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Lindiwe Majele Sibanda (CEO, FANRPAN) [email protected]
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
2
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”
8
$0
$1
$2
$3
$4
$5
$6
$7
$8
$9
$10
12/3
1/07
Corn
USA Today, 23 October 2008
9
$0
$2
$4
$6
$8
$10
$12
$14
12/3
1/07
Wheat
USA Today, 23 October 2008
10
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
12
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.
15
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
17
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
22
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.
30
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
33
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
35
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
36
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
1
How African Governments have responded to food crisisLong Term Responses
•Making the bread basket / investment (risk sharing)•Who invests in Infrastructure
37
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
38
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
40
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
41
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
42
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
43
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
44
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