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Government’s ‘barter system’ on AIP faces questions

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Betchani Tchereni

By Wezzie Gausi:

Government’s plan for farmers to exchange maize with fertiliser from Admarc as a way of making Agriculture Inputs Programme (AIP) sustainable has drawn contrasting views.

While some analysts have described the arrangement as a barter trade that is negative to agriculture growth in Malawi and not founded on sensible economics, others say it would help to cushion the farmer from fertiliser price volatility.

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Minister of Agriculture Lobi Lowe announced the measure on Thursday.

He said farmers will be asked to give two bags of maize, each weighing 50 Kilogramme, to Admarc soon after harvest and in exchange they will, at a later date, get one bag of Urea and one bag of NPK in preparation for 2022/2023 season.

But the plan has stirred mixed reactions among agriculture experts and economists in the country as some say the venture is a non-starter whilst others are praising the government for the initiative, saying it was long overdue.

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Agriculture policy expert Tamani Nkhono Mvula said he is yet to understand the logic of the statement government has made.

He wonders how the two commodities will make AIP self-sustaining.

“They are talking of two bags of fertiliser and two bags of maize. If you look at the two commodities, the cost of the two is very different. Under what mechanism is this going to be done?

“We may need organisation of farmers themselves. Unless government will be using farmers’ organisations, I don’t see this journey shaping up. You cannot exchange two bags of maize for two bags of fertilizer as there is more that needs to come into play before government takes this route,” Mvula said.

An economist, speaking on condition of anonymity, said barter trade was abandoned by Mesopotamians because of its inefficiencies.

He warned that implementing such a plan would exact negative impact on the economy.

“Exchange of maize for fertiliser will cause volatility in the economic value of maize since it will be wholly dependent on the price of fertiliser which Malawi doesn’t have control over.

“They want the poor farmers to be financing Admarc because Admarc will get the maize from farmers after harvest, sell it, then buy the fertiliser. The proposal is retrogressive and simply spells disaster to the agriculture commercialisation efforts,” he said.

But two other economists are holding a contrary view.

Economics Association of Malawi (Ecama) Executive Director Frank Chikuta said this is a good initiative as it will allow farming households that are eligible for AIP to plan their activities properly.

He said for a long time, farmers have been complaining that traders are buying their produce at low prices, way below the price floor set by the government.

“Allowing farmers to barter some of their produce with farm inputs makes economic sense as it will cushion them from price volatility which results in low prices of their commodities during harvest.

“Moreover, these are subsistence farmers who do not have the capacity to keep their produce so that they could exploit higher prices during the lean period,” Chikuta said.

Economic commentator Tchereni Betchani said the plan is probably one of the best that has come about on AIP.

He said economists have been talking about an exit strategy or to at least make AIP sustainable.

“Now in terms of its practicality, yes it is very practical; it is one such area that can assist the sustainability.

“Remember that many of the subsistence farmers do not pay taxes as such to the extent that the money to support AIP comes from the tax envelope. It is imperative that a way of taxing or indeed contributing to the cost be devised. This is one such way which is ingenious,” Betchani said.

The programme has come under serious challenge this year following the skyrocketing prices of fertiliser from between K17,000 and K20,000 last year to K36,000 and K40,000 this year. The funding requirement at the new prices has way outstripped what government allocated in the budget.

In July, the Ministry of Agriculture announced it would reduce the number of beneficiaries from 3.7 million last year to 2.7 million this year. It cited financial constraints as a result of the sharp rise in fertiliser prices.

However, President Lazarus Chakwera reversed the decision, directing that no beneficiary will be removed from last year’s list.

The Ministry of Agriculture has since raised beneficiary contribution from K4,495 to K7,500 while maintaining the number of beneficiaries at 3.7 million.

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