‘Poverty makes subsidies necessary’

Following a policy shift on how to manage the Farm Input Subsidy Programme (Fisp), our news analyst EPHRAIM NYONDO sought views of Tamani Nkhono-Mvula, national director of Civil Society Agriculture Network (Cisanet). Excerpts:

: What has been Cisanet general impression of FISP, nine years on?

: Fisp was one of the most brilliant ideas that the Government came up with to tackle food insecurity after the Structural Adjustment Program (SAP) of the 1980s and 90s as a quick fix solution. Under the SAP we saw most of the subsidies in the agriculture sector removed. The removal of these subsidies, though supposedly done with good intentions, their effects on agriculture production and food security were adverse.

In 1997, subsidy came back in form of starter pack. Under the starter pack we had about 250 000 metric tonnes (MT) surplus in the first year and about 150 000MT in the second. However, in 1999 Starter pack was changed to TIP [Targeted Input Programme] which reduced the number of beneficiaries.

After this change we still had a surplus but the reduction in yields was obvious due to a reduction in fertiliser use and also poor TIP targeting. During the 2000-02 seasons we had the food crisis the reason was drought and some level of mismanagement of the strategic grain reserves (SGR).

In 2004, government re-introduced the current form of subsidies, which was not supported by some development partners but the result was a whopping 1.2 million metric tonnes of food surplus in its first year. We have always been in that range up to date except for 2014/2015 season due to drought.

The effect of food availability on the overall economy was impressive, a reduction in inflation to below 10 percent, an economic growth of six percent, reduction in national poverty level statistics, increased attendance of children in school, reduction in overall incidence of malnutrition, the list goes on.

The root cause of why we need subsidies is poverty, as long as our farmers cannot manage to buy fertiliser at the market price; we will always need the subsidy. It is much cheaper to subsidize production than to rely on food imports. The logic is: stop subsidies today but be prepared to spend at least three times more on food imports

What we need is to rethink the program design and delivery to improve not only in levels of production but also the productivity of the investments on Fisp.

: What do you propose?

: Firstly, what we need to think about is on beneficiary targeting. Who must benefit from the subsidy? One of the most difficult things to do in the current Fisp is on how to target a beneficiary taking into consideration the level of poverty in this country and also the number of people in need of the subsidy, relative to the resources available. This has caused a lot of social problems in most communities. This led to some suggesting that we need a universal subsidy and do away with targeting.

Secondly, the other area that needs a lot of consideration is on the farmer contribution to the bag of fertiliser. We are delighted that Government has made some consideration on this because the price of K500 did not make economic sense and was not a true reflection of most farmer’s ability to procure. Our research showed that farmers are willing to pay more for the bag of fertiliser if that may help to improve efficiency in the Fisp delivery. The level of the subsidy on fertiliser has increased from 64 percent in 2005/06 to 97 percent in 2014/15 of the unsubsidised price. This is unsustainable. What we need to do is to have fixed subsidy, say 70 percent of the prevailing market value or simply by increasing farmer contributions. The design must embrace the concept of sustainable graduation, repeated cohort target and progressive reduction in subsidy. There could also be pre-announced future subsidy levels, for instance, five-year targeting cycle and subsequent cohorts, this may entail less people needing subsidies.

Thirdly, to improve efficiency there is also need to improve on proper coordination of players within the program, there are efforts to that effect as the Ministry of Agriculture conducts weekly meetings throughout the program implementation but I believe more needs to be done. The chaos that we normally see is sometimes as a result of lack of coordination among the players on the grounds

One other important thing we would like to propose is the removal of the tenders on fertiliser. We have noted that one of the things leading to the chaos in the Fisp is the late delivery of fertiliser to the selling points, which normally happens due to late importation of fertiliser. The removal of tenders on fertiliser would help to increase the role of the private sector in the program by ensuring that we have enough quantities of fertiliser in good time, other than the current situation which, mostlywaits for the passing of the budget to have the procurement processes commence. It will also help to reduce the level of corruption that we have experienced in the tendering processes, where people with no capacity or are not traditionally in the business of fertiliser were given contracts to supply the commodity.

This may also help reduce politicisation of the program and reduce the opportunistic tendencies that have rendered the program to go astray. The role of the government must be to pay for the redeemed coupons and to make sure that the private sector have imported enough fertiliser and that all selling deports have enough quantity. We should also consider investing in local manufacturing of fertilizer through a PPP arrangement. This may help to reduce on the time and cost of importation of fertiliser.

: Who, then, must be targeted with Fisp?

: There have been suggestions to shift the beneficiaries category of the farmers under Fisp from the current poor smallholder to medium scale farmers. I don’t think it will be a wise idea to shift the beneficiaries of Fisp from the smallholder farmers to the medium scale farmers. The reason being that the initial objective of the Fisp is to improve household food security and most of the food is produced by the smallholder farmers who are in majority. For the medium scale farmers what we need is a credit program (like the farm Input Loan Program), where they will be required to pay back. Most medium-scale farmers do not produce to meet subsistence need but produce for the market.