In this final discussion of the three-part Admarc series, our news analyst EPHRAIM NYONDO explores some of the ways which could help revamp Admarc to a giant it used to be.
There is a tacit agreement among farmers, scholars and researchers that, despite its apparent decline, Admarc remains the most viable and trusted agricultural market for millions—even those in hard-to-reach remote communities.
John Mwanyesha, a farmer, said although Lufira Admarc depot in Karonga, is not as functional as it used to be, farmers can still access better and improved seeds from the depot.
He added that though the maize sold at the depot is always rationed, it is better, in terms of pricing, than buying from private traders who are always expensive and their availability is always unreliable.
Even policy specialist Blessings Chinsinga agrees with Mwanyesha.
“Regardless of its failings, Admarc remains the beacon of food security in the minds of a vast majority of the people as well as politicians in and outside government. It is almost impossible for the majority of ordinary people as well as politicians to imagine a food secure Malawi without Admarc in the equation,” notes Chinsinga in a presentation titled ‘Admarc in Contemporary Malawi: A Political Economy Analysis’.
In the presentation, which is a product of a study, Chinsinga advances that there is, again, somewhat consensus among the political parties about the centrality of Admarc in the country’s agricultural sector.
“They all point out the potential role Admarc would play in providing ready markets for smallholder farmers’ produce. [Further], there is unanimity among parties in prioritising smallholder farmers’ access to predictable, institutionalised and lucrative markets,” he notes.
The question, then, is: How can Malawi revamp Admarc, a parastatal whose chief executive officer Foster Mulumbe earlier told Business News that it is facing “liquidity problems” and also late funding from government?
Challenge flawed policies
In a 2005 study ‘Agricultural Marketing Liberalisation and the Plight of the Poor in Malawi’ researchers Ephraim Chirwa, Peter M. Mvula and John Kadzandira found tragic consequences of liberalising Admarc into a private institution.
Using evidence from rural Malawi, the three found that privatisation of Admarc left smallholder farmers, particularly, the poor, as main losers through unfair trading practices and monopsony power of private traders, and lack of reliable markets for agricultural produce and inputs.
The privatisation of Admarc was a product of policy agreement between the Malawi government and the World Bank under the Structural Adjustment Policy (SAP). Today, Oxfam, in a study released February this year, has dubbed that agreement as a ‘flawed policy’.
The Oxfam study, hence, recommends that, as one way of revamping Admarc, that policy should be challenged because there is an opportunity.
“The first opportunity is the fact that the neo-classical economic thinking that once a parastatal withdraws from a market, its services would be replaced by emergence of private sector operations has not been supported by empirical evidence in the developing country context.
“Secondly, the Paris Declaration on Aid Effectiveness framework calls for national government’s leadership and ownership of development policies and programmes.
“Thirdly, there is evidence that some of the previous development partners’ policy advice to the Malawi government, such as on the reduction of the Strategic Grain Reserve to 60,000 metric tonnes, had been based on flawed premise, hence leading to a national food insecurity disaster in 2001/02 season,” reads the study.
Develop articulate vision
Chinsinga, on the other hand, argues that government needs to develop a clearly articulated vision of a reformed Admarc in terms of how it will operate, particularly with regard to providing markets for smallholder farmers and play a coordination function in the quest for wealth creation and productive investments in rural Malawi.
The vision, he notes, should advocate for a reformed Admarc that focuses only on its core functions and mandates to avoid it getting overwhelmed by unnecessary responsibilities.
He adds that government needs to consider Admarc reforms as an integral part of the broader rural transformation agenda through joined up policy formulation processes to ensure consistency across related interventions.
With research bemoaning increased encroachment of Admarc by politicians, Chinsinga calls for the need to insulate the operations of a reformed Admarc from unnecessary political interference so as to ensure that its activities remain focused on its core functions and mandates.
He also proposes the establishment of an independent board of management of a reformed Admarc that reports directly to Parliament.
Chinsinga also challenges civil society organisations to closely monitor the activities of a reformed Admarc to ensure that it does not get distracted from its core functions and mandates.
Professor Ephraim Chirwa concurs that Admarc is playing a diminishing role in agricultural markets. He notes that its incorporation into a limited company has not led to innovations to gain competitive advantage over private sector operators.
Against this, Chirwa feels that Admarc’s future roles is in developing markets in remote areas—‘social/development functions’ not ‘commercial functions’
He believes that Admarc, as a limited company, cannot compete with the private sector as some of its social functions should not be played by a limited company.
He notes that the future role of Admarc should be socially oriented for this is what is needed for smallholder market development.
“Admarc ‘social’ focus should be on rural areas, pay less attention to urban markets.
“[This will need] to embark on a ‘develop, operate and privatise (DOP)’ programme of markets that are less accessible by private traders or less serviced by private traders,” he says.
To achieve that, national coordinator of the Civil Society Network for Agriculture (Cisanet), Tamani Nkhono-Mvula, further suggests that Admarc be restructured to have a commercial and social department where the social department will get subvention from government for social marketing roles.
“The point is that rural markets will never be viable without a functional Admarc and, on the other hand, Admarc cannot be wholly supported from the national budget to function,” he says.
Nkhono-Mvula feels that Admarc could do better if it enters into a private-public partnership with the likes of Agriculture Commodity Exchange (ACE) or Action Holdings Commodity Exchange to be able to utilise its massive warehouse capacity for warehouse receipt system.
“One of the issues stopping the private sector operations in the rural areas is an issue of quantity and quality of products. ACE will be able to aggregate the outputs and sell them at a later stage,” he says.
He adds that the other issue difficult to understand is the general lack of innovativeness within Admarc.
“Over the years we have seen ACE and Action Holding growing in warehouse receipt system; why can’t Admarc go into this system and be able to serve the farmers? They have the capacity more than these two companies, yet they are failing to move and be innovative,” he says.
From corporation to cooperative
Politician Mark Katsonga has a different take on saving Admarc. The People’s Progressive Movement (PPM) president says Admarc needs to be transformed into a cooperative (Agriculture Development and Marketing Cooperative) not a corporation as it is now.
He says that Admarc’s main shareholder, (government) has continued to allow the company’s assets to be abused and stripped.
As a cooperative, on the other hand, Admarc will be supported by government but it will be owned by the smallholder farmers themselves.
He says that all the profits made by Admarc up to the last sale in the product distribution chain (for example, profit made at the London Tea Auction Floors or New York Grain Market) will be for the farmers.
Concurring with Katsonga, Nkhono-Mvula further says what ‘we need is to have government sell some of its shares in the company to farmers who will then use its infrastructure for marketing’.
“If every farmer in Malawi who wants to sell through Admarc put in a minimum of K1 000 as their share in the company, the company will resurrect within a few years and it will be made efficient in my view,” he proposes.
Arguably, there can never be a single route to saving the falling Admarc. These varying suggestions are for authorities to weigh and also setting the agenda for further debate. Surely, years from now Admarc, if authorities move with speed, will not be as inactive as it is today.n