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Subsidies poorly targeted, as spending inflates—report

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Felix Mlusu

Ten African governments, Malawi inclusive, spend roughly $1.2 billion (almost K99 Billion) annually on poorly targeted input subsidies, a Global Centre on Adaptation report called State-and-Trends-in-Adaptation- 2021-Africa reveals.

The ten countries are Mali, Senegal, Burkina Faso, Ghana, Nigeria, Kenya, Tanzania, Zambia, Malawi and Ethiopia.

The report released on October 27, 2021 also indicates that no country in Sub-Saharan Africa is currently on track to meet its commitment of allocating at least 10 percent of total budget funding for agriculture as the per the Malabo Declaration commitments.

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“Yet, in many Sub-Saharan African countries, a significant share of public spending goes to poorly targeted and distortionary market price supports and subsidies. This calls for adopting smarter public spending programs,” reads the report in part.

The information is corroborated by Solidaridad, a Civil Society Organisation in value chain in its 2020 update on the Malabo declaration titled African governments fail smallholders in their commitments made in the Malabo declaration.

“A number of negative developments stand out. Firstly, the agreed commitment to allocate 10% of annual public expenditure to agriculture is not achieved by any of the member states in Southern Africa. Namibia and Zimbabwe even have lower scores than in 2017.” reads in part the update.

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But Ministry of Agriculture, spokesperson Gracian Lungu, in an interview said the report lacks updated information as the country has been committing more that 10 percent of the national budget to the agriculture sector after the declaration was made.

In an earlier interview on subsidies, Lungu said while government appreciates suggestions on subsidies brought forward by various stakeholders, it believes that a time will come when farmers will graduate from relying on subsidies.

Since 2005, Malawi has been investing heavily in agriculture by subsidizing inputs; fertilizer and seeds for subsistence farmers in a bid to eradicate hunger in the country.

Analysis shows that between 2005 and 2021, government spent about K687 billion on the same.

A recent joint analysis by Economics Association of Malawi, Oxfam and Lilongwe University of Agriculture and Natural Resources also questioned the rationale behind continued allocation of huge resources to input subsidies to achieve food security and to buy relief maize for the same beneficiaries during the lean period.

Meanwhile, the report suggests reallocation of expenditures from such programmes to resilience-building investments, such as climate smart technologies, research and development, and infrastructure that could bring major food security gains and promote the efficient use of scarce public resources.

“Repurposing agricultural policies and public spending does not only help to deliver more efficient and resilient food security outcomes, but it could also provide an opportunity to develop investment strategies aligned with the formulation of Nationally Determined Contributions under the Paris Agreement,” reads the report.

In June this year Minister of Finance Felix Mlusu said Treasury is working on an exit strategy model for the AIP admitting the initiative is not sustainable in the long-term.

Further the report noted that about 36 percent of the food produced in Sub-Saharan Africa is lost or wasted, and the largest proportion of the losses occur at the production and handling stages.

To manage food loss and waste, the report suggests biological controls, storage infrastructure, management and information systems, and diversification of value addition and byproduct use as some of the interventions.

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