1 Agricultural Livelihoods and Food Security: Malawi Agricultural Input Subsidy Programme and Cash Transfers Ephraim Chirwa Wadonda Consult & Chancellor College, University of Malawi Andrew Dorward School of Oriental and African Studies, University of London Presented at a Policy Dialogue and a South-South Learning Event on Long-Term Social Protection for Inclusive Growth, Johannesburg, South Africa, October 2010 School of Oriental & African Studies

Outline of Presentation  Role of agriculture in Malawi  Agricultural Input Subsidy Programme  Cash Transfer Programme  Issues and Challenges 2

Role of Agriculture and Challenges in Malawi  Agriculture is the main source of livelihoods in rural Malawi where 88% reside.  Agriculture contributes 35-39% to GDP and generates 90% of the foreign exchange earnings.  Tobacco is the main cash and export crop – generating more than 60% of foreign exchange earnings; 15% of smallholder farmers grow tobacco.  Maize is the main staple food – largely grown by smallholder farmers for subsistence consumption – only 15% is marketed.  Food security in Malawi is largely defined by the availability and access to maize. 3 Johannesburg October 2010

4  High poverty rates (50% <$0.40 in 2004)  Small holdings (50% < 1.0ha)  Continuous maize cultivation  Declining soil fertility  Recurring food insecurity  Highly variable maize prices  97% farmers grow maize (half also buyers)  >70% cultivated land under maize Malawi rural economy: poverty & the low maize productivity trap Low producer investment Unstable maize prices Low maize & agric productivity Consumer ‘lock in’ to low productivity maize Low & vulnerable real incomes Low demand for non-agric goods & services Limited agric. credit

Agricultural Input Subsidy Programme  Implemented since 2005/06 season as a targeted programme using coupons, following a poor harvest in the 2004/05 agricultural season.  The objective is to improve access to and use of fertilizers in order to increase agricultural productivity and food security (national and household food self-sufficiency).  Initially, the subsidy covered both maize and tobacco fertilizers but since 2009/10 only maize fertilizers are subsidized.  Targets poor and vulnerable smallholder farmers with land and able to redeem coupons, and special consideration of vulnerable groups (female/elderly headed, orphans, affected by HIV and AIDS).  Each household receives two fertilizer coupons for 1 bag of 50 kg of basal and 1 bag of 50 kg bag of urea, and a maize seed coupon.  Funded mainly from the national budget, with donor budget support. 5 Johannesburg October 2010

Coverage and Size of Programme /62006/72007/82008/9 Households receiving >= 1fertiliser coupons n/a54%59%*65% Total fertiliser sales (mt) 131,388174,688216,553202,278 Fertiliser cost (US$/mt) Subsidy % (approx)64%72%79%91% Programme cost, net (US mill) Johannesburg October 2010

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Planning & budgeting Secure coupon printing Coupon distribution Beneficiary identification Coupon allocations Farmer registration Coupon redemption Input distribution (transport & storage) Input purchase Coupon issue Coordination & control Payments & control Stakeholders FARMERS MoAFS: HQ, LU, ADDs, DADOs, Ass, FAs DCs, TAs, VDCs, Police, CSOs Fertiliser importers, retailers Seed producers, importers, retailers ADMARC: HQ, districts, markets SFFRFM: HQ, depots, markets Transporters Donors INPUT USE, PRODUCTION, FOOD SECURITY Implementation achievements

Estimates of incremental maize production over 2002/3 & 3/4, net exports & prices 9

Other impacts  Greater village maize availability (focus group discussions), lack of evidence of food shortages despite high prices  Significant rising nominal wage rates from 2005/6 (greater than 2006/7 maize prices rises, matched 2005/6 -8/9)  Poverty incidence estimates fallen from 52% in 2004/5 to 40% in 2007/8 and 2008/9  Economic growth impacts? Other contributors are  high tobacco prices  macro-economic stabilisation  good weather  Indicative modelling: poor beneficiary households real income increases of 10% to 100%, poor non-beneficiary households real income increases 0% to 20% Johannesburg October

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Social Cash Transfer Programme  Implemented since 2006, first as a pilot in 1 district but it has been extended to cover a total of 7 districts of 29 districts.  The objectives are to reduce poverty, hunger and starvation among labour constrained and ultra-poor households; to increase school enrolment and attendance.  Uses proxy means test to target: 1 meal per day, begging, no valuable assets, dependency ratio > 3  On average households receive MK1 700 ($12) per month (inclusive of bonus payments for children in primary ($1.4) and secondary ($2.8) school)  Cash transfer costs about $3.6 million and is funded by the Global Fund. 12 Johannesburg October 2010

Coverage and Impacts  Reaches about households in 7 districts.  Several positive impacts have been attributed to cash transfers  Less incidence of disease compared to control group  Low malnutrition rates  Greater demand for health care  Increased expenditure on children education – 4.9% higher enrolment  Significant accumulation of household assets and livestock  Increased agricultural production  High monthly expenditures on food 13 Johannesburg October 2010

Issues and Challenges  Institutional challenges – coordination of various programmes, tag of war & vested interests (FISP), lack of registry (multiple access).  Implementation challenges – identification of beneficiaries – high targeting errors.  Financial and economic challenges – huge resources required if all poor and vulnerable households were to be reached.  Design issues – multiple objectives, poor monitoring of outcomes; no graduation benchmarks.  Elite and political capture - everybody claims to be poor in rural areas. 14 Johannesburg October 2010

15 THANK YOU FOR YOUR ATTENTION Ephraim Chirwa Wadonda Consult & Chancellor College, University of Malawi Andrew Dorward School of Oriental and African Studies, University of London Presented at a Policy Dialogue and a South-South Learning Event on Long-Term Social Protection for Inclusive Growth, Johannesburg, South Africa, October 2010 School of Oriental & African Studies