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In Malawi the coupon system for agricultural inputs seems to offer the only practicable way for poorer members of the community to ‘kill Njala’. But for how long should the subsidy on inputs be maintained?

IS 'NJALA' DEAD OR JUST RESTING?

The village leader drew his hand across his throat in a menacing manner at a recent meeting which I attended and announced “Njala is dead”. The announcement was met with cheers from the assembled farming families who had just harvested their second bumper crop of maize in two years and had recently been through the least stressful “hungry season” that most people can remember, with cheap maize available in markets across the country.
This happy situation is a result of the government’s decision to make two vital farm inputs available to a far wider section of the rural community by drastically lowering the price. The inputs are, of course, fertiliser and good quality seed. These two, in combination, have enabled the rest of the world to feed itself, despite a trebling of the population over the past fifty years. Only Africa has failed to dramatically increase its use of fertiliser and only in Africa has food production not kept pace with population growth. The dramatic change in household maize availability in Malawi in 2006/07 bears witness to the crucial role which fertiliser and good seed play in farming to-day.
But, you may say, there have been companies in Malawi selling both fertiliser and good maize seed for many years so why do farmers have to be subsidised in order to buy it? What happens in the rest of the world, do other farmers have to be helped in the same way?
The answer is that they certainly do, and subsidies of one kind or another are a common feature of farming from China to the United States. A useful way of assessing how farmers are helped elsewhere is to look at how much grain a farmer has to sell in order to buy a given amount of fertiliser. If we take the case of urea (a popular fertiliser in Malawi), then in Europe a farmer would have to sell 46 kg. of wheat to buy a 50kg bag of urea. In the U.S. the figure has been around 80kg. of grain and in India a farmer would need to sell 92kg. of rice to buy the same amount of fertiliser. In Malawi at the full price of urea and the current price of maize a farmer needs to sell 300 kg. of maize to buy a bag of urea. With a subsidised price of fertiliser of K950 per bag a farmer now only has to sell 80kg. of maize to buy a bag of urea. The government has therefore put Malawian farmers in the same position as maize growers in the U.S. This would not seem to be an unreasonable strategy and one which should attract support rather than criticism.

The Critics
If the subsidy on fertiliser and seed over the past two seasons has had such a striking impact on the welfare of so many Malawian families why should it be subject to so much criticism? The critics tend to fall into two groups.
Firstly there is a basic objection on the part of some donors to any subsidy for Malawian farmers. It is difficult to fully grasp the basis of this criticism. It comes from people who heavily subsidise farmers in their own countries and have done so for at least half a century. The same people would be generous in contributing to an emergency feeding programme which provided free food to rural families in the case of shortfalls in production, such as have occurred in the early years of this century. They will give food free to families but object to helping the same families to produce the food for themselves. Their basic reason for this position is that “subsidies are too costly and are not sustainable”. In fact the cost of the subsidy on the 153,000 tons of fertiliser allocated to the maize programme in the past season worked out at $4 per head for every person in Malawi. This is a small fraction of total donor support to the country and would seem to be a small price to pay for seeing the majority of rural people saved from serious hunger for a whole year. If 400,000 tons of maize are successfully sold to our neighbours then the cost per person will be even lower. One has to ask whether importing thousands of tons of food aid every year is more sustainable than enabling farmers to adequately feed themselves and the nation with the help of a subsidy.
The second range of criticisms concerns the actual implementation of the programme and here there is more justification. Was the procurement and distribution of the fertiliser transparent and free from corruption? Was the fertiliser available at the right time so that it would provide the maximum benefit? Was the allocation of coupons to different districts both logical and fair? Did all the coupons go to the intended recipients? These are the obvious questions that have to be asked and the answer to each is that there were certainly failings and weaknesses which have to be dealt with in future years if the initiative is to retain its credibility. The important point is that despite these failings in implementation the country was clothed in green maize in February for two years running, many more people were able to feed themselves from their own production and the price of maize in the market for the large number of poor people who have to buy food from November onwards was more affordable than it has been for many years.
A different kind of criticism comes from those who claim that the subsidy programme is focussed on food security rather than economic development. It is quite true that food security for the majority of the population is at the heart of this initiative, but one can hardly separate that from economic development. Do people really believe that a population in which a majority of its members can think of little else but how to feed their families for five months a year, which all too often goes to bed hungry and whose children are inadequately fed and stunted provides a sound foundation on which to build economic growth? Surely it is only when serious food insecurity at the household level has been properly overcome that the population will be able to turn its energies to other activities which will promote economic growth. Killing “njala” is a vital prerequisite for national development.

Where do We Go from Here?
Two main issues are under discussion as policy makers consider the future of the subsidy initiative. The first concerns how it should be organised. One group says “Let us have a general subsidy on fertiliser so that everyone can just go to a store and buy the product at the subsidised price.” Such a policy would have two predictable outcomes.
Firstly, based on the experience of other African countries which have adopted this approach, a lot of fertiliser would go over the border into neighbouring countries where prices are higher.
Secondly there would have to be a limit to the amount which could be subsidised and the wealthier members of the farming community with the most ready cash would soon buy up the available fertiliser leaving the poor to face low yields from unfertilised fields.
The next group says “Let it be allocated to farmers’ clubs.” This was the policy of the 1980’s and the result was that the poorer farmers who have never belonged to farmers’ clubs did not get any share of the fertiliser. If the nation wants household food security for the majority of its people through the use of fertiliser and good seed then farmers clubs, which will never involve the majority of the poor, will not be the right channel to achieve that goal.
That leaves us with the coupon system now in use which seems to offer the only practicable way of ensuring that poorer members of the community will get access to these inputs which are so vital to their welfare. Obviously there is plenty of room for improving on the timeliness and fairness of the distribution of the coupons but they appear to represent the best method of ensuring that subsidised inputs reach the intended beneficiaries..
The second issue is for how long should the subsidy on inputs be maintained. If we look at other countries we find that subsidies have been in place for decades and yet there are those in Malawi who are already demanding an “exit strategy” for the initiative. There is no sign that fertiliser prices will do anything but go up in the foreseeable future and there is equally no indication that the majority of Malawian households will gain access to sufficient money to buy fertiliser and good seed at its full price at any time soon.
Well informed observers are suggesting a 15 year trial period to provide a foundation of broad based food security on which to build economic development. This would seem to be a minimum timeframe for Malawi to break out of years of food shortages which have dogged the poor. What is quite certain is that if the current subsidy initiative is ended, and farmers have to pay the full price for the inputs which can transform their lives, then njala will prove that he is certainly not dead but just resting and ready to leap back into action once more.

Steve Carr