1. THE POTENTIAL OF USING AN INPUT VOUCHER SYSTEM TO INTEGRATE THE COMMERCIAL AND NON-COMMERCIAL INPUT DISTRIBUTION SYSTEMS:A CASE OF MALAWI, MOZAMBIQUE AND ZAMBIA BY Julius Mangisoni Department of Agricultural & Applied Economics, Bunda College

2. Background Studies on importance & share of relief seeds were implemented by FANRPAN (Kananji and Phiri, 2006; Simfukwe,2006). Major findings of the studies confirmed the importance of relief seeds in countries like Mw & Zam. 2 parallel input distrbtn channels (comm. & non comm) identified. Such parallel markets currently not well integrated.

3. Necessary to assess whether using an input voucher system would help to integrate the two markets. Subsidies distort the market & crowd out private sector dvlpmnt. Vouchers are less distorting, promote free market competition, allow for greater economic diversity. Properly designed voucher system would reduce state intervention. We therefore hypothesize that the vouchers can be used to enhance the purchasing power of the poor, and the commercial sector can redeem the vouchers and expand its distribution network.

4. In Zambia (Simfukwe, 2006) reported that there was lack of information on vouchers. The Zambia study recommended a study on voucher system to create awareness among govnt officials, relief agencies & NGOs.

5. OBJECTIVES The specific objectives of the study are: 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.

6. OBJECTIVES cont… To bring about policy changes for enhancing input supplies to small farmers. To develop training materials for policy analysts to engage in complete policy analysis cycle. To conduct training of policy analysts at national level.

7. APPROACHES The study has two phases: Phase 1 (1)Each country node carried out literature review and updated country studies on relief seed trade recently conducted in Malawi, Mozambique, South Africa and Zambia. (2) A training workshop was held in Lilongwe in March this year-devped questionnaires and PRA field guide (3) Draft synthesis report on first phase developed. Phase 2 (1)Rapid field research

8. APPROACHES cont….. ( 2) Discussions with key stakeholders. (3) Preparation of comprehensive country reports. (4) Preparation of a synthesis report. (5) Preparation of policy briefs. (6) Preparation of journal article.

9. Research questions-phase 2 This phase focused on getting answers to following questions: What commitments, knowledge and skills gaps on voucher systems are present? What distortions are visible to stakeholders with regard to relief input markets? What are the stakeholders’ perceptions of an input voucher system? How should vouchers be issued to small farmers and who should be issuing them?

10. Phase 2 cont.. What should be the specific criteria for the voucher holders when he/she buys inputs from the supplier of her/his choice at any point throughout the country? Who are the key private companies, agro- dealers and NGOs in the input supply chain? How should registration of competent agro-input suppliers, dealers and small farmers in the relief program be carried out to conform to the tenets of a free marketing system? Who should be registering the small farmers ?

11. Phase 2 cont.. Who are the potential rural agro-dealers who can link up with private input (seed and fertilizer) companies? What anti-fraud measures should be put in place? Where would the holder of the voucher redeem the voucher (at wholesale, retail, etc?) What system should be used by the input retailer to en-cash the vouchers to ensure prompt payment and to control irregularities ?

12. Phase 2 cont… How should such a marketing model be implemented? What should be the role of government, private companies, agencies, NGOs, farmers, etc. in an input voucher system? What are their fears and concerns about an input voucher system? What market-friendly relief seed marketing model would be recommended by stakeholders?

13. Phase 2 cont.. The study will not address the following questions; How can agro dealers be persuaded to extend their market network into rural areas? Which categories of farmers should use flexi- vouchers and for what? Are percentile coupons or vouchers more feasible? How should the percentages in the value of the coupon or voucher be determined? How can the Zambian Government be persuaded to shift to a voucher-based system?

14. PHASE 2 RESULTS Field research shows that stakeholders have knowledge about input vouchers - key input in Zambia and Mozambique is seed via SV&F -key inputs in Malawi are hybrid seed and fertilizers used on maize (urea and 23:21:0+4S) and tobacco (CAN & D compound). -smallholders in Malawi prefer OPVs Registration of beneficiaries

15. PHASE 2 RESULTS Registration of beneficiaries -stakeholders at local level to be involved -local leaders acting alone not recommended in both Malawi and Zambia -Local leaders, NGOs, donors to play a supportive role in registration -Zambian registration process more systematic and transparent than the Malawian process

16. Registration of beneficiaries -Evidence in Malawi and Zambia shows that some unintended beneficiaries benefited from the program due to: favoritism; selling of vouchers; selling of inputs acquired through vouchers; vouchers found with foreigners -Challenges in coordination between govt, input companies and other players led to more or fewer coupons being distributed.

17. Flexi-vouchers Some farmers in Malawi and Zambia expressed desire for flexi-vouchers to extend their choices Farmers suggested that the range of inputs covered should include groundnuts, beans, vegetables and other seeds. Beneficiaries varied in their desired level of contribution to the cost of the input.

18. Distribution network Main fertilizer and seed companies involved:ADMARC, SFFRFM, Farmers World, Kulima Gold, Chipiku Stores, NASFAM, SEEDCO. Zambia used a tendering process. Some traders left out. Mozambique used SEMOC. Mozambique and Malawi reported poor quality inputs were distributed in certain cases. Quality of inputs were quite good in Zambia. Late delivery of inputs was common to all countries.

19. Distribution network Suggested penalties for poor quality input delivery -suspension of violators -confiscation of inputs -payment of stiff fine

20. Potential benefits of vouchers Impact on smallholder farmers -Two year surplus production in Malawi -Progressive increase in yield from less than a tonne to 2.04MT/ha -Increased use of new technologies e.g. hybrid seed. -In Zambia stakeholders noted that it has potential to to promote the development of farmers’ seed systems and allow quicker transactions between seed sellers and farmers. -In Mozambique, econometric estimation showed that emergency seed distribution is associated with 3-22% decrease in producers’ probability of buying commercial seed.

21. Potential benefits of vouchers Commercial marketing -In Malawi, program allowed increase in private traders’ seed and fertilizer sales. Seed sales rose from 4000MT to 6700MT -Creation of competition amongst players -Involvement of the private sector which has funds has led to improvements in timely distribution of inputs -Reopening of previously closed market outlets -Creation of employment. -Increased monetization of the input distribution economy. -In all countries, sellers allowed to expand network into rural areas, saved government distribution trouble.

22. CONCLUDING REMARKS Research-vouchers have potential to integrate commercial and non-commercial Prepackaged input packs are extremely expensive. They stifle private sector development and do not offer option/choices to smallholders. Only few companies benefiting from subsidy program in Zambia Challenge in Zambia is, how to reprogram the Fertilizer Support Program to a voucher-based program.

23. CONCLUDING REMARKS To improve efficiency work on: -registration of beneficiaries -follow Zambian model where all stakeholders are involved at local level (Community Project Teams) -define clear criteria for selection of beneficiaries (Targeting of crops and households) -use different colors for vouchers meant for different inputs

24. CONCLUDING REMARKS -involve companies with a reputation for quality -apply stiff penalties for violators -Timing -Improve distribution-rural areas/small dealers

25. RECOMMENDATION TO FANRPAN Assess sustainability of the voucher system –Exit strategy –Link to agroforestry Document best practices Distribution -Rural areas -small dealers Quantify the benefits

26. ACKNOWLEDGEMENT Regional Center for Southern Africa, US Agency for International Development FANRPAN DR Douglas Merrey MR R. Kachule and Mr T. Chilongo (Malawi) Dr Emilio Tostao (Mozambique) Dr T. Kalinda and M. Simfukwe (Zambia)