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Friday, 11 July 2008

Rising food prices...the Angolan approach..

The Angolan government is pushing for large agro-industrial companies (modelled on Brazil) to ensure the sustainability of food stocks. Back in 2006, the state owned Pungo Andongo farm came into being, spanning 36,000 hectares. Now with rising food prices the government is seeking to expand more on this. In securing our food , I argue that Zambia should explore the potential benefits of more mechanised farming given to expand food production, perhaps through a combination of fiscal incentives for would be mechanised farmers, and greater investment in appropriate infrastructure.

10 comments:

  1. To begin with let us start giving title deeds to small scale farmers who have the desire and acumen to engage and expand their small holdings. I have a retired uncle who couldnt be able to buy a 'formal farm' but instead was allocated land by a chief in Katuba (central province). He has been able to expand his production from 1000x50kg to 5000x50kg in a space of three years using his own savings. He is so exicited of what he has been able to do. He wants to expand but the banks are refusing him credit because he doe not own the land. He cannot expand organically because he still has to complete building his half-finished house. I am quite sure there are many other people in this predicament who just need capital to fulfill their potential.

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  2. Mbuluwa,

    Quite insightful.

    Very true...Its quite an important point actually. In many cases the constraints to those wishing to expand production and those seeking to start farming may be different...

    Many upstarts do not face credit constraints as such but cost of inputs... While those like our uncle in Katuba wanting to expand production need access to credit...

    The trouble is that, for those farmers "future production" cannot really be used as collateral because of uncertainty in produce and so forth.

    What are your views on the credit management system for farmers? DO you think that could help him it if was extended to farmers like him?
    A credit management database for farmers...

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  3. Just a few ideas:

    1) Credit system through chiefs

    If someone farms on communal land, the chief could serve as a guarantee. They could have their own fund and receive modest royalties from production in their area. The government could even get them going by giving them starting capital (money from the mines could help here).

    Also, as chiefs basically hand out the right of usufruct (the right to use the land, but not actual ownership), perhaps that right should be supported in law to a greater extent than it is today. For instance, people who are assigned the right to use land should never be viewed as 'squatters', to be evicted by 'investors' and the like.

    If this fund was held in a stable currency, the chiefs could charge relatively low interest rates - lower than commercial banks. Plus, they know their territory and the people in it and their history better than a commercial bank without access to a credit registry would.



    2) Title Deeds

    Or alternatively, people could have title deeds. However, there is the obvious danger in borrowing against the land you own - that is that if there is some calamity, the land belongs to the bank. Which means that the bank then has to sell it, and that the land is out of productive use for some time. Farm land is only that when there is a farmer to work it.

    There is also the issue of how title deeds would infringe on the very concept of communal land.

    The only thing I really like about title deeds, is that it is much harder to evict the owner who holds that deed. Usually, only the state can do that if are building infrastructure. And even then, often compensation has to be paid.

    So if there was a way to maintain communal land, but make it very hard for someone who has been assigned that communal land to be evicted or have the land confiscated as soon as they make improvements to it, perhaps that would be ideal.

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  4. Cho,

    In securing our food , I argue that Zambia should explore the potential benefits of more mechanised farming given to expand food production, perhaps through a combination of fiscal incentives for would be mechanised farmers, and greater investment in appropriate infrastructure.

    It would be useful on several fronts to have hundreds of thousands of the millions of subsistence farmers become medium sized farmers, using machinery and being supported by good support systems - way beyond the FRA.

    If they used 'green' methods of farming, they could actually improve soil structure, and turn that fact into hard cash through Carbon Credits, for which there already is at least one exchange (the Chicago Climate Exchange or CCE). (1)

    The way it works, is that farmers or conservationists first do a job, then present the evidence to a broker, which can then sell carbon credits. 1 Carbon Credit is the equivalent of 1 tonne of sequestered carbon. Carbon Credits are trading for $5 to $7, and are projected to be priced in the mid teens in the coming decade.

    The government could buy up carbon credits and front the money to farmers, in the process making a small profit itself.

    This would be enough to finance machinery, so every farm could have at least one tractor with additions.

    Now the real money in this could be with extreme soil building methods. For instance, the Keyline Designs claims that it can sequester 1000 to 1500 tonnes per hectare in the first 2-3 years. Even if they only sequestered 1/10th of that, the money would go a long way in financing a small tractor for a family farm.

    To quote:

    " 1. PRODUCING TOPSOIL

    The cultivation, irrigation and stock management techniques of Keyline accelerate the natural process of living soil formation. Conversion of subsoil into topsoil may, under natural conditions, occur at 10 to 15 tonnes per hectare each year. On Keyline farms it can be 10 to 15 hundred tonnes per hectare each year during the two or three years of conversion. Deepening the topsoil by 10 to 15 cm (4 to 6 inches) achieves this result. A practical short term goal is to deepen the living top soil to around 30 to 45 cm (12 to 18 inches). "
    (2)

    If you look at Carbon Credits, the real money could be in producing topsoil, as much as producing crops. :)

    Also, could be planting high value trees that can serve several purposes during their growth (such as preventing erosion, creating microclimates, carbon sequestration as trees lose 20% of their roots annually), while generating large amounts of money after harvesting. Teak trees after 15 years can be sold for $5,000 per tree profit at today's prices. Which would be very significant for a rural family. (3)



    1) Chicago Climate Exchange
    http://www.chicagoclimatex.com/

    2) Keyline Designs
    http://www.keyline.com.au/ad1ans.htm

    3) Tropical American Tree Farms
    http://tropicaltreefarms.com/projections.htm

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  5. Just a few ideas:

    ”1) Credit system through chiefs”

    I think this could work because its basically a variant on microfinance. The whole basis of microfinance is that the community bond sustains the process. Everyone knows the borrower. In your example the chief knows the borrower. There’s an additional difference that in this case land is clearly the collateral. The problem might be long term tenure security, but as I have previously pointed out the cost of inputs have tended to be more important to Zambian farmers than security of tenure. In that sense anything that provides credit without requiring security of tenure on the part of the borrower could be lead to some improvements.


    ”2) Title Deeds”

    We discussed this before. I am sceptical on the extent to which titling can deliver significant improvements. Evidence in Zambia simply does not show this to be critical.


    The key I think is make the distinction between what is needed to attract new farmers from what is necessary to for existing farmers to expand output. I am not convinced the constraints are the same.

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  6. We discussed this before. I am sceptical on the extent to which titling can deliver significant improvements.

    Even if it doesn't, what is there to loose ?

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  7. Cho,

    We discussed this before. I am sceptical on the extent to which titling can deliver significant improvements. Evidence in Zambia simply does not show this to be critical.

    Bailiffs burn houses in Mazabuka
    By Henry Chibulu in Mazabuka
    Monday June 16, 2008 [04:00]

    SEVERAL families in chieftainess Mwenda's area of Mazabuka have been left homeless after their houses were burnt by Court Bailiffs following a High Court order to evict them from a disputed farmland. Household property and foodstuffs were burnt to ashes by the uncompromising bailiffs who were accompanied by armed police officers.


    Now this farmland was probably 'disputed' because of the difference between customary land and state land, and 'title deed' laws.

    If the people in question had owned a title deed, it would be very difficult for them to be evicted. Almost impossible without compensation.

    The key I think is make the distinction between what is needed to attract new farmers from what is necessary to for existing farmers to expand output. I am not convinced the constraints are the same.

    I'm sure there are several constraints, but without the certainty that whatever investment is made in the land is respected, farmers will not invest in their land. And the most certain way to guarantee this is to have individual farmers own their individual farms.

    That is why I mentioned giving a similar status to the right of use, which is what customery landownership is about right now, I believe.

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  8. "Even if it doesn't, what is there to loose ?" - Random

    Titling introduces other transaction costs, including the cost of titling itself.

    But actually I am okay with titling in general as part of the three pronged cord we discussed last time.

    The question here was regarding how best to expand production. My point was that for farmers its not really about titling. I mean tenure security is important for those wishing to expand production, but evidence increasing shows it as not critical for new farmers on a small scale. So the question is important.

    "Now this farmland was probably 'disputed' because of the difference between customary land and state land, and 'title deed' laws." - MrK

    See my response above. I see the point in the general scheme of things, but the question was more pointed at farmers. Incidentally in your example title deeds may not even help unless you had an effective legal system and ensured that somehow women can also be encouraged to get title deeds.

    "I'm sure there are several constraints, but without the certainty that whatever investment is made in the land is respected, farmers will not invest in their land. And the most certain way to guarantee this is to have individual farmers own their individual farms." - MrK

    Size, Mrk...size...
    Mbuluwa's comment perfectly illustrates this. The uncle has got a plot, but the challenge is on expanding production...

    As you know, for small plots of land the issue of credit is not that significant, what is important is farming methods and access to inputs...

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  9. Cho,

    Size, Mrk...size...
    Mbuluwa's comment perfectly illustrates this. The uncle has got a plot, but the challenge is on expanding production...

    As you know, for small plots of land the issue of credit is not that significant, what is important is farming methods and access to inputs...


    I'm not sure I understand what you're saying.

    Wouldn't credit help with both farming methods (irrigation, mechanization) and inputs? And I don't understand what the size of the plot would have to do with it? Small and medium farmers would roughly have the same problems.

    Also, no matter of the size of the plot, the farmer can always expand into value added or more labour intensive activities, like raising livestock, growing herbs and flowers, agroforrestry, canned foods, which would all benefit from credit and capital investment.

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  10. "Wouldn't credit help with both farming methods (irrigation, mechanization) and inputs? And I don't understand what the size of the plot would have to do with it? Small and medium farmers would roughly have the same problems."

    It would, but is not a critical factor when you have a very small plot at the back of your house. Credit is critical for larger investments. Incidentally larger credit can be cheaper (per Kwacha) than than smaller credit sometimes.

    ReplyDelete

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