AGRICULTURE-MALAWI: Going Against the Grain on Subsidies

In each of the past three growing seasons, the family of Bernadette Banda, in Chidambo village in the central region of Malawi, has doubled the maize harvest from the family plot, thanks to a government input subsidy programme.

Subsidised hybrid maize seed and fertilisers have helped boost harvests and incomes at household level for more than 1.7 million farming families in Southern Africa's most densely populated country. Resource-poor smallholder farmers like the Bandas have demonstrated that subsidies -- opposed by international donors such as the World Bank and the International Monetary Fund -- can overturn a food crisis if applied correctly.

In 2005, Malawi experienced a major famine where more than 5 million people needed food aid. Three years later, Malawi has dramatically moved from a serious food deficit to becoming a net food exporter, with the 2008 maize harvest of 2.6 million metric tonnes the highest on record.

"We used to have food shortages but now that has changed as a result of the subsidy programme, says Banda. "My family has enough to eat and we are able to sell some of the maize to get cash."

While the subsidy programme may not be the silver bullet for the global food crisis, it has bolstered food security in Malawi. Banda explains that sustained bumper maize harvests have freed her family from hunger and given them a better outlook on life.

In a country where almost 7.2 million people -- 60 percent the population -- live under the poverty line, each extra bag of grain harvested and extra kwacha earned makes a difference. The Banda's compound in Chidambo village is a hive of activity. Bricks are being moulded and neatly lined up to dry in the sun ready for firing. The bricks are for a new house for the Bandas and their five children.

A short walk from their home is the homestead of another farmer, David Mpezeni (32). Mpezeni saved some of the proceeds from selling excess grain in an account opened with the village Bank. He had built a brick house with a wrought iron roof.

"I am food secure," he says pointing to a loaded traditional granary. "This granary holds a harvest of seven ox carts of maize (about 1 tonne of maize). From the surplus maize l sold, I have been able to build a new house which is better than the old thatched one you see over there."

Government officials, the private sector representatives and researchers say the maize productivity turn around is proof that with the right policies, Malawi can say goodbye to international food aid. As a result of the subsidy programme, Malawi's grain production tripled from national production average of 1.2 million metric tonnes in 2005 to 3.4 million metric tonnes in 2006 and 2007.

It was a government policy intervention which changed country's food fortunes to the extent that it has even exported grain to its neighbour Zimbabwe. Malawi President Bingu wa Mutharika -- who is also the Minister of Agriculture -- went against the grain and risked international donor support by promoting the subsidy programme. Government distributed seed and fertiliser vouchers allowing small holder farmers to buy two 50 kg bags of fertiliser which would normally cost the equivalent of $14 for around a fifth of the market price.

In addition, farmers received a coupon for maize seed. Average yields per hectare have more than doubled. Donors opposed the programme at the outset, but faced with spectacular results, some have changed their opinion.

"Malawi and Africa need subsidies because within the three years of our programme our farmers have benefited," says Dr Andrew Daudi, Principal Secretary in the Ministry of Agriculture. This year, the government has budgeted about $14 million for the programme, which will include provision of pesticides and storage space.

Players in the private sector have also been won over. Concerns that the subsidy programme would fuel budget deficits and distort the market and be costly to administer. The jump in maize production, saving the country millions of dollars in imported food aid, has players in the sector commending the programme for promoting "smart partnerships" with government.

"There is no doubt that the programme is a success," says Dimitri Giannakis, chairman of the Fertilizer Association of Malawi. "Initially we thought it would be devastating to the fertiliser industry and that government would dominate the whole process. But with dialogue between ourselves and government, we worked together and came up with a formula that will promote our business and assist government at the same time."

The Seed Traders Association (STAM) which represents eight companies has reported an increase of about 40 percent in actual sales by participating seed suppliers since the start of the subsidy programme.

The programme has not been without its challenges. Farmers and human rights organisations want more people to be included. In addition, the programme needs to adjust the roll-out times for farmers to get the input in the right quantities and on time for planting.

"Subsidies are good and we should advocate for them but not indefinitely," says Richard Kachule, a researcher at Bunda College who coordinated a study OF the input programme. The study was funded by the Food, Agriculture and Natural Resources Policy Analysis Network (FANRPAN), a regional multi-stakeholder network promoting effective food security policies in Southern Africa.

Kachule adds that subsidies should have a sustainable exit strategy. "The whole issue of subsidies is looking at inputs marketing but what of the output markets? Once you develop output markets, producers must be able to sell at higher prices to be able to afford the agriculture inputs without subsidies."

How Malawi achieved its 'Green Revolution' and tackled the food crisis was the focus for 200 international and local delegates at a Regional Stakeholders Policy Dialogue convened BY FANRPAN in Lilongwe Sep. 1-5.