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Reclaiming policy space: Lessons from Malawi's fertiliser subsidy programme
2007
Blessings Chinsinga
Future Agricultures

Acknowledgements: FANRPAN acknowledges the Future Agricultures website as the source of this report: http://www.future-agricultures.org/publications.html


Context matters

This case study argues that political context matters in agricultural development issues. No matter what the technical or economic arguments for or against particular policy positions are, it is ultimately the configuration of political interests that influence agricultural policy outcomes on the ground.

The case of the on-going debate about fertiliser subsidies in Malawi provides a prime example. Recurrent food crises through the 1990s in Malawi provide the backdrop for the recent debate. The economic reform packages supported by donors from the 1990s insisted on the removal of agricultural subsidies. A targeted input programme, supported by the UK Department for International Development (DFID), persisted, but this too was withdrawn in 2004. This resulted in a substantial political backlash, reflected in the focus of campaigns during the presidential elections of 2004, with all candidates backing a subsidy programme for fertilisers. A simple narrative was presented: hunger and recurrent food crises are best responded to by supporting agriculture, and this means providing subsidies to get agriculture moving with a focus on key crops (notably maize and tobacco). National food security and a reduction on dependence on food imports, as had happened in successive years, required, it was argued, concerted state action.

This position gained wide popular backing, and in June 2005 the new president announced the introduction of subsidy programme targeted at resource-constrained, but productive, maize farmers. This budget speech ignited intense political debate. Opposition parties argued for a universal subsidy, extended beyond maize to tobacco as a boost to economic growth and foreign exchange earnings. In the end, the government responded and a universal fertiliser subsidy was agreed with a budget of MK4.7 billion. A coupon-based distribution system was implemented through state-owned organisations and overseen by local government officials and traditional leaders nationwide.

The national political consensus – fuelled by the maize politics of Malawi – was seen in some quarters are a regressive, potentially disastrous step. It ran against all the efforts at liberalisation and reform that had been on-going over many years. Many technical experts and donors were appalled. Most major donors argued that the programme was not fiscally sustainable, that huge wastage and corruption would result and that the policy contradicted government commitments to private sector investment. No donors supported the 2005-06 programme, and the full cost was borne by government.

Different views however emerged within the donor community. Some argued against subsidies at all costs (including the International Monetary Fund (IMF) and US Agency for International Development (USAID)), on the basis that they would undermine private sector development in the country. Others (including the World Bank, DFID and the European Union (EU)) remained sceptical about government capacity and highlighted the challenges of targeting, but conceded that some type of ‘smart subsidy’, building on the lessons of the targeted input programme might be feasible. Others, including some United Nations agencies and Scandinavian donors, backed the programme on the basis that fertiliser is critical to boosting production and assuring food security, and that phasing out over time once farmers had ratcheted up their capacity and asset base was the best option. This latter view was given a major boost by the high-publicity given to the Millennium Villages Project in Malawi in this period, an initiative which had received much scorn from other donors. Many NGOs also backed a subsidy programme with the argument that bringing in the social costs of food insecurity and aid dependence shifts the balance in favour of productive subsidy of agriculture. Thus across a wide array of actors a range of different narratives, associated with different actor networks and aligned to different interests, about fertiliser subsidies were evident, each backed by different political and technical justifications and rationales.

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