Ministry of Finance has authorised Agricultural Development and Marketing Corporation (Admarc) to borrow K22 billion from commercial banks to buy farm produce from farmers.
The Parliamentary Cluster Committee on Agriculture and Natural Resources recommended to Treasury that the provision for maize purchase should be increased from K10 billion to K20 billion to enable the State produce trader buy the staple grain from smallholder farmers during the 2020/21 growing season.
In his response when he was winding up debate on the 2020/21 National Budget at Parliament in Lilongwe on Friday, Minister of Finance Felix Mlusu said it is the wish of government that Admarc is well resourced to enable it to adequately buy farm produce from smallholder farmers.
He said: “I am pleased to inform the august House that additional resources will be incorporated into the budget during the mid-year budget review.
“The august House may also wish to further note that Admarc has been provided with a guarantee to borrow K22 billion from the banking sector to be used for purchase of farm produce for its commercial function.”
Admarc acting chief executive officer Felix Jumbe recently said the institution requires K300 billion for recapitalisation to enable it to buy all types of farm produce, rehabilitate its dilapidated warehouses and to source value-adding machineries across the country.
Last week, Minister of Agriculture Lobin Lowe committed in Parliament that government will provide Admarc with capital required to fulfill both its social and commercial functions.
He said government is banking on the institution to provide ready and lucrative markets for farmers in the country in line with the Affordable Inputs Programme, the successor of Farm Input Subsidy Programme.
Agriculture expert Tamani Nkhono-Mvula earlier proposed specific policy to govern how Admarc’s social functions will be managed, observing that government has pulled down the institution through unsustainable social functions.
He said government instructs Admarc to borrow money from commercial banks for purposes of fulfilling its social functions, which has resulted in Admarc being in perpetual debt for failing to service commercial loans; hence, not supporting its business model.
Parliamentary Committee on Agriculture deputy chairperson Ulemu Chilapondwa said Admarc is the only institution that can enforce minimum prices, saying farmers are being duped by vendors because the institution has no capacity to compete on the market.
He supported the reforms being carried out at Admarc to revitalise the institution, saying things have changed over the years and Admarc needs to adapt to remain relevant and competitive on the market.
In 2016, Treasury also allowed Admarc to borrow K22.4 billion from commercial banks for maize purchase, but the produce marketer struggled to pay back the loan because the maize Admarc bought was sold below market value to consumers during the lean period.
Government owns 99 percent of Admarc with one percent owned by its chief executive officer.
Of late, experts have proposed to the government to offload about half of its shares to the private sector as part of recapitalisation drive.