AGRICULTURAL RISK MANAGEMENT FOR GROWTH & FOOD SECUIRTY IN MALAWI

Lilongwe, October 1, 2015The World Bank

Why do we analyze data and trends?

World Bank methodology applied around the world

Provides an overview of what major risks are (production, marketing, enabling environment)

Gives an understanding of how frequent the risks are

Shows the scope of the major risks

Shows resources allocated to risk management

Sector-Wide Agricultural Risk Assessments

Why do we analyze data and trends?

- Risks differ from constraints and trends!

- To capture systemic risks to the whole sector, we look at:

– Production Risks

– Market Risk

– Enabling environment risks

- We look at biggest commodities that together account for 80% of GAO and assess risks over the past 30 years

Risk Assessment Approach

MAIN FINDINGS FROM AGRICULTURE SECTOR RISK ASSESSMENT IN MALAWI

Systemic Risks to Malawi’s Agricultural Sector

• Droughts (all major crops, in particular maize, cassava, potato, and tobacco)

• Pests and Diseases

• Price Volatilities (maize, tobacco, cotton)

• Government Interventions (maize)

Cassava Maize

Potatoes

Tobacco,

Sugar Cane

Groundnuts

Beans

Pigeon Peas

Bananas

Rice

TeaCotton

(200.00)

-

200.00

400.00

600.00

800.00

1,000.00

1,200.00

1,400.00

1,600.00

0.00 0.10 0.20 0.30 0.40 0.50 0.60

Loss

es

pe

r C

rop

(m

illio

n U

SD)

Frequency of Losses

Production losses in Malawi add up to US$150 million /year over the past 30 years*) I should be noted that the production data upon which these estimates are based (yield and area data) is debated in Malawi and that cassava losses therefore may be over estimated.

Production Losses to the Sector

Risks Have Direct Impacts On Malawi’s GDP (1968-2014)

Solutions Should be Risk Management, not Risk Response

100

1510

0

20

40

60

80

100

120

m US$

RM allocation and Losses (m US$)

Risk mitigation Losses Coping mechanisms

Ideally….

Additional positive effects are productivity increases and more stable business climate

0

20

40

60

80

100

120

140

160

Mitigation Losses Coping

Costs of Mitigation and Coping in Malawi

MITIGATIONIrrigationExtensionResearch

COPINGNFRAWFPDODMAADMARC

Solutions Areas Agreed with the Ministry

1. On-farm risk mitigating technologies and practices: What are the obstacles to uptake?

2. Mechanisms for Food Security Interventions: How can coordination and decision-making be improved?

3. MoAIWD capacity to effectively respond to agricultural risks: How can policy formulation and analysis be strengthened?

ON-FARM RISK MITIGATING TECHNOLOGIES AND PRACTICES: OBSTACLES TO UPTAKE

Root Causes Behind Poor Uptake

Government coordination of donors/NGOs and coordination between donors/NGOs & government

Project designGender Extension Seed System Limited Access to Finance Limited Access to Markets

Stronger leadership by the Ministry is needed in the sector for individual interventions to be sustained and for investments to take off

Incentives for Investments?

• Farm budgets from 2008 and 2014: maize, groundnuts, beans

• Nominal prices increased for all three crops in this period • BUT maize prices did not keep up with prices for inputs in

this period => gross income declined in this period.

Note: Incomes are based on production with improved inputs;the ranges in gross income reflect different practices and labor inputs, including for CA

STRENGTHENED COORDINATION BETWEEN THE SGR, ADMARC, MVAC, & DODMA

Main Findings

Export ban affects farm-gate prices but retail prices tend to follow regional prices later in the season when consumer demand increases – this also during good harvest years

High intra-annual and monthly price volatility in Malawi compared to other countries in the region

The coefficient of variation (CV) 2007-2014 of average monthly prices: Malawi: 62%Sub-Saharan Africa: 36%Zambia: 24%

Limited price differences between surplus areas and deficit areas

What Distort Prices?

• Interventions are not guided by rules or triggers (e.g. procurement, ADMARC’s interventions)

• Timing of procurement leads to distortions and are more costly than necessary

• No transparency in the system – costs are not clear, interventions and prices are not systematically reported

• Impacts (positive or negative) of interventions are not evaluated

What Are the Costs to the Sector?

Results of the Policy Analysis Matrix (PAM)

BETTER INFORMATION FOR BETTER POLICY MAKING AND M&E

Important Gaps

• Information systems are inadequate for effective policy making and M&E – difficult to assess exactly what is needed and what are the results of interventions

• Result in misaligned and sometimes contradictory policies (e.g. for productivity and food security)

• Communication is poor between and within of institutions

• Actors are poorly coordinated in the sector and interventions are often not aligned

Policies Are Implemented But What Are The Impacts?

RECOMMENDATIONS

Institutions, institutions, institutions…Strengthen policy capacity in ministry by Better information systems (e.g. AMIS, registers, production data, agriculture health

data, subscribe to regional data; define farm HH) Better communication back from the field Systematic M&E of policy

Food Security Agencies for non-distortive support in times of need Rule-based management and interventions, e.g. by triggers Align procurement with the agriculture year and make it predictable Move towards a combination of virtual (call options, etc.)-physical SGR Remove trade bans Revised and strengthened roles of ADMARC and DODMA

Coordination of activities Develop system for coordinating agriculture activities between actors (or build on data-base in MoF) Develop GAP Manual to standardize ag. principals for Malawi Strengthen communication between Public Agencies

All Under One Umbrella

Food Security: Availability and Access

Productivity and Resilience

Emergency Preparedness

Good risk management is often win-win => strengthened productivity and competitiveness

Thank You!