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Lindiwe Majele Sibanda (CEO, FANRPAN) lmsibanda@fanrpan.org

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

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Outline of Presentation

About FANRPAN Level of the FOOD Insecurity Crisis Policy Responses –Subsidies FANRPAN Studies on Input Subsidies Recovery vs Rescue Plans

FANRPANNetwork Topography

FANRPANRegional

Secretariat

Malawi

Namibia

Mozambique

Tanzania

Mauritius

South Africa

Swaziland

Lesotho

Angola

Botswana

Zimbabwe ZambiaNode Secretariat

GovernmentFarmers

Researchers

CSOs

Private Sector

Madagascar

Membership and Expectations

Government/Policy Makers

Farmers Organisations

Private Sector

Policy Advice/Options/Evidenceto support policy development

Enabling policies – Production toTrade and Markets (Value Chain)

Enabling policies – Production to Markets (whole Value Chain)

Researchers/Policy AnalystsTechnical Partners

Development Partners

Platform for research, analysis and dissemination

Grant worthiness – track record

Media and AdvocacyRallying point for regional

FANR news

FA

NR

PA

N

Co

mm

un

ication

s Strateg

y

FANRPAN Policy networking and Policy ProcessStage of policy process

Objectives Network roles

Agenda setting • Convince policymakers that the issue does indeed require attention

Marshall evidence to enhance the credibility of the argument

Extend an advocacy campaign Foster links among researchers, CSOs and

policymakers

Formulation • Inform policymakers of the options and build a consensus

Collate good-quality representative evidence and act as a ‘resource bank’

Channel international resources and expertise into the policy process

Build long-term collaborative relationships with policymakers

Bypass formal barriers to consensus

Implementation • Complement government capacity

Enhance the sustainability and reach of the policy Act as dynamic ‘platforms for action’

Evaluation • evidence and channel it into the policy process

Provide good-quality representative evidence and feedback

Link policymakers to policy end-users

Underlying • Capacity building for CSOs aiming to influence policy

Provide a dynamic environment for communication and collaborative action

Provide support and encouragement Provide a means of political representation

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

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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”

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$0

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

12/3

1/07

Corn

USA Today, 23 October 2008

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$0

$2

$4

$6

$8

$10

$12

$14

12/3

1/07

Wheat

USA Today, 23 October 2008

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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

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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

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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.

1. To bring about policy changes for enhancing input s to small farmers.

2. To develop training materials for policy analysts to engage in complete policy analysis cycle.

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FANRPAN Studies on Input Subsidies in the southern Africa regionCase 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

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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.

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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.

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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

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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

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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

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Maize production VS national requirement

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BACKGROUND TO 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

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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

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Government Subsidies: The Case of MalawiCROP 2004/05 YIELD

(mt/ha)2005/06 YIELD

(mt/ha)2006/07 YIELD

(mt/ha)

Maize 0.83 1.61 2.04

Rice 0.91 1.75 1.95

Groundnuts 0.57 0.83 1.02

Pulses 0.42 0.62 0.69

Cotton 0.67 0.94 1.04

Cassava 14.27 17.13 18.78

Sweet potatoes 8.08 13.51 15.32

Tobacco 0.51 0.89 0.99

Wheat 0.46 1.20 2.30

Millet 0.30 0.65 0.72

sorghum 0.28 0.77 0.86

Source of data: MoAFS (Ministry of Agriculture office)

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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

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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).

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Subsidy Management structure

INPUT SUBSIDY PROGRAMME SECRETARIAT

MINISTRY OF AGRICULTURE AND FOOD SECURITY MANAGEMENT

ADMARC, SFFRFM AND PRIVATE TRADERS

VILLAGE DEVELOPMENT COMMITTEE

BENEFICIARIES

AGRICULTURE DEVELOPMENT DIVISION

LOGISTICS UNIT

DISTRICT AGRICULTURE

OFFICE

DISTRICT ASSEMBLIES

EXTENSION PLANNING AREA

AREA DEVELOPMENT COMMITTEE

Coupon FlowCommunication and coordination

Registration Process

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Program Expenditures

Description Actual Expenditure % OF Total

Suppliers of fertilizer

10.7 billion 64

Transporters 859 million 5

Redemption of fert. coupons

3.2 billion 19

Redemption of seed Coupon

1.05 billion 6

Operational costs 304 million 2

Other Costs 654 million 4

Total 16.7 billion 100

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Malawi Success Story cont

YEAR NATIONAL REQUIREMENTS (METRIC TONS)

PRODUCTION SURPLUS (DEFICIT)

2004 2.039.291 1.733.125 (306.166)

2005 2.115.317 1.259.332 (855,985)

2006 2.183.506 2.611.486 427.980

2007 2.255.049 3.444.655 1.189.606

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Zambia’s Experience Strategies for promoting increased use of improved inputs

should heed the lessons of the past.

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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.

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Distributing the Subsidy

Targeting

Abuse

Political expediency

Transparency & accountability

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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

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AFRICA: 1970-90s

SCRUBBLE 70s-90s A TIME FOR– war of words in the colonies

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AFRICA: 1990s- Structural Adjustment Programs (SAPS)

A TIME FOR SAPS- SNAKES AND LADDERS & Yo-Yo games

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Policy Responses

Policy action Number of countries

implementing

Probable consequences

Short-term policies

Conditional cash transfers, e.g. cash--for-work, food-for-work programmes

5 Not feasible for low income countries, require high administrative capacities

Self targeted food-for-work programmes

5 Less costly than administrative targeting, physical food transfer may lead to significant leakages

Emergency food aid distribution

4 Physical food transfer may lead to significant leakages, disincentive to producer supply response

School feeding programmes

5 Do not address malnutrition at infancy

How African Governments have responded to food crisis

•Short Term Responses•Knee jerk reaction / striking the match

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Policy Responses

Policy action Number of countries

implementing

Probable consequences

Medium-term

Reduction in tariffs and other taxes (VAT) on key staples

8 Reduction in fiscal revenues

Food consumption subsidies for the poor, e.g. price subsidies, ration card systems, etc.

4 Create disincentives for domestic food producers if entrenched, require high fiscal costs

Bans or taxes on grain exports 5 Limited impact on domestic prices, negative earnings for producers and exporters, sharp price fluctuations for net importing countries

Grain buffer stock policies 5 High fiscal costs – management and governance, price effects not clear

Market based risk management tools, market information systems

1 Private sector involvement, improved market efficiency

How African Governments have responded to food crisisMedium Term Responses

Case of Subsidy / extinguishing the fire

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Policy Responses

Policy action Number of countries

implementing

Probable consequences

Long-term Increased investment in agriculture sector R&D

2

Investments in infrastructure – inland transport links between surplus and deficit areas

2

Support to an equitable international trading system

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How African Governments have responded to food crisisLong Term Responses

•Making the bread basket / investment (risk sharing)•Who invests in Infrastructure

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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

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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)

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Role of CSOsWho What

Ordinary Citizens Demilitarise and empower with evidence to strengthen advocacy and hold GVT to account

Farmer Organisations

Honest , credible leadership, set the agenda communicate issues

Research Organizations

Relevance, Credibility, Consistency, North-South and South to South Partnerships Inter disciplinary and multi-disciplinary teams Longitudinal studies

Private Sector (input suppliers, processors, wholesalers, retailers)

Contribute to policy process in a transparent manner

Media Rallying point for CSO engagement, editorial, opinion pieces, commentaries, features, profiles, hard news, photo journalism, story telling, visual and personally, analysis

Women Empowerment, Have a voice and insist on being heard; Honest representation

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Policy Processes Issue Where we

are nowMedium term: 2010

Long term: 2020

Participation Selected advisors, trusted partisans, donors

-Strengthen multi-stakeholder policy dialogue platforms at local level-Build trust between Gvt and CSOs

Strong networks with space and capacity to engage

Knowledge of the policy process

The elite, educated, technocrats , economists participate

Invest in building capacity of ordinary citizens to participate

CSOs participate and add value to policy processes

Evidence and policy options

Unreliable data, Weak infrastructure for data collectionWeak analytical skills

Invest in longitudinal household surveys, production data, use local researchers to collect data

Evidence is a public good and all citizens have access to information and voice

Long term-proactive planning

Knee jerk reaction

Aligned development agenda

Policies and programmes aligned to common goal

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Monitoring and Evaluation

Agenda Setting

DecisionMaking

Policy Implementation

Policy Formulation

POLICY DEVELOPMENT PROCESSES

Civil Society

DonorsCabinet

Parliament

Ministries

Private Sector

Source: John Young, Networking for impact. Experience from CTA supported regional agricultural policy networks, 2007

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Evidence

Experience & Expertise

Judgement

Resources

Values and Policy

Context

Habits & Tradition

Lobbyists & Pressure Groups

Pragmatics & Contingencies

Factors influencing policy making

Source: Phil Davies Impact to Insight Meeting, ODI, 2005

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What does it take-Go for RED-Networks

External Influences

Political context

EvidenceLinks

Politics and Policymaking

Media, Advocacy, Networking Research,

learning & thinking

Scientific information exchange & validation

Policy analysis, & research

Campaigning, Lobbying

Source: The Rapid Framework. Research and Policy in Development Programme Briefing Paper No1, October 2004

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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

Thank You