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Friday, 1 February 2013

Securing our Food

By Chola Mukanga

Agriculture is not only one of the most important economic sectors in the country, but it is also the most politically sensitive. 70% of our people live in rural areas and largely practise farming or fishing. The other reason is that it is heavily connected to the issue of land which inevitably draws in traditional leaders and other players. It’s therefore comes as no surprise to many that we have an infinite array of ideas on what should be done to get our agriculture policy back on track. Which is fine but we need to remember that not every voice adds value. It's therefore important that we weigh the issues affecting this sector very carefully.

The latest to join the queue in offering opinion is the  Zambia Consumers Association (ZACA). They recently called for the transformation of the the Food Reserve Agency (FRA) from only a maize storage agency into a wider parastatal with a subsidiary milling company. ZACA Executive Director Muyunda Ililonga says there is need for the role of FRA to be revised so that it can compete with private millers in order to guarantee that consumers are not being exploited. ZACA believes that if FRA had a milling department millers would not take advantage of consumers by hiking mealie meal prices, thereby making the staple food affordable to the average Zambian.

ZACA's position is a logical extension of the current FRA model which has increasingly focused on guaranteeing low maize prices to consumers. Recently President Michael Sata asked millers to reduce prices. At present we effectively have price controls on maize. ZACA is simply pointing out that the way to guarantee prices at a certain level is by Government doing everything itself. Government would buy maize from small farmers and would also sell mealie-meal to consumers. In short it would have milling company with outlets throughout the country, especially in rural areas, to undercut any alternative millers who would sell at a more expensive price. In theory, there's no reason (aside from ideological ones) why Government should not do this, provided there would be no taxpayer funded subsidies to FRA and the market remained open to others to undercut FRA if necessary.The problem is that currently FRA is heavily subsidised. There's no guarantee that the proposed milling company won't be equally inefficient. 

ZACA are right about one thing : the status quo is not working. We are subsiding agriculture to a tune of K2 trillion (old Kwacha) and getting little for it. The bigger problem everyone knows : there is lack of a comprehensive policy framework to guide proper functioning of agriculture marketing in Zambia. Lack of decisive and tough leadership has robbed the Zambian people of real solutions to our agriculture problems. To sort them out it requires political capital to be spent. It requires political leaders to accept that change cannot happen without producing winners and losers. It may also be possible that in taking forward that change the PF administration lose support from some quarters. But isn't that what leadership is about? Making tough choices! Sadly, politicians will keep the subsidies going and will even create this milling company because of a lack of courage to do what is right in the long term - 2016 is around the corner and my sense is that from here on - it is populism all the way. But one must live in hope. Miracles do still happen.

If miracles do happen, the question then is what sort of miracles do we need in our agriculture policy? The answer surely is that it won't come through ZACA's misguided proposal. Before one starts making the FRA bigger, surely the starting point is to ask what is wrong with the FRA? The idea behind the FRA is to guarantee food security whilst providing the right incentives for smallholder and large producers to emerge in the market. The Government's aim is to encourage a private sector led agriculture industry whilst ensuring that enough food is available in the country. ZACA's vision would introduce perverse incentives in the market. A government led agriculture industry has been done before and it has not worked.  Therefore the only game in town is how to ensure the FRA achieves its food security goal within a broader and coherent agricultural strategy that contributes towards poverty alleviation - and that is important, we don't just want food in our mouths, we want agriculture to be an engine of economic growth.

We can start with the following eight ideas that would help get our agriculture policy back on the right track.

Idea 1# - Reform the FRA to make it more directly focused on food security, rather than the current inefficient and costly practice of large significant purchases of maize on the market. It is also important that policy on FRA is made more certain. One of the biggest obstacle to more rapid growth in agriculture is the uncertainty on government’s policies on buying, importing and exporting many product, especially for maize and wheat. This has made it difficult for the private sector to undertake investment decisions.

Idea 2# - Encourage FRA to make maize purchases through Zambia Agricultural Commodity Exchange (ZAMACE) rather than directly with farmers to reduce price distortions. It will also develop the exchange market significantly.  Alongside the usual substantial gains that trade in commodities bring, ZAMACE offers the potential to contribute towards the development of fair, orderly, and efficient marketing systems, and; moves us towards more efficient and reliable supply chains, thereby helping smallholder Zambian farmers to produce more for the market. 

Idea 3# - Eliminate export restrictions. When the incentives are correct and you have a fully functioning FRA you have nothing to fear. More exports means more money in the pockets of rural dwellers to drive growth in other areas.

Idea 4# - Improve physical infrastructure especially road transport to improve access to markets is vital. Literature evidence supports the notion that "market access is a key determinant of smallholder income-diversification and growth, and, for peripheral regions, improvements in market access require investments in infrastructure". Link 8000 needs to be targeted at agriculture nodes. But it is a step in the right direction if properly managed and costs do not escalate. It is important that transport investment is not erratic but consistent - roads require maintenance.

Idea 5# - Improve access to credit for smallholder farmers. This requires tackling the issue of high defaults, lack of collateral. A government bank for farmers is not ideal, but supporting cooperatives and credit unions is not a bad idea. And yes, land reform would help. It is long overdue!

Idea 6# - Improving "market discovery" for small farmers. One of the key constraints facing many rural dwellers appear to be knowledge about market opportunities. There are many good opportunities for income creation in rural areas, but locals are just not aware of the opportunities or they struggle with discovering the profitable markets. There are many opportunities for expanding in different areas including Chilli, bees and mushrooms, to name a few. Although private organisations like are doing their bit to unlock the potential that exists, Government can play a more proactive role at the local level working with communities to identify their local assets and solving the coordination and "market discovery" failures that exist. Unlocking these opportunities would make our local areas engines of agriculture growth. We are seeing progress in this area with the local industries clusters idea. It must be delivered - not merely talked about!

Idea 7# - Better investment in education and research. We need to create better educational institutions that supports farmers. Statistics show that only 3% of graduates in the higher sectors study agriculture. This is both unsustainable and unacceptable. Further investment is needed to encourage more research and development. As well as main-streaming agriculture education, we can also look at decentralising research services to sub-provincial level so that local opportunities can be identified and exploited - in line with Idea 6#.

Idea 8# - Targeted subsidies to support mechanised farming, coupled with the on-going policy of farming blocks. The potential benefits of more mechanised farming should now be explored. Now is the time to look to the Brazilians and ask ourselves how they have been able to develop large farms. We have the land just as they do, why can't we put together the same programme in place? We have no money, but the little that exists must be poured into agriculture.

Undoubtedly, there are many more ideas, including policies to encourage greater crop diversification, as well as support the livestock industry. But the ideas above from a starting point for coherent agricultural framework that would help us move towards securing our food. Ultimately food security depends on robust and sustainable agriculture industry. We cannot have by Government doing everything from providing food inputs to milling to retail! Real sustainable agriculture policy is built on the realisation that for agriculture growth to translate into poverty reduction, the poorest have to be directly involved, not government doing the milling and supporting the entire industry through large and inefficient subsidies! Growth requires a fully functioning market with all the correct incentives for private sector led investment. It is not only sensible, but it is also fair to taxpayers. 

Chola Mukanga is an economist and founder of the Zambian Economist which provides independent economic perspectives on Zambia's progress towards meaningful development for her people

Copyright: Zambian Economist, 2013
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1 comment:

  1. Cho,

    Great piece, and I think you're spot on for 97% of it. Particularly Idea #6, which is an under-appreciated issue. I disagree with you on Idea #8, though. Brazil's premature focus on industrialized farming is thought to have contributed largely to the rapid growth of urban poverty. Better to focus on smallholders. Also, it surprises me that you don't mention anything about FISP (fertilizer subsidies), which have been a detriment to the private sector:

    www.aec.msu.edu/fs2/zambia/wp70.pdf

    and of surprisingly little benefit to small farmers:

    www.aec.msu.edu/fs2/zambia/ps_51.pdf

    www.aec.msu.edu/fs2/zambia/ps_52.pdf

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