of maize grain above
national requirements
• The incremental effect of the fertilizer subsidy on maize
production was estimated at 670,000 t for 2006–2007,
valued at US$117 million in additional crop production,
assuming a maize producer price of US$175/t.
www.fanrpan.org
Continued
• The total program cost in 2006–2007 was US$72 million
, approximately US$62 million of which was directed to
maize fertilizer and seed costs.
• By late 2007, Malawi had exported over 300,000 t of
maize to Zimbabwe, not only generating income for its
smallholder farmers, but contributing to regional food
security
• The 2005–2006 crop- the average price dropped by
61%. And dropped further in the 2006–2007 benefitting
the maize consumer
• These results suggest that the maize consumers in
Malawi have benefited from the successive strong
harvests and the related price declines
www.fanrpan.org
Continued
• An associated decline in the price of maize conveys
important benefits to low-income urban and rural
households that are net food consumers.
• This outcome is fully consistent with experience in Asia
and suggests an important potential impact of seed and
fertilizer subsidies on food security for the poorest
households that are net consumers even after good
harvests
www.fanrpan.org
Studies
• Enhancing Food Security in Southern
Africa: Lessons from Malawi’s Input
Subsidy Programme (2008)
• Input Voucher study In Swaziland (2008)
• Input voucher study in Zambia (2008)
• Input Voucher study in Mozambique
(2008)
• Input Voucher study in Lesotho (2008)
www.fanrpan.org
Objectives of the studies
• To document experiences and assess the feasibility of
using input vouchers to support smallholders to improve
agricultural productivity
• To establish, through consultative process the interest of
stakeholders in Input voucher
• To understand the input supply program in Malawi with
respect to cost and benefits
• To develop detailed plans and achieve commitment from
stakeholder
• To demonstrate the potential impact of integrating relief
and commercial seed and fertilizer distribution channel
www.fanrpan.org
Mozambique
• Increased purchasing power for farmers
that are aware of the benefits of the
agricultural inputs (seed Voucher fairs)
• Has allowed farmers to buy agricultural
inputs of their choice
• Revealed farmers’ preferences and
allowed suppliers to respond to farmers’
demand (improving trade)
• Assisted the emerging local input dealers
to invest on their businesses.
www.fanrpan.org
Swaziland
• Improved food security at household level
• Increased participation of private sector
leading to increased sales volume
• Increased the operational base on input
dealers and created employment
www.fanrpan.org
Lesotho
• Ensured proper selection and registration
of both beneficiaries and suppliers at the
fairs.
• Voucher verification before payment has
minimized fraud
www.fanrpan.org
Zambia
• Helped to open up new markets for private
sector in remote areas
• Increased volume of business
• However it has been noted that if vouchers
were used operation of the overall input
market would be improved
www.fanrpan.org
Malawi
• Malawi has broken from what has become a
norm
in
the
Southern
Africa
region,
commitments that are not followed through.
– Met and exceeded the CAADP target 14% of national
budget
– Met and exceeded agricultural growth target per
annum of 6% to 11.9%
– Increased national productivity from 800kg/ha to
2250kg/ha
www.fanrpan.org
Continued
• 2ndly, Malawi has proved that despite the many
challenges facing smallholder African
agriculture,
– it is possible to increase smallholder crop productivity
through existing technologies.
– success in maize production shows that the situation
facing the rural poor is not beyond the capability of
governments to address.
– National food self-sufficiency can be attained through
the smallholder sector
www.fanrpan.org
Improving Agricultural Productivity and Nutrition of Poor
Rural
Political resolve can contribute to food security
1995-99
2000-05
Agriculture Share in Budget:
8.9%
6.13%
2006-07
12.10%
2007-09
14%
The policy shift needed a financial commitment that has seen increase in
agriculture budget to 14% of the national budget and 60% of it allocated
to ISP.
Malawi Maize production surpluses over the last six years:
2003/04
Surpls(MT) (.2million)
04/05 05/06
06/07
07/08
08/09
(.8million)
1.3million
.5million
1.2million
.5million
In recognition of the above achievement
–
Inaugural FANRPAN Annual Food Security Policy Leadership Award
presented to His Excellency Dr. Bingu wa Mutharika President of Malawi,
2008
•
FANRPAN Documented the Malawi Input Voucher Programme – “The
Malawi Success Story”
www.fanrpan.org
Overall Outcome
• Use of vouchers have potential to integrate commercial
and non-commercial input distribution systems
• Evidence on the increased and timely access to inputs
• Evidence on Increased agricultural productivity
• Increased purchasing power for farmers
• Input voucher program is a market-smart form of subsidy
• Increased sales volume for example in Malawi hybrid
maize seed rose from 4,000mt to 6,700mt in 2006/07
• Increased fertilizer application from 17% in 2005 to 30%
of the rural household in 2006
www.fanrpan.org
Overall outcome
• Increased smallholder maize yield from
less than 1.0mt/ha in 2005/06 to 2.25mt
/ha in 2008/09
• Increased maize surplus from 0.5million
mt to 1.2 million mt in 2008/09
• Between 2005 and 2006 the number of
people below the poverty line in Malawi
declined from 50% to 45%
www.fanrpan.org
Significant of Malawi Experience
• Malawi experience demonstrates several points that are
significant for the Southern Africa region.
– That the right investments done in the right way under the right
circumstances can produce the desired results;
– Southern Africa is not doomed to remain in food deficit;
– Policy makers can make a difference;
– Hunger and dependence on food aid can be reduced; and
• Support mechanisms for smallholder farmers can be
integrated with market development
– to address the dual goals of increasing agricultural productivity
and developing agro-input markets.
www.fanrpan.org
Challenges
• Accurate targeting of beneficiaries
• Lack of monitoring of voucher
beneficiaries to evaluate impact
• Compromise on inputs quality
• Late decisions leading to late delivery
• Uncertainty with its continuity
• Logistical
• Political interference
www.fanrpan.org
Need to continue
• Policy development is dynamic, exciting
and challenging but also full of
uncertainties.
• Policy continues to be influenced by
external and internal factors and also
government agenda of the time and in
most cases there is no holism
www.fanrpan.org
A Study of the Impact of ISP Fertilizer and
Hybrid Seed
On Livelihood in Malawi/Zambia
www.fanrpan.org
Back ground
• The Malawi government call
– Evidence to support research in informing
policy makers and other players in the
agricultural inputs trade
• The need, was to build credible evidence
on the
– impact of the ISP fertilizer and hybrid seed on
people’s livelihood
– This is critical if the ISP is to influence future
food security policy decisions.
www.fanrpan.org
Response
• FANRPAN has commissioned a comprehensive study
– to establish the impact of the ISP fertilizer and hybrid
seed on people’s livelihood in Malawi.
– to capture evidence and draw lessons to inform
policy direction
– to contribute towards achieving improved food
security at national level
– to inform policy development and direction
– Identify farmers and track them for three consecutive
years in order to tell a complete story
–
www.fanrpan.org
The results
• Impact of ISP on HH food Security
•
•
•
•
•
65% having adequate food for the whole year
35% need to buy during lean period
60% had three meals per day
34% had two meals per day and 3% had 1 meal
75% of the HH had been food secure for the 7 days of
the study
• Increase in rural household income
www.fanrpan.org
Farmer case studies
Production from ISP Fertilizer and Hybrid Seed
No of
people in
HH
Village
2007/2008
production in kg
2008/2009
production in kg
Raphael Chirwa
4 Jasten
500
1500
1000
Grace Nkhata
5 Kapeta
0
300
300
0
Weston Kawani
5 Njaya
1700
1850
150
0
Elliot Africa
8 Jasten
0
750
750
160
90
14400
Martin Chiputula
5 chaputula
100
250
150
450
90
40500
Beneficiary
Change
Additional
Food
unit
cost
Total
spent
www.fanrpan.org
Zambia
• Only 24.1% of smallholder farmers have access
to fertilizer (15.4% commercial and 8.7% FSP)
• 795,000ha fertilized and 1,131,000ha not
fertilized
• Average yield fertilizer users 2.4mt/ha and non
users 1.3mt/ha
• Fertilizer users have higher asset value
• Increased income for those with surplus maize
www.fanrpan.org
Common issues
• Need to investment more in research and
extension
• Need to develop distribution channels
(agro dealer network)
• Promotion of new technologies
• Investment in grain storage to reduce Post
harvest loses
www.fanrpan.org
FANRPAN ACTION RESEARCH
• To inform food security policy development and direction
aimed to achieve improved management of ISP
• Pilot and document the process of integrating the
FANRPAN HVI and Input Vouchers in three countries
(Lesotho, Malawi and Swaziland)
• Draw lessons to inform welfare support intervention
practices and policies, and improve stakeholder knowledge
on developing market-based instruments
www.fanrpan.org
Thank you
www.fanrpan.org