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Fertilizer subsidies in Africa: are vouchers the answer?
July 2009
Nicholas Minot and Todd Benson
International Food Policy Research Institute (IFPRI)

Acknowledgements: FANRPAN acknowledges the International Food Policy Research Institute as the source of this article: http://www.ifpri.org/pubs/ib/ib60.asp


Summary

In the 1970s and 1980s, most African countries sold fertilizer at subsidized prices through state-owned enterprises. In response to the fiscal cost and ineffective implementation of these subsidies, as well as pressure from international financial institutions, almost all of these countries liberalized their fertilizer markets to some degree as part of structural adjustment programs carried out in the late 1980s and early 1990s. Under these reforms, governments eliminated state monopolies on fertilizer distribution and phased out universal subsidies.1

Now several factors have stimulated renewed interest in fertilizer subsidies in Africa. The fertilizer and seed subsidy program of the government of Malawi is credited with contributing to significant increases in that country’s maize harvest. African policymakers came together in 2006 at the African Fertilizer Summit and resolved that member states should grant "targeted subsidies in favor of the fertilizer sector."2 Both the Millennium Villages program, guided by economist Jeffrey Sachs, and the Alliance for a Green Revolution in Africa have in recent years called for governments to boost fertilizer use in Africa, with subsidies if necessary.3 Finally, the global food crisis of 2007–08 highlighted the importance of boosting agricultural production. Increased fertilizer uptake is an important component in raising crop yields on the continent—on average, farmers in Sub-Saharan Africa use about 13 kilograms (kg) of fertilizer nutrients per hectare (ha) of arable land compared with the developing-country average of 94 kg/ha.4

Yet fertilizer subsidies remain controversial. Many development economists and international development agencies point to the high cost and limited effectiveness of fertilizer subsidies in the 1970s and 1980s. They note that past subsidy programs, which often involved state monopolies in fertilizer marketing, undermined the emergence of efficient, widespread, private input distribution networks. Moreover, there are significant opportunity costs to devoting public funds to subsidizing fertilizer rather than investing in market development, agricultural research, transportation infrastructure, or other public goods to achieve a country’s development goals.5

Proponents of subsidies believe, however, that fertilizer subsidies are the only way to jump-start African agriculture and deliver concrete food security and income benefits to the rural poor. Agronomists see such subsidies as a way of reversing the depletion of soil nutrients in Sub-Saharan Africa. Political leaders often view fertilizer subsidies as a simple way to quickly assist rural households. And some development agencies see them as central to achieving a Green Revolution in Africa. These proponents argue that governments can avoid the mistakes of the past by implementing "smart subsidies", which are designed to target the poor and to support, rather than undercut, the development of private input distribution markets. Input vouchers have been proposed as a way to make fertilizer subsidies "smart." Nonetheless, such schemes are not appropriate or cost-effective in all situations. It is important to clarify the conditions under which fertilizer subsidies and vouchers make sense.


  1. Kherallah, M., C. Delgado, E. Gabre-Madhin, N. Minot, and M. Johnson. 2002. Reforming agricultural markets in Africa: Achievements and challenges. Baltimore, Md.: Johns Hopkins University Press.
  2. African Union. 2006. Abuja declaration on fertilizer for the African Green Revolution. Declaration of the African Union Special Summit of the Heads of State and Government, June 13, Abuja, Nigeria. http://www.africafertilizersummit.org/Abuja%20Fertilizer%20Declaration%20in%20English.pdf. Accessed July 15, 2009.
  3. Denning, G., P. Kabambe, P. Sanchez, A. Malik, R. Flor, R. Harawa, P. Nkhoma, C. Zamba, C. Banda, C. Magombo, M. Keating, J. Wangila, and J. Sachs. 2009. Input subsidies to improve smallholder maize productivity in Malawi: Toward an African Green Revolution. PLoS Biology 7 (1): e1000023. DOI:10.1371/journal.pbio.1000023. Accessed July 15, 2009; Sachs, J. 2007. How I’d fix the World Bank. Fortune, July 2. http://money.cnn.com/2007/06/25/news/economy/sachs_worldbank.fortune. Accessed July 15, 2009.
  4. FAO (Food and Agriculture Organization of the United Nations). 2009. FAOStat. http://faostat.fao.org/site/422/default.aspx#ancor. Accessed July 15, 2009.
  5. Morris, M., V. Kelly, R. Kopicki, and D. Byerlee. 2007. Fertilizer use in African agriculture: Lessons learned and good practice guidelines. Washington, D.C.: World Bank.


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