A recent piece from IAPRI on Zambia's agricultural subsidies surprisingly does not engage with recent government policy changes in the area. However, it does helpfully note that given the continuation of input subsidies in general, the challenge is to increase their benefit by addressing the design and implementation problems. These problems include inequitable targeting of fertiliser distribution, low cropresponse rates, and crowding out of commercial fertiliser distributor.
Zambia's agricultural subsidies: money well spent? Chance Kabaghe & Thomas Jayne, Guardian (UK), Commentary :Zambia's decision to spend 90% of its agricultural budget on subsidies has left little money for activities that generate a greater impact on agricultural growth and poverty reduction.Florence Chipwende, a farmer, was elated to discover in October last year that the ministry of agriculture had designated four bags of subsidised fertiliser for her under the farmer input support programme (Fisp). However, they arrived a month after the rains started and, as a result, her maize was planted four weeks late.
Although the initiative enabled Chipwende to boost her maize production from 30 bags last year to 34 in 2013, the delay knocked 20% off her anticipated production.
She is not alone. Year after year, roughly a third of Fisp recipients in Zambia receive their fertiliser late. In the past five years, the benefits of the programme have not exceeded the costs borne by the government.Recent research (pdf) by Zambia's Indaba Agricultural Policy Research Institute (Iapri) estimates that every kwacha (11p) spent on Fisp has returned less in benefits (0.9 kwacha) to farmers and consumers.Input subsidy programmes (ISPs), which were largely phased out in the 1990s, have once again become a major plank of agricultural development strategies. This is mainly due to initial assessments of Malawi's programme in 2007 and 2008 concluding that input subsidies hadtransformed the country from a food basket case into a grain exporter and had dramatically reduced rural poverty.More recent and comprehensive analyses by Iapri and others have shown these assertions to be questionable in some instances and factually incorrect in others. Yet by 2010, 10 countries, accounting for 60% of sub-Saharan Africa's population, had reinstituted ISPs. These countries are spending about $1bn annually on subsidies, or 28.6% of their public expenditure on agriculture.There is no doubt that ISPs have raised food production, even within one growing season. But this is insufficient justification for their implementation. The weight of the international research evidence indicates that other kinds of public expenditure – such as crop research and development, and agronomic management training programmes – generate greater payoffs to agricultural growth and poverty reduction.Even in Malawi the cracks are starting to show – it's facing severe hunger in 2013-14. The country has been a net maize importer in most years, even after its ISP was massively scaled up in 2005-06.There are three main problems limiting the impact of fertiliser-subsidy programmes. First, farmers do not get a good response to fertiliser application in soils that are highly acidic or have low soil organic matter – problems affecting many, if not most, farmers in the region. These soil problems can be corrected with other public programmes that have been chronically underfunded.Second, spending 90% of the agricultural budget on fertiliser subsidies leaves little money for other complementary activities - such as crop research, agronomic management extension programmes including minimum soil tilling, irrigation, and road infrastructure - shown byresearch evidence to generate a greater impact on agricultural growth and poverty reduction.Third, ISPs crowd out farmers' purchases of commercial fertiliser.It is sobering to contemplate how many schools and clinics could have been built if even half of the expenditure on input subsidies had been reallocated to these livelihood-promoting investments.Rural poverty remains virtually unchanged despite a decade of Fisp in Zambia, and despite the fact the former government spent some 2% of gross domestic product supporting maize production and subsidising input for farmers.There are many reasons for low fertiliser use in Africa: low crop-response rates, yield risk and low returns in rain-fed, semi-arid conditions. Fertiliser subsidies address only some of these problems – and only as long as they remain in place. Subsidies, however, cannot address underlying problems of declining soil fertility caused by rural population growth and more continuous cultivation. Nor can input subsidies make fertiliser use more sustainable over the long run.Despite this recent evidence, ISPs remain popular in Africa for many reasons: they demonstrate highly visible government support to constituents; they are powerful tools for raising food production within one season; politicians like programmes that produce visible payoffs before the next election cycle; and farmers worldwide love to receive free input.For these reasons, ISPs are likely to remain for the foreseeable future. In this case, the challenge is to increase their benefit by addressing the problems of inequitable targeting of fertiliser distribution, low crop-response rates, and crowding out of African commercial fertiliser distributors. More attention to the design and implementation details of ISPs is necessary to translate the theoretical benefits of smart subsidy concepts into reality.This month G20 leaders in St Petersburg will endorse a draft development action plan and a G20 development working group accountability reportthat recommends we concentrate our efforts towards such issues as agricultural production increases. Let's hope leaders more carefully review the research evidence on how governments can use their scarce resources to enable farmers, like Florence, to sustainably produce more food to support an ever-growing world.