1

Agricultural Livelihoods and Food Security: Malawi Agricultural Input

Subsidy Programme and Cash Transfers

Ephraim ChirwaWadonda Consult & Chancellor College, University of Malawi

Andrew DorwardSchool of Oriental and African Studies, University of London

Presented at a Policy Dialogue and a South-South Learning Event on Long-Term Social Protection for Inclusive Growth, Johannesburg, South Africa, 11- 14

October 2010

UNI VERSI TY OF MALAWI

Chancellor College

School of Oriental & African Studies

Outline of Presentation

Role of agriculture in Malawi Agricultural Input Subsidy Programme Cash Transfer Programme Issues and Challenges

2

Role of Agriculture and Challenges in Malawi Agriculture is the main source of livelihoods in rural

Malawi where 88% reside.

Agriculture contributes 35-39% to GDP and generates 90% of the foreign exchange earnings.

Tobacco is the main cash and export crop – generating more than 60% of foreign exchange earnings; 15% of smallholder farmers grow tobacco.

Maize is the main staple food – largely grown by smallholder farmers for subsistence consumption – only 15% is marketed.

Food security in Malawi is largely defined by the availability and access to maize.

3

Johannesburg 11-14 October 2010

Johannesburg 11-14 October2010

4

High poverty rates (50% <$0.40 in 2004)

Small holdings (50% < 1.0ha)

Continuous maize cultivation

Declining soil fertility

Recurring food insecurity

Highly variable maize prices

97% farmers grow maize (half also buyers)

>70% cultivated land under maize

Malawi rural economy: poverty & the low maize productivity trap

Low producer

investment

Unstable maize prices

Low maize & agric

productivity

Consumer ‘lock in’ to low

productivity maize

Low & vulnerable real

incomes

Low demand for non-agric

goods & services

Limited agric. credit

Agricultural Input Subsidy Programme Implemented since 2005/06 season as a targeted programme using

coupons, following a poor harvest in the 2004/05 agricultural season.

The objective is to improve access to and use of fertilizers in order to increase agricultural productivity and food security (national and household food self-sufficiency).

Initially, the subsidy covered both maize and tobacco fertilizers but since 2009/10 only maize fertilizers are subsidized.

Targets poor and vulnerable smallholder farmers with land and able to redeem coupons, and special consideration of vulnerable groups (female/elderly headed, orphans, affected by HIV and AIDS).

Each household receives two fertilizer coupons for 1 bag of 50 kg of basal and 1 bag of 50 kg bag of urea, and a maize seed coupon.

Funded mainly from the national budget, with donor budget support.

5

Johannesburg 11-14 October 2010

Coverage and Size of Programme

6

  2005/6 2006/7 2007/8 2008/9

Households receiving >= 1fertiliser coupons

n/a 54% 59%* 65%

Total fertiliser sales (mt)131,388 174,688 216,553 202,278

Fertiliser cost (US$/mt) 393 490 590 1250

Subsidy % (approx) 64% 72% 79% 91%

Programme cost , net (US mill) 32 73.9 95.4 241.7

Johannesburg 11-14 October 2010

7Johannesburg 11-14 October

2010

Planning &

budgeting

Secure coupon printing

Coupon distributio

n

Beneficiary identificatio

n

Coupon allocation

s

Farmer registratio

n

Coupon redemptio

n

Input distribution (transport &

storage)

Input purchas

e

Coupon issue

Coordination & control

Payments & control

StakeholdersFARMERSMoAFS: HQ, LU, ADDs, DADOs, Ass, FAsDCs, TAs, VDCs, Police, CSOsFertiliser importers, retailersSeed producers, importers, retailersADMARC: HQ, districts, marketsSFFRFM: HQ, depots, marketsTransportersDonors

INPUT USE, PRODUCTION,

FOOD SECURITY

Implementation

achievements

Estimates of incremental maize production over 2002/3 & 3/4, net

exports & prices

9

Other impacts Greater village maize availability (focus group

discussions), lack of evidence of food shortages despite high prices

Significant rising nominal wage rates from 2005/6 (greater than 2006/7 maize prices rises, matched 2005/6 -8/9)

Poverty incidence estimates fallen from 52% in 2004/5 to 40% in 2007/8 and 2008/9

Economic growth impacts? Other contributors are high tobacco prices macro-economic stabilisation good weather

Indicative modelling: poor beneficiary households real income increases of 10% to 100%, poor non-beneficiary households real income increases 0% to 20%

Johannesburg 11-14 October 2010 10

11

Social Cash Transfer Programme Implemented since 2006, first as a pilot in 1 district but it has

been extended to cover a total of 7 districts of 29 districts.

The objectives are to reduce poverty, hunger and starvation among labour constrained and ultra-poor households; to increase school enrolment and attendance.

Uses proxy means test to target: 1 meal per day, begging, no valuable assets, dependency ratio > 3

On average households receive MK1 700 ($12) per month (inclusive of bonus payments for children in primary ($1.4) and secondary ($2.8) school)

Cash transfer costs about $3.6 million and is funded by the Global Fund.

12

Johannesburg 11-14 October 2010

Coverage and Impacts

Reaches about 24 000 households in 7 districts.

Several positive impacts have been attributed to cash transfers

Less incidence of disease compared to control group Low malnutrition rates Greater demand for health care Increased expenditure on children education – 4.9%

higher enrolment Significant accumulation of household assets and

livestock Increased agricultural production High monthly expenditures on food

13

Johannesburg 11-14 October 2010

Issues and Challenges

Institutional challenges – coordination of various programmes, tag of war & vested interests (FISP), lack of registry (multiple access).

Implementation challenges – identification of beneficiaries – high targeting errors.

Financial and economic challenges – huge resources required if all poor and vulnerable households were to be reached.

Design issues – multiple objectives, poor monitoring of outcomes; no graduation benchmarks.

Elite and political capture - everybody claims to be poor in rural areas.

14

Johannesburg 11-14 October 2010

15

THANK YOU FOR YOUR ATTENTION

Ephraim ChirwaWadonda Consult & Chancellor College, University of Malawi

Andrew DorwardSchool of Oriental and African Studies, University of London

Presented at a Policy Dialogue and a South-South Learning Event on Long-Term Social Protection for Inclusive Growth, Johannesburg, South Africa, 11- 14

October 2010

UNI VERSI TY OF

MALAWI

Chancellor College

School of Oriental & African Studies