UNIVERSITY OF
MALAWI
School of Oriental
& African Studies
Chancellor
College
Agricultural Livelihoods and Food Security:
Malawi Agricultural Input Subsidy
Programme and Cash Transfers
Ephraim Chirwa
Wadonda Consult & Chancellor College, University of Malawi
Andrew Dorward
School of Oriental and African Studies, University of London
Presented at a Policy Dialogue and a South-South Learning Event on Long-Term Social
Protection for Inclusive Growth, Johannesburg, South Africa, 11- 14 October 2010
1
Outline of Presentation
 Role of agriculture in Malawi
 Agricultural Input Subsidy Programme
 Cash Transfer Programme
 Issues and Challenges
2
Role of Agriculture and Challenges in Malawi
 Agriculture is the main source of livelihoods in rural
Malawi where 88% reside.
 Agriculture contributes 35-39% to GDP and generates
90% of the foreign exchange earnings.
 Tobacco is the main cash and export crop – generating
more than 60% of foreign exchange earnings; 15% of
smallholder farmers grow tobacco.
 Maize is the main staple food – largely grown by
smallholder farmers for subsistence consumption – only
15% is marketed.
 Food security in Malawi is largely defined by the
availability and access to maize.
Johannesburg 11-14 October 2010
3
Malawi rural economy: poverty & the low maize
productivity trap
 High poverty







rates (50%
<$0.40 in 2004)
Small holdings
(50% < 1.0ha)
Continuous
maize cultivation
Declining soil
Limited agric.
fertility
credit
Recurring food
insecurity
Highly variable Low producer
maize prices
investment
97% farmers
grow maize (half
also buyers)
>70% cultivated
land under
maize
Johannesburg 11-14 October2010
Unstable maize
prices
Consumer ‘lock in’
to low productivity
maize
Low maize & agric
productivity
Low & vulnerable
real incomes
Low demand for
non-agric goods
& services
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Agricultural Input Subsidy Programme

Implemented since 2005/06 season as a targeted programme using
coupons, following a poor harvest in the 2004/05 agricultural season.

The objective is to improve access to and use of fertilizers in order to
increase agricultural productivity and food security (national and
household food self-sufficiency).

Initially, the subsidy covered both maize and tobacco fertilizers but
since 2009/10 only maize fertilizers are subsidized.

Targets poor and vulnerable smallholder farmers with land and able
to redeem coupons, and special consideration of vulnerable groups
(female/elderly headed, orphans, affected by HIV and AIDS).

Each household receives two fertilizer coupons for 1 bag of 50 kg of
basal and 1 bag of 50 kg bag of urea, and a maize seed coupon.

Funded mainly from the national budget, with donor budget support.
Johannesburg 11-14 October 2010
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Coverage and Size of Programme
2005/6
2006/7
2007/8
2008/9
n/a
54%
59%*
65%
131,388
174,688
216,553
202,278
Fertiliser cost (US$/mt)
393
490
590
1250
Subsidy % (approx)
64%
72%
79%
91%
32
73.9
95.4
241.7
Households receiving >=
1fertiliser coupons
Total fertiliser sales (mt)
Programme cost , net
(US mill)
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Johannesburg 11-14 October 2010
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Planning &
budgeting
Input
purchase
Input
distribution
(transport &
storage)
Secure
coupon
printing
Farmer
registration
Coupon
allocations
Coupon
distribution
Beneficiary
identification
Coupon
issue
Coupon
redemption
INPUT USE,
PRODUCTION,
FOOD
SECURITY
Implementation
achievements
Payments &
control
Coordination
& control
Stakeholders
FARMERS
MoAFS: HQ, LU, ADDs,
DADOs, Ass, FAs
DCs, TAs, VDCs, Police,
CSOs
Fertiliser importers,
retailers
Seed producers,
importers, retailers
ADMARC: HQ, districts,
markets
SFFRFM: HQ, depots,
markets
Transporters
Donors
Estimates of incremental maize production
over 2002/3 & 3/4, net exports & prices
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Other impacts
 Greater village maize availability (focus group
discussions), lack of evidence of food shortages despite
high prices
 Significant rising nominal wage rates from 2005/6 (greater
than 2006/7 maize prices rises, matched 2005/6 -8/9)
 Poverty incidence estimates fallen from 52% in 2004/5 to
40% in 2007/8 and 2008/9
 Economic growth impacts? Other contributors are
 high tobacco prices
 macro-economic stabilisation
 good weather
 Indicative modelling: poor beneficiary households real
income increases of 10% to 100%, poor non-beneficiary
households real income increases 0% to 20%
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Social Cash Transfer Programme

Implemented since 2006, first as a pilot in 1 district but it has
been extended to cover a total of 7 districts of 29 districts.

The objectives are to reduce poverty, hunger and starvation
among labour constrained and ultra-poor households; to
increase school enrolment and attendance.

Uses proxy means test to target: 1 meal per day, begging, no
valuable assets, dependency ratio > 3

On average households receive MK1 700 ($12) per month
(inclusive of bonus payments for children in primary ($1.4) and
secondary ($2.8) school)

Cash transfer costs about $3.6 million and is funded by the
Global Fund.
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Coverage and Impacts
 Reaches about 24 000 households in 7 districts.
 Several positive impacts have been attributed to cash
transfers
 Less incidence of disease compared to control group
 Low malnutrition rates
 Greater demand for health care
 Increased expenditure on children education – 4.9%
higher enrolment
 Significant accumulation of household assets and
livestock
 Increased agricultural production
 High monthly expenditures on food
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Issues and Challenges
 Institutional challenges – coordination of various
programmes, tag of war & vested interests (FISP), lack of
registry (multiple access).
 Implementation challenges – identification of
beneficiaries – high targeting errors.
 Financial and economic challenges – huge resources
required if all poor and vulnerable households were to be
reached.
 Design issues – multiple objectives, poor monitoring of
outcomes; no graduation benchmarks.
 Elite and political capture - everybody claims to be poor
in rural areas.
Johannesburg 11-14 October 2010
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UNIVERSITY OF
MALAWI
School of Oriental
& African Studies
Chancellor
College
THANK YOU FOR YOUR ATTENTION
Ephraim Chirwa
Wadonda Consult & Chancellor College, University of Malawi
Andrew Dorward
School of Oriental and African Studies, University of London
Presented at a Policy Dialogue and a South-South Learning Event on Long-Term Social
Protection for Inclusive Growth, Johannesburg, South Africa, 11- 14 October 2010
15