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Rethinking structured markets to prevent farmer exploitation

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Moffat Zimba, 28, combs through Jenda Rural Growth Centre Market in search of high-quality modified maize, beans and groundnuts seed to grow this season.
Zimba, a small-scale farmer from Kamundenga Village in Traditional Authority (T/A) M’mbelwa in Mzimba, owns three acres on which he grows different crops for sale and consumption.
And owing to favourable weather conditions in 2017, he realised bumper harvests from all the crops in the previous agricultural season.
However, Zimba seethes with anger when he thinks about what the vendors did to him between April and July 2017.
“Unscrupulous vendors ripped me off by offering me very poor prices for the produce. I never enjoyed the fruits of my labour. I made a huge loss and, I swear, I could have closed shop if this was a grocery shop,” he says.
Agriculture makes up the largest share of Malawi’s labour force while contributing over 80 percent towards the national gross domestic product.
The sector’s capacity to help realise national development priorities is beyond doubt and guaranteed.
Yet, as Nsanje South West Member of Parliament (MP) Joseph Chidanti Malunga and Civil Society Agriculture Network (CisaNet) Head of Hrogrammes Alfred Kambwiri argue, the industry is failing to meet its full potential as an employer, fair distributor of income and national revenue earner.
Malunga, who is Parliamentary Committee on Agriculture, Irrigation and Water Development Chairperson and Kambwiri say the sector is riddled with many challenges, which render it impossible to effectively contribute towards the development of the national economy.
“Malawi is among very few countries that have allowed vendors to exploit their farmers, which denies governments of the taxes they need for the national development. This is one of the very few countries in the Sadc [Southern African Development Committee] Region and indeed in the world where one would just wake up in the and say I am buying such and such a commodity and at a such a price,” Malunga explains.
He says because the system is so disorganised, the farmers are sometimes obliged to sell their commodity to vendors.
The MP challenges that the current marketing system will not take Malawi anywhere in as far as development of the country is concerned because the vendors do not pay tax.
Malunga says this is why his committee is pushing for the establishment of structured markets to protect farmers from vendors’ manipulation and exploitation.
“When we have structured markets, then all the commodities will be centrally controlled. And, therefore, when someone from outside the country wants groundnuts, maize and pigeon peas from Malawi, government will easily say we have so much quantity on offer,” Malunga narrates.
He says structured markets will not only improve the income into the farmer’s pocket but increase government revenue collection as it will allow authorities to collect taxes from the farming communities, which is “extremely difficult” at the moment.
Malunga adds that the committee is exploring employing aggregators who should be tasked to collect agricultural produce in whatever quantity, accumulate it and store it in designated warehouses.
He says this will make it easy for government to identify local and international buyers for the crops stored in the warehouses.
He says these aggregators will also be licensed and allowed to go out to buy the commodities at a minimum price set by government.
“This will help government to know quantities in the warehouses, which will be constructed across the country. But, as of now, nobody knows where there are groundnuts or pigeon peas because everybody is doing on his or her own. So, this is a very good system that, as a country, we have to encourage and push forward that we have it,” Malunga says.
Additionally, the committee envisages hope in the Warehouse Proceeds Bill, which Parliament passed recently.
Under the Warehouse Proceeds Act, farmers will be allowed to store their produce in the warehouses and get a receipt for the same.
Then, government will look for the markets of the crops.
“The farmers will not be the ones looking for the market because there will be structures properly arranged that will actually collect commodities from across the country and deposit them into the warehouses or indeed certain farmers will deposit commodities on their own in the warehouse.
“Now, you get a receipt to say I have put so much into the warehouse. Then you can use the receipt as collateral to access loans from banks and other financial institutions because the bank will now be assured that you cannot run away since you have put your commodities in a warehouse,” Malunga says.
Kambwiri says the efficiency and inclusiveness of agricultural markets are hampered by gaps in market infrastructure, information and, in some cases, asymmetries between farmers and downstream actors.
He says these are some of the issues the draft National Agricultural Investment Plan (Naip) intends to address.
The draft plan, among others, advocates commodity exchanges, warehouse receipt systems and contract farming as effective instruments in building more structured markets.
“It is against this background that CisaNet, with financial support from Oxfam in Malawi, has been sensitising stakeholders in Karonga, Mzuzu, Phalombe and Mulanje to the National Agricultural Investment Plan. We believe the draft plan presents a game-changer in the agricultural sector,” says Kambwiri.
He says market interventions through trade policy measures and public grain storage often create uncertainty for value chain players, reduce prices and margins and leads to under-investment in production and storage.
“And this calls for improved market information and analytical capacity by government along with better coordination between public and private actors,” he stresses.
But Kambwiri recommends that government should improve the rural roads and market infrastructure, emphasising that these are critical to improve market access, reduce postharvest losses and improve product quality.
“An enabling legal and regulatory environment and effective oversight are needed to realise the full potential of these instruments, hence ensuring fairness, competitiveness and security for market participants,” he says.

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