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How AIP became a proper dragon for Capital Hill

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Lazarus Chakwera

By Charles Mpaka:

From afar, one could smell the smoke of a frantic number crunching going on at Capital Hill – in the Ministry of Agriculture and Treasury departments in particular.

AIP (Agriculture Inputs Programme) has become such a dragon.

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The devil is in the detail. The details in the funding requirements for the 2021/22 AIP suggest that government was confronted by a real monster of work to do.

With a sharp rise in fertiliser prices this year to between K36,000 and K40,000, government would have needed between K221 billion and K265 billion for fertiliser purchase alone, according to Malawi News calculations.

Already, this funding would have outstripped the total budget for the entire programme in this financial year. Government allocated K142 billion – meant to cater for fertiliser purchase, logistics and other activities in the programme.

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But going by the calculations based on the current fertiliser prices, it means the budget for the entire programme this year would not even be enough to purchase a total 7.5 million bags of fertiliser required for 3.7 million targeted small scale farmers.

The budgeting particularly became an albatross on the neck of the Ministry of Agriculture following a directive by President Lazarus Chakwera that none of the 3.7 million beneficiaries who were targeted last year would be left out.

Cutting the numbers

The decision to cut the numbers came from the Ministry of Agriculture itself.

In a circular in July this year, the ministry advised all District Commissioners to trim the number of AIP beneficiaries for the oncoming farming season.

“…Due to financial constraints and the rising prices of fertiliser, the ministry, after looking into these two compound challenges, has decided to have AIP beneficiaries scaled down.

“It is therefore very necessary that the scaling down of the beneficiaries be done up to village level,” reads the memo dated July 21, 2021, signed by Sandram Maweru, Secretary for Irrigation.

The ministry recommended specific figures to come from every district, with the total coming down from 3,788, 105 beneficiaries last year to 2,710,893 this farming season.

It further required the District Commissioners to submit all the data to the ministry by 13 August 2021.

On August 21, by which date the ministry had possibly received the new data from the districts, Chakwera ruled out the decision by his technocrats.

While acknowledging global factors as influencing the prices of fertiliser, he also blamed it on sabotage by local forces he did not name.

“I will not allow anyone to remove any family or village from the list of beneficiaries,” he declared.

Real headache

And so the Ministry of Agriculture went back to the drawing board and the headache was real, a Capital Hill source told Malawi News.

“It is the arithmetic that is causing real headache, how to shuffle things around before taking everything to the Treasury. Where Treasury gets the money from, that’s another issue,” said the contact last week.

It was obvious that the Ministry of Agriculture would need really significant sums of money to implement the programme in the form it was last year.

At that current market prices of the fertiliser, even with the number of beneficiaries reduced by one million as earlier planned by the ministry, it would still have posed a significant budget headache based on current retail fertiliser prices.

Here is how it would have happened:

With beneficiaries reduced to 2,710, 893 (which would have translated to 5,421,786 bags), at a retail price of between K30,000 and K35,000 per bag (after the farmer has paid their cost share of K4,495), government would have needed sums between K162 billion and K189 billion.

These figures do not include logistics.

Now since the President directed that no one should be left out of the 3.7 million beneficiaries registered last year, it became a dragon of the a problem.

At 3,788,105 beneficiaries and 2 bags each beneficiary, it translates to 7,576, 210 bags of fertiliser for the programme. For 7,576,210 bags of fertiliser, government would have to spend somewhere between K227 billion and K265 billion. That is just for purchasing the fertiliser.

Two weeks ago, Minister of Agriculture, Lobin Lowe, said following the President’s directive, the ministry would be engaging Treasury to look at how “the budget shortfall could be covered”.

On Thursady, Lowe brought some news. He said the price of fertiliser under AIP this year has been estimated at K27,000 per bag and that the ministry will use K124 billion for fertiliser alone out of the budgeted K141.9 billion.

He added that the number of beneficiaries has been maintained but each household will be contributing K7, 500 instead of K4,495.

No feasible responses

In a policy brief last month, think-tank Malawi Agriculture Policy Advancement and Transformation Agenda (Mwapata) institute said 90 percent of the increases in domestic fertiliser prices are due to increases in global prices for fertiliser and fuel and the weakening in value of the local currency.

According to Mwapata, any near-term response would have required the government making tough choices on how to distribute the burden of the skyrocketing prices of the commodity through scaling down the number of beneficiaries, cutting the value of the subsidy, or increasing the cost burden to be borne by Treasury.

The Parliamentary Committee on Agriculture apparently seems to think the problem in the rise of the prices is private sector’s making. It has therefore been pushing for the elbowing out of the private sector so that government can directly import the fertiliser through Smallholder Farmers Fertiliser Revolving Fund (SFFRFM) and Admarc.

However, Mwapata warned in the brief that pushing out the private sector in favour of the government assuming its previous role as a direct buyer of the commodity will not solve the problem.

“Any buyer, government or otherwise, will find it virtually impossible to land fertiliser in-country for much less than current prices.

“Moreover, such an approach could have detrimental long-term ramifications for the private sector and risks delaying delivery,” reads the policy brief.

The institute further challenged that there are no practicable responses for the next farming season that maintains the same number of AIP beneficiaries as last season’s, the level of support for each beneficiary and the overall costs.

Such is how the AIP became a dragon, viciously lashing about its tail and breathing fire — for Capital Hill to pacify. At least, something small has been done, for now. But there is no suggestion that this dragon has been suffocated not to cause problems in the coming seasons.

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