Theme: “From Basket Case to Bread Basket: How subsidy reform can help Southern Africa surmount the food crisis” Topic:Some successes and failures of African subsidy policies in the agricultural sector Date:3 November 2008 Lindiwe Majele Sibanda (CEO, FANRPAN) firstname.lastname@example.org
Outline of Presentation About FANRPAN Level of the FOOD Insecurity Crisis Policy Responses –Subsidies FANRPAN Studies on Input Subsidies Recovery vs Rescue Plans
CSOs Farmers Government Private Sector Malawi Zimbabwe Zambia Node Secretariat Namibia Botswana Researchers FANRPAN Regional Secretariat Angola Mozambique Madagascar Tanzania Lesotho Mauritius Swaziland South Africa FANRPAN Network Topography
Membership and Expectations Government/Policy Makers Policy Advice/Options/Evidence to support policy development Farmers Organisations Enabling policies – Production to Trade and Markets (Value Chain) Private Sector Enabling policies – Production to Markets (whole Value Chain) FANRPAN Communications Strategy Researchers/Policy Analysts Technical Partners Platform for research, analysis and dissemination Development Partners Grant worthiness – track record Media and Advocacy Rallying point for regional FANR news
Highlights of Policy Dialogues • CAADP Compact dialogues • Agricultural Inputs (Seeds and Fertilizers) • Land and Water • Food Security (Vulnerability and Targeting) • Trade and Markets • HIV and AIDS • Response to burning policy issues- Biofuels, Climate Change
Food Security Crisis: FOOD, FUEL, FERTILIZER, FINANCIAL • The Food Crisis • Threatens to destroy years of economic progress. • Disproportionately affect the world’s poorest citizens • As many as 100 million people will be affected by the high price of food (World Bank, 2008) • 21 countries hardest hit are in Africa (FAO, 2008). • Fuel price increases • Heightened costs of agricultural inputs -FERTILIZER. • Increased demand for biofuels • Increased of costs of agricultural production • FINANCIAL CRISIS— • Less demand for commodities • Less donor “aid”
Corn USA Today, 23 October 2008
Wheat USA Today, 23 October 2008
Goal & Purpose of Subsidies • Definition of Food Security • Accessibility • Availability • Utilization • A Food Secure Africa Free From Hunger and Poverty • Profitable enterprises along the whole agric. value chain: (inputs, farming, processors, wholesalers, retailers, households, etc.) • A condusive policy environment for all Players • The case of strategic grain reserve
Why subsidise? To promote adoption of new technologies thus increase agricultural productivity Give farmers access to Fertilisers and improved seeds at lower cost=reduction in disincentives to adoption that stem from farmers’ cash constraints, risk aversion and low expectations of returns from investments in inputs. To encourage economically and technically efficient use of inputs. Means for raising farm incomes, particularly where farmers were being taxed in other ways through export tariffs and low fixed domestic prices
FANRPAN’s Work on Subsidies • In 2006 FANRPAN with the support of USAID commissioned a study on “The Potential Of Using An Input Voucher System To • Integrate The Commercial And Non-commercial Input • Distribution Systems: Malawi, Mozambique Zambia Lesotho Swaziland” • The objectives of the study • To test the potential benefits of using voucher systems to integrate the commercial and non-commercial input distribution channels. • To demonstrate the potential impact of implementing a full cycle of policy research, analysis and engagement, using the case of seed and fertilizer input vouchers. • To bring about policy changes for enhancing input s to small farmers. • To develop training materials for policy analysts to engage in complete policy analysis cycle.
FANRPAN Studies on Input Subsidies in the southern Africa region Case study programmes by country Malawi • Emergency Cash Transfers • Input Subsidy Programme • Public Works Programmes Mozambique • Food Assistance Programme • Food Subsidy Programme • Input Trade Fairs • Education Material Fairs Swaziland • Neighbourhood Care Points • Public Assistance Grants • Chief’s Fields • Food and Inputs for OVC Zambia • Food Security Pack • Social Cash Transfer Pilots Zimbabwe • Small Livestock Transfers • Rural Micro-Finance • Urban Food Programme
Agricultural input subsidies 1960s and 70s Agriculture input subsidies a common element in agricultural development in poor rural economies Responsible for successful green revolutions such as the in the Asian green revolution. 1980s and 90s Dominant donor thinking- subsidies seen as ineffective and inefficient policy instruments in Africa, Subsidies seen as contributing to government over- spending and fiscal and macro- economic problems. 2000-2008 A resurgence of interest in agricultural input subsidies in Africa, emergence of innovative subsidy-delivery systems.
MALAWI Story Malawi’s economy - agro based with 85% depending and surviving on subsistence farming. Agriculture sector generates over 90% of the country’s export earnings. Contributes 40% of the GDP. Smallholder sector with 3.2 million households – less than 1 ha of land. Smallholder sub-sector dominates with a contribution of 75% of the food crop production in the country. Since Malawi got independence in 1964, the agricultural sector has undergone through several policy reforms.
Malawi Success Story cont Objectives of AISP Long term Improve national food security Immediate Improve accessibility and affordability of agricultural inputs among the most vulnerable farmers in the country
Malawi Success Story Agricultural policy reforms: 2004/2005 Political commitment to implement the Input Subsidy Programme 2005-2007 the Agricultural Input Subsidy Programme (AISP) launched- financed by Government of Malawi, DfID, Norway, EU, WB, Irish aid, UNDP
Main Goal for ISP The main objective of ISP Improve national food security The immediate objective Improve accessibility and affordability of agricultural inputs among the most vulnerable farmers in the country
BACKGROUNDTO ISP 2005/2006 ISP 147,000 mt of fertiliser for both maize and tobacco production A surplus of approximately 500,000 mt of maize 2006/2007 ISP 176,000 mt of fertiliser 156,000mt for maize growers 20,000 mt for tobacco growers A surplus of about approximately 1.1 million mt of maize 2007/2008 ISP 216,500 mt of fertiliser 193,000 mt 23,500 mt A surplus of about approximately 500,000 mt of maize has been produced Current food requirement – 2.4 million metric tonnes
Malawi Success Story: SUBSIDY OR RISK SHARING • Value of the pack • Government contribution per target household: • tWO 50KG bags fertilizer • 2 bags seed • Expected harvest: 1-3 tons maize • Landed maize cost per ton: USD 284
Government Subsidies: The Case of Malawi Source of data: MoAFS (Ministry of Agriculture office)
Malawi Success Story cont 2005/2006 ISP 147,000 mt of fertiliser for both maize and tobacco production A surplus of approximately 500,000 mt of maize 2006/2007 ISP 176,000 mt of fertiliser 156,000mt for maize growers 20,000 mt for tobacco growers A surplus of about approximately 1.1 million mt of maize 2007/2008 ISP 216,500 mt of fertiliser 193,000 mt 23,500 mt A surplus of about approximately 500,000 mt of maize has been produced Current food requirement – 2.4 million metric tonnes
Managing the subsidy--COUPON DISTRIBUTION • Dates are announced in advance for the beneficiaries to gather at an open fora • Those registered receives the coupons as follows: • Maize growing – NPK (23:21:0 + 4S), Urea & Maize seed coupons • Tobacco – D Compound (8:18:15) & CAN • Others – flexible coupons (cotton, ground nuts, common beans, soya beans, pigeons peas).
Subsidy Management structure MINISTRY OF AGRICULTURE AND FOOD SECURITY MANAGEMENT INPUT SUBSIDY PROGRAMME SECRETARIAT LOGISTICS UNIT AGRICULTURE DEVELOPMENT DIVISION DISTRICT ASSEMBLIES DISTRICT AGRICULTURE OFFICE ADMARC, SFFRFM AND PRIVATE TRADERS AREA DEVELOPMENT COMMITTEE EXTENSION PLANNING AREA BENEFICIARIES VILLAGE DEVELOPMENT COMMITTEE Coupon Flow Communication and coordination Registration Process
Zambia’s Experience Strategies for promoting increased use of improved inputs should heed the lessons of the past.
Zambia’s Experience cont Subsidies went to relatively wealthy farmers rather than intended beneficiaries. Program difficult to implement input subsidy extremely high costs, undesirable market and distributional effects.
Distributing the Subsidy • Targeting • Abuse • Political expediency • Transparency & accountability
Unpacking the Africa’s Policy Responses • The challenges we face • Subsidies to boost the performance of farmers • Subsidies to keep food costs below market prices • Entry point vs. End point • The Yoyo Policy Games
AFRICA: 1970-90s SCRUBBLE 70s-90s A TIME FOR– war of words in the colonies
AFRICA: 1990s- Structural Adjustment Programs (SAPS) A TIME FOR SAPS- SNAKES AND LADDERS & Yo-Yo games
Policy Responses • How African Governments have responded to food crisis • Short Term Responses • Knee jerk reaction / striking the match
Policy Responses • How African Governments have responded to food crisis • Medium Term Responses • Case of Subsidy / extinguishing the fire
Policy Responses • How African Governments have responded to food crisis • Long Term Responses • Making the bread basket / investment (risk sharing) • Who invests in Infrastructure
Living in Interesting Times: 2003-2015 SUDOKU games- Business of numbers: 10% national budgets to agric sector; 6% annual growth for sector NEPAD CAADP- Africans driving an African agenda
Leapfrogging from Subsidies to Investment • 2008 food crisis and plus 3 “F”s (Fuel, Fertilizer, Financial) calls for lasting solutions and not rescue plans • Bold visionary leadership • Investment in infrastructure • Institutional reforms • Credible data for policy development • Home grown solutions (optimize on local resources (human and financial) and with AID for gap filling • Evidence Backed Advocacy (policy dialogues, radio, TV, print, online)
POLICY DEVELOPMENT PROCESSES Cabinet Donors Policy Formulation Parliament Agenda Setting Decision Making Civil Society Ministries Monitoring and Evaluation Policy Implementation PrivateSector Source: John Young, Networking for impact. Experience from CTA supported regional agricultural policy networks, 2007
Factors influencing policy making Experience & Expertise Pragmatics & Contingencies Judgement Lobbyists & Pressure Groups Evidence Resources Values and Policy Context Habits & Tradition Source: Phil Davies Impact to Insight Meeting, ODI, 2005
What does it take-Go for RED-Networks External Influences Campaigning, Lobbying Policy analysis, & research Scientific information exchange & validation Political context Politics and Policymaking Media, Advocacy, Networking Research, learning & thinking Links Evidence Source: The Rapid Framework. Research and Policy in Development Programme Briefing Paper No1, October 2004
Tightening the Loose Screws • TARGETTED INPUT SUBSIDIES ARE INVESTMENTS-RISK SHARING • Being politically sensitive and professionally astute • The Global Food Crisis: Brings The Subsidy Debate to Full Circle • LEARN & BUILD ON SUCCESS CASES