School of Oriental & African Studies

1. School of Oriental & African Studies 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

2. Outline of Presentation Role of agriculture in Malawi Agricultural Input Subsidy Programme Cash Transfer Programme Issues and Challenges

3. 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.

4. 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 fertility • Recurring food insecurity • Highly variable maize prices • 97% farmers grow maize (half also buyers) • >70% cultivated land under maize Unstable maize prices Limited agric. credit Consumer ‘lock in’ to low productivity maize Low producer investment Low maize & agric productivity Low demand for non-agric goods & services Low & vulnerable real incomes

5. 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.

6. Coverage and Size of Programme

8. Implementation achievements Planning & budgeting Farmer registration Coordination & control Input purchase Secure coupon printing Coupon allocations 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 Coupon distribution Beneficiary identification Input distribution (transport & storage) Coupon issue Coupon redemption INPUT USE, PRODUCTION, FOOD SECURITY Payments & control

9. Estimates of incremental maize production over 2002/3 & 3/4, net exports & prices

10. 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%

12. 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.

13. 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

14. 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.

15. School of Oriental & African Studies 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