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Raising the productivity of public investment in Zambia's agricultural sector
December 2006
J Govereh, JJ Shawa, E Malawo and TS Jayne
Food Security Research project, Michigan State University (MSU)

Acknowledgements: FANRPAN acknowledges the DEC website as the source of this report: www.dec.org


Executive Summary

Agriculture provides the main support for Zambia’s rural economy, and because of this, growth in the agricultural sector is the clearest avenue through which poverty reduction can be achieved in Zambia. Yet despite widespread recognition of the strong connection between agricultural development and poverty reduction, there is continuing under-provision of public goods investments for over a decade. Zambia’s primary policy objective of achieving accelerated growth and competitiveness in the agricultural sector cannot be achieved unless adequate public resources are committed towards catalyzing the desired growth. Strong evidence from southern Africa as well as throughout the world indicates that long–term public investment in research and development, extension services, rural infrastructure, and food safety and quality systems have high pay-offs and are among the most important drivers of agricultural growth and competitiveness.

Agricultural-led development has been identified by African Heads of State and Governments as key to restoration of food security and rural development on our continent. Under the African Union’s Comprehensive Africa Agricultural Development Program (CAADP) framework, Zambia, like many other members of the union, has targeted to achieve a minimum of 6% annual agricultural growth by making available 10% of the national budget towards the sector. In Zambia, it is important not only to increase the resource allocation to the sector in accordance with the CAADP target of 10%, but to allocate these resources productively so as to make the maximum contribution to sustainable growth within the shortest possible time.

This paper examines trends in Zambia’s public budgeting for agriculture and the composition of the budget. This report does not cover tax expenditures by the government, private sector expenditures, and support from donors. Support from development partners channeled through government programs is included in the report. The report covers approved budget allocations and compares approved expenditures with actual expenditures.

The period between 1981 and 1992 was characterized by a high proportion of the national budget being spent on agriculture. This was because of the large treasury outlays for state food and input marketing operations. After the Movement for Multiparty Democracy (MMD) took over the government in 1991, the real national budget size declined by about 50% in years that followed. But agriculture took a disproportionate share of the reduction in the public budget. In 1991, the share of the budget to agriculture was 26%, but this declined to 4.4% by 1999. With this decline, Zambia’s agricultural sector witnessed deterioration of research, extension, and other institutional support services from the government. The 2006-2008 expenditure framework shows that agriculture’s share of public resources in the immediate future will remain at 4%, and Zambia will fail to achieve the CAADP target of 10% by 2008. Given this low level of public investment in the sector, rapid agricultural growth will remain elusive, and the country is unlikely to achieve its Millennium Development Goal (MDG) number one.

The composition of the sector’s public budget matters as much as the total amount spent. The sector’s budget is comprised of six major budget items. These include personnel emoluments, recurrent departmental charges (operational expenditure), poverty reduction programs, capital expenditure, agricultural development programs, agricultural infrastructure spending allocated through other ministries, and other public payments to the sector. Over the past six years, poverty reduction programs had the largest share of 48%, followed by agricultural development programs at 18%, followed by personnel emoluments, agricultural infrastructure and social relief, recurrent departmental charges, and capital expenditure in that order.

Poverty Reduction Programs (PRP) funding supports out-grower schemes, farm block and land development, livestock restocking and disease control, the Fertilizer Support Program (FSP), the operating costs of the Food Reserve Agency (FRA), agricultural research, and extension projects. Since 2004, allocations for PRPs in general have increased, but 80% or more of the funding is for only two programs, the FSP and the FRA. These programs promote maize production despite the stated policy to support crop diversification. Furthermore, the manner of conducting these programs sometimes conflicts with government goals of stimulating private sector investment in the sector.

Agricultural development programs are funded by donor grants and loans. The volume of expenditure has grown in real terms. The program activities include capacity building of smallholder farmers and MACO staff, infrastructure rehabilitation, e.g., feeder roads, camp and farmer training center facilities, and some elements of agricultural finance. The majority of these programs have a short life span. Challenges in managing these donor projects lead to unsustainability, poor monitoring and evaluation, overlapping interests, diversion of public sector officials’ time away from core government activities, and a lack of effective coordination. The effectiveness of these projects depends on the synergy and continuity among them and their integration with national strategies.

Since 2001, allocations for personnel emoluments have grown in real terms. Evidence at hand does not show whether this increase is due to growth in the size of the public agricultural workforce or increases in real wages and benefits.

Part of the sector’s public budget is channeled through other ministries including Finance and National Planning , Energy and Water, Works and Supply, Community Development and Social Services, and Ministry of Lands. Allocations through these other ministries pay for relief services and the provision of infrastructure services in farm blocks, including electrification, construction of roads, dams, and land development. Expenditures on agricultural infrastructure have trended downwards and fluctuated over the years. In spite of stated policy emphasis on irrigation development, actual spending remains negligible.

Allocations to recurrent departmental operations have declined in real terms. This decline has crippled technical public agricultural institutions as staff operate with increasingly few resources. The efficiency of public agricultural employees has been negatively affected. A number of research programs have been abandoned due to inadequate resources.

Capital expenditures for the agricultural sector by the government have been squeezed over the years. The inability to rehabilitate existing equipment and supporting infrastructure has further reduced the effectiveness of employees. In a number of locations, public agricultural institutions are non-existent. Poorly functioning equipment and facilities at agricultural institutions have made it difficult for officers to carry out their duties. Public agricultural research and extension in Zambia has virtually collapsed.

Although MACO submits its expenditure plans to MOFNP, the latter only approves a fraction of what the former requests. On average, over 70% of what is requested is approved. Such a pattern of funding approval means that a number of planned activities are not carried out.

The size of the budget approved for the sector is important, but the resources that will be released as the budget gets implemented does not necessarily match with the resources approved. Partial release of funds means that program development is not coordinated with resources made available for these programs. The discipline to match releases with the amounts approved has improved under the MMD’s New Deal Government. Since 2002, more than 90% of the resources have been released.

The level of allocation of resources does not give the full picture of the amount of resources that will be made available for spending. For example, the FSP, involving the distribution of subsidized fertilizer to small farmers, has received more resources than approved at the expense of other budget items such as recurrent departmental charges. The significant disparity between budget authorizations and actual releases suggests that the budget itself offers only a notional guide of the actual spending priorities.

In summary, an important challenge facing Zambian policy makers is to focus on improving the effectiveness of fiscal spending on agriculture. While higher levels of investment are needed, merely spending more on agriculture may not effectively contribute to national policy objectives unless the funds are spent in productive ways and complemented by a supportive policy environment. It is especially important that future efforts evaluate the returns to alternative public and linked private investments, as there can be very positive (or negative) linkages between these, depending on the nature of the investments made by the public sector and their effect on incentives and the risk environment for encouraging private investments.

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