the role of southern governments and the world bank in the rise of hunger

8/21/2019 The Role of Southern Governments and the World Bank in the Rise of Hunger

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UNDERSTANDING THE ISSUE2/2007

Deadly Combination: The Role of Southern Governmentsand the World Bank in the Rise of Hunger

Author: Mark Curtis

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Research commissioned by: Norwegian Church Aid (NCA),Church of Sweden (CS), Danish Church Aid (DCA),

Brot-fuer-die-Welt (BfdW).

Funded by:

NCA, CS, DCA, BfdW who are member agencies of APRODEV,which is the association of the 17 major developmentand humanitarian aid organizations in Europe, whichwork closely together with the World Council ofChurches. APRODEV agencies engage in many kinds ofactivities related to development cooperation: fundraising, funding of emergency, relief, rehabilitationand development activities, capacity building,consultancy, awareness raising, education, andadvocacy.

Views here presented do not always correspond to thoseof the funding organizations.

Author:

The consultant and lead author on this report was MarkCurtis. The text was revised and edited by the fundingorganizations.

All photos:

Mark Curtis

Layout:

Antenna

Coordinator:

Helene Hoggen, Norwegian Church Aid

Big thank you to Danish Church Aid Offices in Malawi, Ethiopiaand Zambia for assisting the author of this report on his field trips.

DEADLY COMBINATION:The Role of Southern Governments and the World Bank in the Rise of Hunger.

Front page:Alecsina Mbwat grows maize in Chilembampita, Malawi.



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CONTENTS

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1. SYNTHESIS REPORTDeadly Combination: The Role of Southern Governments and the World Bank in the Rise of Hunger.

By Mark Curtis

2. MALAWI CASE STUDY

Aprodev Project: The Impact of Economic Liberalization on Hunger-Prone People

By Mark Curtis

3. ZAMBIA CASE STUDY


By Mark Curtis

4. ETHIOPIA CASE STUDY


By Mark Curtis

5. SUMMARY

Deadly Combination: Some Comments on the Report by the Funding Organizations

By the funding organizations

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47

59

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APRODEV PROJECT:

THE IMPACT OF ECONOMIC LIBERALIZATION ON

HUNGER-PRONE PEOPLE:

DEADLY COMBINATION:

THE ROLE OF SOUTHERN GOVERNMENTS AND THE WORLD BANK IN THE RISE OF HUNGER

CONTENTS

Introduction

1. Poverty and Hunger in Malawi, Zambia and Ethiopia

2. Liberalization and the World Bank

3. The plight of farmers: Findings from the field

4. The impact of the reforms

4.1 Output and productivity

4.2 Access to fertilizer and other inputs

4.3 Agricultural markets and prices

4.4 Extension services and government spending

4.5 Trade and exports

5. The human costs of the reforms

6. Summary of the impact of reforms

7. The problem of partial liberalization the mix ox government and World Bank policies



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This is a study of the impact of economicreforms on hunger-prone people in threeof the worlds poorest countries - Malawi,

Zambia and Ethiopia. Its primary purposeis to assess whether food security has im-proved or worsened, and why.

These three states are among the largenumber of developing countries that havepromoted extensive liberalization of theireconomies over the past 15 or so years,under the auspices of the World Bank andInternational Monetary Fund. The studyfocuses on the agricultural policies pur-sued by country governments and theWorld Bank, and the impact of polices onsmall-scale poor farmers, who comprisethe overwhelming majority of the people

in these three countries.

The analysis covers the whole of the re-form period but it is important to disting-uish between two phases one of deepliberalization in the late 1980s and 1990s;and a phase of partial liberalization in theearly years of this century. In the firstphase, these states transformed theiragricultural sectors, in effect by privati-zing them by abolishing or reducing thedominant role of the state and allowingfree markets and private companies tooperate. Yet in the more recent phase, go-vernment intervention in agriculture has

increased in certain areas in some coun-tries: Zambia and Malawi have re-introdu-ced new fertilizer subsidy programs after

abolishing them in the 1990s while in Et-hiopia government-backed companies do-minate the fertilizer supply markets andcontinue to intervene to set grain prices.At the same time, the World Bank andother donors have pulled back from theirearlier promotion of virtually unfettered li-beralization in the first phase of the re-forms; now they at least tolerate a greaterdegree of government intervention, forexample, (limited) government subsidyprograms. Currently, all three countriesare pursuing a mix of state interventionand liberalization policies in agriculture.

This study assesses these countries ex-perience of partial liberalization as well asof the reforms over the entire period. Theconclusion is that not only has deep libe-ralization increased hunger for the poo-rest people, but also that partialliberalization is barely an improvement.The faults lie as much with national go-vernments as with the World Bank, whichare both essentially undemocratic, elitistactors, who are ignoring the needs of poorfarmers. The price for the current non-strategic mix of (government and liberali-zation) policies is being paid by some ofthe poorest people in the world.

There are around 820 million hungry peo-ple in the world, of whom 150 million arechildren. This number has, according to

the UNs Food and Agriculture Organiza-tion (FAO), risen by 20 million over the pastdecade.1 If hunger is to be halved by 2015 one of the Millennium DevelopmentGoals this deadly combination of policiesneeds to be broken.

This analysis combines an extensive re-view of the literature on the experience ofliberalization with visits by the researcherto the three countries between November2006 and January 2007, in which semi-structured interviews were conducted withpoor farmers in a number of villages (seecountry chapters for more details). The

study has a particular focus on subsi-stence farmers, those whose families aredependent solely on crops grown on familyplots and who sell little or nothing in themarket. It also focuses on the recent ex-perience of liberalization and is not inten-ded as a holistic study of these threecountries agricultural sectors as such; italso does not cover, or rather only toucheson, other important issues in these threecountries, such as HIV and AIDS or climatechange.

SYNTHESIS REPORT:

Around 4 million people - lives in ultrapoverty and thus is likely to suffer fromchronic hunger.Amahara region, Ethiopia



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1. POVERTY AND HUNGER IN MALAWI,ZAMBIA AND ETHIOPIA

Deep poverty is endemic in all three coun-tries: around 65 per cent of the populationin Zambia and Malawi lives in poverty,while the figure for Ethiopia is 44 per cent.These figures mask significant regionalvariations, however 80 per cent of people

in Zambias northern provinces live on lessthan $1 a day. The worst indicator is lifeexpectancy. Zambians born today can ex-pect to live on average just 33 years, 18years less than those born in 1980, duemainly to the HIV/AIDS pandemic whichafflicts an estimated one in five of the po-pulation aged 15-49. Malawians fare littlebetter they can expect to live just 38years, Ethiopians 42.2

These three countries are in a state ofmore or less permanent crisis when itcomes to hunger.

Most of Malawis 11 million population

go hungry for at least some time of eachyear: 36 per cent of the population around 4 million people lives in ultra po-verty and thus is likely to suffer fromchronic hunger, while a further 28 percent of the population experiences food in-security at certain times.3 Women are theworst affected around 40 per cent ofrural households that go hungry areheaded by women.4

In Zambia, over 5 million people, or ne-arly half the population, are undernouris-hed.5 Only a third can afford to eat threetimes a day half have an average of two

meals while one in ten survives on just onemeal a day.6

In Ethiopia, the FAO notes that 6-13 mil-lion people risk starvation every year7;while the World Bank counts 7-8 millionpeople as chronically food insecure (mea-ning they cannot feed themselves for morethan six months even in a year whendrought does not occur)8.

Most farmers cannot feed themselves andtheir families all year round and sufferprolonged periods of hunger, even in goodharvest years. In the good harvest of 2000

in Malawi, for example, the average hou-sehold maize deficit was four months;after the poor harvest of 2001, it was ne-arly six months.9 In all three countries, theresearcher spoke to farmers who lackedsufficient food from anything from 3 to 9months in a year.

The overwhelming majority of farmers in

the three countries are smallholders, pro-ducing most of the countries food. Zam-bias 800,000 smallholder farmersproduce 65 per cent of the countrysmaize, 75 per cent of its groundnuts and85 per cent of its sorghum.10 Smallholderfarms produce 80 per cent of Malawisfood.11 One third of farming households inMalawi, and one fifth in Zambia, areheaded by women. Yet women own on ave-rage half the amount of livestock as male-headed households while they produce onaverage one third less than male-headedhouseholds, due mainly to the lack oflabor for critical farming operations liketilling.12 Government figures suggest that

15 per cent of all female-headed house-holds in Zambia survive on just one mealper day (compared to 9 per cent for male-headed households) less than a third eatthree meals.13

Ethiopias main crop, teff, produces thecountrys staple and national dish, injera,while maize is the main food staple in Ma-lawi and Zambia and dominant crop occu-pying most arable land. Maize is grown inthe rainy season, usually lasting from No-vember to March, by human labor usinghand-held hoes. A porridge made frommaize (Nsima in Malawi, nshima in Zam-

bia) is the principal meal. In a 2002 surveyin Malawi, nearly 80 per cent of the ruralpopulation had eaten nsima as their mainmeal for lunch and supper the previousday a very undiversified, less nutritious,diet even when sufficient food is available.14

There is broad consensus in all threecountries that pro-poor agriculturalgrowth needs to come principally from in-creasing productivity in smallholder far-ming. Yet smallholders face numerousproblems in their farming, the most im-portant of which are:

Small plots. An increasing number ofhouseholds farm small and unproductiveplots, thus becoming more vulnerable tothe vagaries of unpredictable rainfall. Inthe southern highlands of Ethiopia, ave-rage farmland per household has decrea-sed to less than a quarter of a hectare. 15 InMalawi, the average landholding size isdeclining and now stands at around 1.2

hectares per family but most farmersfarm on plots less than one hectare in size- in the poor south, average plots are a mi-nuscule 0.1 hectares, meaning farmersare in effect landless.16

Degraded land. In Ethiopia, due to increa-sing human and livestock population pres-sure, large areas of the country areexposed to loss of soil fertility and degra-dation. A recent study suggested that ofthe 54 million hectares of land in highlandareas, 29 million hectares were either se-riously or moderately degraded or had soilcover too shallow to cultivate crops.17 InMalawi and Zambia, partly due to increa-

sing land pressure, the traditional practiceof leaving land fallow for a year has beenreplaced by continuous cropping wherebymaize is grown on the same land yearafter year, resulting in declining cropyields and increasing soil erosion.

Lack of irrigation. In Ethiopia and Malawionly 1 per cent of arable land is irrigated.18

Farmers practicing rain-fed agricultureare thus dependent on rains and at themercy of the weather especially seriousin Malawi and Zambia which rely on asingle, short rainy season.

Lack of technology and access to inputs.Most farmers use basic farming techni-ques, relying on family labor, recycledseeds and a hoe. Cereal yields are low andpost-harvest losses are frequently highdue to inadequate structures for graindrying and storage.19 Most farmers cannotafford any modern technology or inputssuch as fertilizer and seeds. This is an es-pecially serious problem since much ofthe land is becoming degraded and largeincreases in the amount of nutrients ap-plied to the soil are generally believed tobe needed if smallholder farming is to in-crease its productivity. The World Bank



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notes that fertilizer use in Ethiopia is thelowest in sub-Saharan Africa.20

Inadequate access to markets. Food mar-kets in rural areas are generally under-developed and, since the collapse of thestates role in buying farmers produce atguaranteed prices, they are often domina-ted by exploitative private sector traderspaying low prices for farmers produce.Road infrastructure is poor in remoteareas, with many roads impassable in therainy season, which constrains the abilityto buy and sell crops in local markets. InZambia, the most efficient markets andthe large export-oriented farms which arelinked to buyers are located along the lineof rail where about 60 per cent of the po-pulation lives. One in five rural Zambian

households live more than 5 km from theirnearest food market while 3 in 5 live morethan 5 km from their nearest market topurchases inputs such as fertilizers.21

Few extension services and credit. Thereis a lack of adequate, or any, credit facili-ties for most smallholder farmers whilegovernment extension services, such astraining and support, are generally weakand often non-existent, especially in moreremote rural areas.

Weather. Erratic weather, varying fromdroughts to floods, severely affects cropproduction and hinders planning and in-vestment. Zambia has experienced two

major droughts in the past decade in1991/92 and in 1995/96, while the 2000/01and following seasons were also besetwith poor rainfall and a large amount offood aid was required to avert hunger.22

Major drought-related famines have oc-curred in Ethiopia 1973, 1984 (causingover one million deaths) and 2003 (when afifth of the population required emergencyfood aid). In Malawi, droughts and majorfood shortages have occurred in 1992,1994, 1997, 2001, 2002 and 2005.23 Climatechange is increasingly recognized as likelyto impact severely on African agriculture with increased temperatures causing re-ductions in (often already scarce) wateravailability and crop yields.

HIV/AIDS is exacting a huge toll on far-

ming communities and food security. InMalawi and Zambia, for example, it is es-timated that around one in every six adultsis living with AIDS. AIDS-related deathscan lead to a loss of labor and agriculturalproduction knowledge while those livingwith AIDS can have less energy to cultivatetheir crops and incur additional medicalcosts that could be used for farming in-vestments.

Alongside all these factors are bad go-vernment and donor policies, which areconsidered further in the sections below.

2. LIBERALIZATION AND THE WORLDBANK

Agricultural strategy in the three coun-tries has been transformed in the past twodecades under World Bank/IMF reforms.Before these were implemented, govern-ment policy was dominated by state inter-vention, involving the provision ofsubsidized fertilizers and maize/grain tofarmers supported by government-admi-nistered credit schemes, while state mar-keting agencies - ADMARC in Malawi,NAMBOARD in Zambia and the AMC in Et-hiopia - set guaranteed prices for farmersand bought their produce from depotsaround the country. Farmers had an assu-red market for their produce and accessto farming inputs at affordable prices.

In Malawi, the performance of the agricul-tural sector was impressive in the 1960sand early 1970s but stagnated in the late1970s and early 1980s. By the early 1980sADMARC resorted to heavy borrowingfrom commercial banks to finance its croppurchases; yet in spite of this, it was stillunable to buy all that farmers offered tosell or meet the demand to provide fertil-izer. Government intervention was defen-ded on the grounds of promoting nationalfood security and ensuring that all small-holder farmers, especially those in moreremote areas, had access to markets tobuy and sell their produce at guaranteedprices but these policies came at a heavyfinancial cost, as the subsidies contribu-

Farmer family, Amhara region, Ethiopia



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ted to large government budget deficits.24

Malawi experienced an economic crisis in1979/80 that led the government to adoptstructural adjustment programs (SAPs)under the auspices of the World Bank andIMF beginning in 1981.

Economic liberalization reforms began inZambia in the mid-1980s and in Ethiopiain 1992 following the end of the civil war.The reforms involved:

lifting restrictions on private sector par-ticipation in grain movements;

removing price controls on agriculturalcommodities (pan-territorial pricing);

reducing or removing fertilizer subsidies

and liberalization of the fertilizer market;

devaluation of the currency, and main-taining tight fiscal and monetary policy;

trade and labor market liberalization;

privatization of state-owned companies

In Zambia, NAMBOARD (the National Agri-culture Marketing Board) was abolished in1989 and its functions allocated to localcooperatives, while prices of most agri-cultural commodities (excluding maize)were liberalized. Fertilizer and other inputsubsidies were removed in 1992 and con-sumer food subsidies in 1994.25 In Malawi,

Bank and Fund-supported reforms de-epened after the 1994 election, ending thesystem of guaranteed producer prices (ex-cept for maize), undertaking several deva-luations of the currency and liberalizingmaize pricing. ADMARC's monopoly inpurchasing maize and some other cropsfrom smallholders was eliminated.

Ethiopia agreed a Poverty Reduction andGrowth Facility (PRGF) arrangement withthe IMF in 2001 and finalized its PovertyReduction Strategy Paper (PRSP) in 2002.Zambia signed a three-year PRGF loanagreement with the IMF in June 2004while the Bank approved a three-yearcountry assistance strategy running from2004-2007. Since 2000 Malawi has beenimplementing a PRGF program aimed at

promoting macro-economic 'stability'. Theprogram went off track in 2001 due to thegovernments fiscal slippages that promp-ted donors to withhold budget support; itresumed in 2003 after donors deemedMalawi to have improved fiscal manage-ment.26

Bank/Fund loans in the 1990s invariablycame with numerous conditions attached,notably involving the sweeping privatiza-tion of the economy generally and, in agri-culture, the removal of subsidies and theprivatization of state marketing boards.The Bank notes that between 1992 and2003, it lent Zambia US$ 2 billion, stating:adjustment credits in support of swee-

ping liberalization of the economy domi-nated, accounting for nearly 40 per cent oftotal commitments.27 As a 2006 Norwe-gian government-sponsored study conc-luded, privatization and liberalization arestill included in Bank/Fund loans, notablyin Zambia, where they are linked to theprivatization of state-owned banks and ut-ilities.28 Currently, however, there are few,if any, formal conditions attached to agri-cultural policy in these three countries,although one major exception is the Ban-ks ongoing push to privatize Malawisstate marketing board, ADMARC (see Ma-lawi chapter).

In recent years, the Bank has modified itsprevious opposition to various policies ofgovernment intervention (see Box 1). Re-

garding subsidies, the Bank is currentlygoing along with fertilizer subsidy pro-grams in Malawi and Zambia. Although itis consistently arguing for the governmentto bring these to an end within a shortspace of time, loans are not conditional onthis. Its concerns are mainly about trans-parency in the program, ensuring that dis-tribution is not determined by politicalconsiderations and enhancing rather thanundermining the role of private fertilizersuppliers.29 In Ethiopia, the Bank is pus-hing for the government to end its de factocontrol of the fertilizer market, but again,without specific conditions or benchmarksbeing attached to loans

Box 1: The World Bank and liberalization

The World Bank has been strongly pushing for liberalization of agriculture in the three countries for the past 20 years, but there have beenshifts. In the 1980s, conditions attached to loans required removing subsidies and liberalizing prices within a rigid framework to roll back thestate to a minor role. This position was somewhat revised towards the end of the 1980s and until the mid-1990s the Bank accepted the needfor targeted subsidies in order to raise agricultural productivity. What followed was a reversion to a dogmatic belief in markets, oppositionto fertilizer subsidies and a push for a complete government withdrawal from agricultural markets.

Currently, the Bank has again pulled back from a belief in unfettered markets. It is still strongly pushing trade liberalization and market re-forms, but with qualifications:

On liberalization, it states that market reforms have sometimes been implemented before the private sector gained the capacity to stepin when public companies were closed. Policies to liberalize or privatize marketing functions must be sequentially implemented over time

to ensure that the institutional framework for competitive markets develops, that support services are in place during the transition and thatcomplementary investments are made that enable the private sector to function smoothly. And it accepts the need for appropriate transi-tional arrangements that may require some involvement of the public sector, but aiming for a medium- to long-term strategy that createsan enabling environment for private investment.

On subsidies, the Bank states that subsidies may be useful in the transition to a more liberalized trading environment, although it addsthat but when maintained over the longer run, they reduce equity and efficiency. It also states that sudden elimination of input subsi-diescan cause a radical decline in the use of inputs and that until private input suppliers become established, the public sector must as-sist poor producers by carefully phasing the removal of subsidies and/or supporting such institutions as voucher systems.

On privatizing parastatal organizations, the Bank notes that policies to liberalize or privatize marketing functions must be carefully pha-sed.

On price setting, it notes that for sensitive commodities, including food staples, price bands and price floors might be used. Price floorshelp to keep prices from falling while price bands help stabilize prices between a floor and a ceiling. 30



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Governments in all three countries cont-inue to play a role in setting prices formaize or grain. In Malawi, the Bank cur-rently accepts that ADMARC can continueto play a role in the more remote regionsof the country, but argues that it shouldwithdraw from the more profitable areaswhere the private sector should operate.As regards Zambia, Bank officials told theresearcher that the issue was not so muchwhether government price interventionwas right or wrong per se, but if it couldbe implemented more transparently andpredictably and if the price set could becloser to the prevailing market price.31

Although the Bank and Fund have pulledback from explicit conditionality in agri-culture, their overwhelming focus remains

on pushing the commercialization ofagriculture in all three countries within acontext that if countries generally performwell in pursuing their reform agenda,they will receive higher amounts of aidthan if they do not. In Malawi, for example,the Bank's current Country AssistanceStrategy (CAS), approved in February2007, is stated to provide around $340 mil-lion in aid over the years 2007-2010. TheCAS notes that among Malawi's donors,the Bank will take a leading role in agri-culture and food security and also privatesector development, and makes clear thatthe level of aid is conditional upon the go-vernment's continuing overall economicreforms: The IDA program will be cali-brated against continued reform pro-gressCoherent sector strategies andprioritized investment plans will be cru-cial in transport and energy in particular,and planned IDA investments in theseareas would be contingent upon the Bankbeing satisfied that resources were beingeffectively utilized in accordance with suchstrategies.32

In agriculture, the Banks aim in Malawi isto improve smallholder agricultural pro-ductivity and integration into agro-proces-sing, which involves a focus on four key

areas: (i) farmers' vulnerability to weat-her-related shocks; (ii) distorted incenti-ves (including government policies) thatkeep farmers in subsistence farming in-cluding limited knowledge and thus de-mand for crop diversification; (iii) poorlyfunctioning input/output markets; and (iv)weak institutional capacity to manage therisk of food insecurity.33

In Ethiopia, an Interim Country AssistanceStrategy (ICAS) was drawn up in May 2006,and proposes lending Ethiopia US$ 491million in 2006 and between US$ 400-550

million in 2007, depending on govern-ment performance in implementing itsplans particularly in respect to gover-nance.34 In November 2005 the Donor As-sistance Group of international donors,chaired by the Bank, cut off direct budgetsupport to the Ethiopian government andsaid it would reduce aid over time if go-vernance did not improve, in protest at thegovernments clampdown on oppositionfollowing the elections in May. When do-nors met again in March 2006, they alsostressed that aid volume will depend onEthiopias progress on governance.35 Inagriculture, the Bank is focused on sup-porting the governments transition to-wards small-scale market orientedagriculture.36

3. THE PLIGHT OF FARMERS:FINDINGS FROM THE FIELD

The researcher visited farmers in thethree countries asking them of their expe-riences with hunger and farming in Ethi-opias North Wollo zone around 700 kmnorth of Addis, mainly a highland regionwhere farmers practice rain-fed agricul-ture, principally of crops such as teff, bar-ley and wheat; in Malawi, in western Dowadistrict, a two hour drive north of Lilongwewhere farmers grow maize, groundnuts,soya beans, cassava and sweet potatoes;and in Zambia, in Chipata District of Eas-tern province, 550 km east of Lusaka,where the principal crop is also maize.

Around half of the woredas (districts) inEthiopias North Wollo zone are classifiedas food deficient and in some people go

hungry for 6-9 months of the year. MesvenTadesse and Daniel Kuma37 are wheat andbarley farmers each working a very smallplot around a third of a hectare nearthe town of Bilbala. They do not use im-proved seeds or fertilizers saying thatthere is not enough rain for them to takeeffect. When asked how their yields per-form each year, they reply: Down, down,down. The land is getting worse everyyear. Both farmers fail to produce a sur-plus for sale in the market and cannot pro-duce enough from their land to feed theirfamilies; every February, their families gohungry and are forced to cut out somemeals, sometimes eating only once a day.38

When the food runs out in North Wollo,many farmers look for work (which is hard

to come by, especially for those far awayfrom towns) or are forced to sell their as-sets, such as livestock. As for the problemof land degradation, the farmers intervie-wed said either that yields vary from yearto year, depending on the rains, or thatproductivity is decreasing year by year. Thepoor quality land through soil erosion is vi-sible all around and can be seen in nume-rous parts of the zone.

Zambias Chipata district has relativelygood soils and usually sufficient rainfall,giving it high potential for producing cropslike maize, groundnuts, cotton, sunflower,tobacco and soya beans. Yet most peoplein the province go hungry for long periods;around half of families do not produceenough food themselves for more than sixmonths a year in a normal season, theproblem being worse in drought years.39

Farmers in North Wallo Zone, Amhara region, Ethiopia



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Government figures suggest that 11 percent of all households in Eastern provincesurvive on just one meal per day halfhave two meals and 38 per cent three.40

A quarter of the farming households inChipata district are female-headed. One ofthem is Priscilla Sagala, a farmer aged 52from Kalonji village 10 km outside the pro-vinces main town, Chipata, who growsmaize and groundnuts on a two acre plot.She says that many farmers in the villageonly produce enough food for two monthsa year, while she herself can feed her fa-mily for a few months. Priscilla tells usthat: When the food runs out, I eat less,sometimes eat roots, and sometimes I justhave to go to bed and sleep. She wouldlike to grow other crops as long as the

seed is available, but its not available. Iwould like to grow sunflower but Id haveto buy seeds which needs money. Id need35,000 kwachas (US$ 8.70) for 5 kg. Whenasked what support she needed, she re-plies: Fertilizer. If fertilizer was available,production would go up. The main pro-blem is a shortage of fertilizer and the factthat the soil is bad. Food finishes veryquickly due to our shortage of inputs likefertilizer. I dont have money to buy it.

Lack of inputsFertilizer was recognized as the singlemost important aid to farming among thefarmers the researcher spoke to in allthree countries. Few can afford to buy it,yet everyone that the researcher questio-ned would use it if it were available free ofcharge or at affordable prices. In Chilem-bampita village in Malawis Dowa districtonly 11 of the 46 households can afford topay for the subsidized fertilizer in the go-vernments voucher program. At 950 kwa-cha (US$ 7) per 50 kg bag, this was beyond

most farmers reach but even this buysonly enough for use on 0.4 hectares ofland. In the private market, fertilizer is av-ailable only at an astronomical 3,075 kwa-cha (US$ 23). No credit is available tofarmers to borrow money since the ruralcredit program has collapsed. The resear-

cher was also told that the fertilizer vou-chers distributed under the government-administered program often went to thewrong people, sometimes the better-offfarmers rather than the poorest, or elsewere politically-motivated, going to head-men, for example, who used it for theirown purposes or to curry favors.

Of 91,000 households in Zambias Chipatadistrict, 12,000 bought subsidized fertili-zer in the governments Fertilizer SupportProgram (FSP), while a further 1,600 re-ceived food security packs. This meansthat the other 86 per cent of farmers mustbuy fertilizer at market prices, which theoverwhelming majority is not able to do,given the high price. But even the govern-ments subsidized price is beyond the

reach of most farmers - farmers in theFSP have to pay 40 per cent of the marketprice of fertilizer, meaning they usuallyneed to find 460,000 kwacha (US$ 115) (for8 bags, which is fixed). In Ethiopia, far-mers said that under the governmentsagricultural extension program, fertilizer

was available at a cost of 370-380 Birr(US$ 43) which they can receive on creditat a 12.5 per cent interest rate, which istoo high for many farmers.

Clara Pande, 65 year old farmer whogrows maize and groundnuts on her 1.5hectares farm, told us that when she usesfertilizer, production goes up. She recentlyclubbed together with others in the village

and bought fertilizer for 210,000 kwacha(US$ 52). Most of the time I cant affordit. Im a widow. If we join with others, wecan afford a little. My relatives and I putour money together.Low pricesFarmers universally complained of thevery low prices they receive for sellingtheir produce in local markets. In MalawisDowa district farmers say that maize ge-nerally sells for 10 kwacha (US$ 0.07) perkg (while some had recently been offeredas low as 8 kwacha), a pitifully smallamount which many farmers said wasbelow the cost of production. The govern-ment sets a minimum price for maize at20 kwacha (US$ 0.14) but the parastatal,ADMARC, which used to guarantee buyingproduce from farmers at set prices, now

has no resources to buy farmers producein this area, meaning that farmers are for-ced to sell to private sector traders.These companies are in Lilongwe, thoughthey come here and buy at a cheap priceand then sell back our maize at a higherprice, one local development worker said.Traders were making a 100 per cent profiton maize. In Lilongwe, maize was beingsold for 1,000 kwacha (US$ 28) per 50 kgbag, after being bought in the Dowa areafor 500 kwacha. The companies are richpeople, the development worker addedand the problem is that farmers have noother place to sell. Farmers received abetter price for groundnuts - at 65 kwacha(US$ 0.5) per kg, but private traders wereselling these for 120 kwacha (US$ 0.9) inLilongwe and Kasungu, another majortown nearby.Poor extension servicesFarmers receive pitifully little supportfrom government extension services,which have been massively cut back underthe reforms. In Zambias Chipata province,extension officers are supposed to visit

Very few farmers in my area use fertili-zer because they cant afford it. But if theyuse fertilizer what they get from the landis less than what they pay in interest.Most of the farmers who have irrigation

want fertilizer very badly but they want tobuy small amounts of fertilizer for smallamounts of money. Government deve-lopment agent, North Wollo district,Ethiopia

Those who come and buy from us cheatus. They can make three times as much.They just come and say Ill buy this at thatprice. Theres no discussion or anythinglike that, Harold Kanyerere, villager inChilembampita, Malawi.

Clara Pande, Kalonji, Zambia



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Box 2: The dilemma of contract farming in Zambia

Outgrowers are essentially contract farmers who grow cotton and tobacco for specific companies in exchange for the latter providing loansto buy inputs such as fertilizer on credit at the beginning of the season. The theory is that farmers benefit by gaining access to needed in-puts with a guaranteed market to sell in. The reality is that all contract farmers interviewed by the researcher complained of the low pricethey received for their produce. The price they are led to believe they will receive at the beginning of the season is almost always reduced bythe companies when buying the produce after harvest, meaning that farmers receive much less income than they often plan for.

Contract farming is a key outcome of liberalization and almost a third of small farmers in the country are organized in some form of contractfarming arrangement, the majority with cotton companies. The World Bank and the government are the key promoters. Bank literature re-fers to the partnerships between smallholders and commercial farmers or agro-entrepreneurs and that the reason behind the upsurgeof contract farming is the appreciation that these arrangements respond to the reciprocal needs of both the agri-businesses and the small-scale farmers.41

There have been some benefits to some farmers from the contract farming schemes: the private sector has moved into some areas of sur-plus agricultural production and has provided loans to farmers to buy inputs, thus raising production. But a recent major study by the Cat-

holic Centre for Justice, Development and Peace inLusaka is little short of a complete indictment of thewhole system. The study concludes that most con-tract farmers experienced either no change or a wor-sening of their livelihoods since engaging in contractfarming. The main problems experienced were lowprices, unfair input and produce pricing mecha-nisms, unfair input credit conditions and punitiveloan recovery methods. Outgrower company prac-tices such as under-grading and underweighing offarmer produce contributes to the perpetuation ofpoverty among outgrowers, while outgrower sche-mes have an adverse effect on rural household foodsecurity through the diversion of resources from foodcrop cultivation to cotton and tobacco. Labor andtime are the main resources diverted to outgrowercrops at the expense of food crops. Furthermore,outgrowers have no channels of communicationthrough which they can influence decisions regardingoutgrower schemes, which is compounded by thelack of a comprehensive government policy on con-tract farming and the fact that companies are unre-gulated, there being no government supervision ofthe operations of the companies at national or locallevels.42

each zone twice a month but the reality ismuch less because the area each officeris expected to cover 20 km radius is toogreat. When the researcher asked the Dis-trict Agricultural Officer where he wouldspend any increased funding from the go-vernment on agriculture, he pinpointedextension services as the critical area, toimprove the knowledge base of farmers incrop management and growing techni-ques, including in the use of fertilizer.Other spending needed to take place onroads and bridges, he said, to make trans-portation easier between villages andtowns. The lack of adequate infrastructurewas the main reason why only a few pri-vate traders operate in the area to deliverinputs to farmers, he told us. It is wishfulthinking to think the private sector will

come here. Look at our infrastructure.Were not commercialized enough for thisto work. Its not profitable enough for theprivate sector except when they come inand knock down the price to farmers fortheir produce.

Several farmers in Malawi recalled howfarming had changed since the early1990s, the beginning of the deeper phaseof the reforms, all saying that farming wasmuch easier then and that they producedmore food and were less hungry. In Undivillage, a group of older farmers recalledhow they used to use fertilizer but afterprices rocketed (in the mid-1990s) theycould no longer afford it. All said their pro-duction was much lower now and thattheir land produced less than previously.Other older farmers said that, although inthe past farming was still hard, it was for-merly easier to obtain fertilizer and seeds,that credit schemes were available to givethem affordable loans and that they recei-ved higher prices for their maize sales.One further important change now was

the lack of predictability in price farmershave no idea in advance what price theywill get for their produce.

Most farmers also said they would like togrow other crops, such as Irish potatoes,rice or sorghum, to reduce their depen-

dence on growing maize mainly since theselling price of maize was so bad andsince, for many, their productivity wasgoing down year on year. Preventing suchdiversification is partly the high price ofnew seeds and partly the lack of adviceand support for growing and managingnew crops. A packet of vegetable seed onthe market currently costs 410 kwacha(US$ 3) per kg, rice seed costs 130 (US$ 1)kwacha and Irish potatoes seeds cost 400kwacha - too much for many.

Most farmers told the researcher thattheir productivity had been declining overthe years, as their land produced less andless. And many of the farmers selling theirproduce said that if they received a betterprice for their outputs they would reinvest

that income in their farming by buying fer-tilizer to increase their output. So farmersare locked into a vicious circle - low pricesmean less money to buy fertilizer, mea-ning less ability to increase output, mea-ning less overall income etc.

Vainness Malanda, Vinba, Zambia



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These interviews with farmers provide asnapshot of many of the key impacts of thereforms. The reduction of the state role inbuying produce has left farmers prey toexploitative private traders, its reducedrole in providing key inputs such as fertil-izer has put its use beyond most farmerswhile cuts in extension services are re-stricting diversification and preventing in-creases in output. Farmers eking out anincreasingly precarious existence have

essentially been left to themselves, far-ming in the dark. All this occurs not only inremote, inaccessible areas in these coun-tries, but quite generally the villages theresearcher visited in Malawi, for example,are just off a good road, the M1 in Malawi,less than two hours from the capital city.Farmers own perceptions and experienceare largely borne out by analyses in thesecondary literature of the impacts of thereforms, considered in the next section.

4. THE IMPACT OF THE REFORMS

This section first considers studies asses-

sing the overall impact of the reforms, be-fore turning to the effects on specific po-licy areas.

In Malawi, the 1990s saw an accelerationof market liberalization begun in the pre-vious decade, resulting in large maizeprice rises and rapid input price rises. Theremoval of subsidies mid-decade togetherwith the collapse of the government cre-dit scheme and currency devaluations

(which caused a basic food prices to dou-ble in 1998) hit many poor farmers hardand increased food insecurity. Some poli-cies notably the liberalization of tobaccoproduction - benefited the large farmerswhile poorer households became worseoff, as did women in particular. After 1998,the transition from parastatal marketingstructures to liberalized markets left a va-cuum in terms of institutions responsiblefor safety nets or supplying key farminginputs. When the state pulled out, eitherthe private sector did not move in at all(especially in more remote, rural areas) orelse only a small number of private agents

did, meaning they could easily exploit poorfarmers, by hoarding food supplies andcharging exorbitant prices.

Overall, market liberalization has increa-sed rural inequality and stratification, amajor study for the NGO Care, notes, ad-ding that government policy and imple-mentation, particularly over the lastdecade, has increased rather than ameli-orated differentiation, both because policy

has tended to favor better-off farmers andbecause of weak capacities and corruptionentailed in the implementation of policy.A 2005 study by the Overseas Develop-ment Institute notes that Malawis overalleconomic performance has deterioratedover the last 20 years, with negative out-comes from economic liberalization in the1980s and 1990s. Poor macro-economicmanagement associated with patronage-based politics have accentuated Malawispoverty reduction and economic growthcrisis, reducing economic growth ratesfrom a 6 per cent average until 1979 toaround 1 to 2 per cent more recently. A re-

13

Vinba village is 45 km west of Chipata town and contains around 100 farming households, around 20 of whom can feed themselves for thewhole year, villagers said. There are many cotton farms in the area. Chris Kalumba is a contract farmer producing cotton for Cargill. The fat-her of three daughters, he also grows maize, groundnuts and sunflower on a 9 hectare farm, relatively large for the district, of which 4 hec-tares is devoted to cotton. This is his first season of growing with Cargill; the previous year he was with Clark Cotton Zambia. Last year, Clarkgave us a very bad price. They offered us only 800 kwacha (US$ 0.2) per kg of cotton. We farmers complained and for two months refused tosell all over the area. The government intervened but the companies only raised the price to 850, he told the researcher. They went backon their promise of a higher price. As a result, some farmers went back to maize since they didnt make any money from cotton, especiallythe smaller farmers. He added: Managers come here and say well take the matter to our superiors but they never do. It is impossible,Chris told us, for farmers to negotiate a better price with the companies. Farmers the researcher spoke to thought that 2,000 kwacha (US$0.50) was the least that they should expect as a fair price; many other farmers believe that much more is needed for them to be able to re-coup their loans. Yet most farmers were hoping to receive only 900-1,200 (US$ 0.2-0.3) kwacha this year.

Vainness Malanda, a woman farmer of 30 years in Vinba, and a widow with four children, told us that: Its difficult to protest against thecompany because our loans for our inputs come from them. If the government provided the fertilizer it would make it easier to get a betterprice from the companies. Thousand Phiri, another contract cotton farmer, said that the government should be asked to mediate to raisethe price with the companies. If we protest, the companies would say give us back the loan you have with us, so its difficult to change things.

Some contract farmers the researcher spoke to said they were better off as a result. Lazarus Banda in Sisinje village, 35 km north west ofChipata town, told us that last year, despite the very low price, he made 275,000 kwacha (US$ 69) profit from cotton, as a contract farmer withDunavant, a prominent company in the area. After three years as a contract farmer, he now makes much more than he used to from maizegrowing. But he adds that some of the farmers are no better off than before, because of the price. Those people with smaller land dont be-nefit so much. Those who have bigger land are improving. Those with cattle and livestock are improving; those only using their hands in thefield face a problem.

Farmers also told the researcher of their worries about the use of pesticides included in the packs they buy from the companies at the be-ginning of the season. Some companies, such as Dunavant, appear to always provide protective clothing such as goggles and gloves for safeuse in spraying. But the researcher was told by many farmers that other companies, such Cargill, do not always provide farmers with suchprotective gear. Chris Kalumba, for example, had just bought a bottle of Delta-X insecticide from Cargill to use on his cotton crop. Warningson the bottle make clear that protective equipment must be worn in using the insecticide, but no protective gear was supplied by the com-pany as part of this package. Every year we tell the companies to supply protective gear and gloves but they dont, he says, referring to hisprevious experience as a contract farmer with Clark, which also did not supply protective equipment. Asked what the effects might be ofusing this insecticide without protection, he replies: This is very dangerous. It can kill. It causes itchy skin.

Chris and other farmers from Vinba, Sisinje and other villages in the area told us that farmers regularly suffered from itchy skin after usingthese pesticides. Some had taken to spreading petroleum jelly over their arms as protection. Some villagers told us of chest pains, sneezingand coughing after use. Simon Sakara, from Kalonga village near Sisinje, and a cotton grower for Mulungushi had just paid 110,000 kwacha

(US$ 28) for seed and pesticide. He told us that the company did not supply protective equipment as part of this package and that neither didClark, for whom he worked previously. I wasnt using any protective clothing before when I was working with Clark. I didnt have problemssince I was told not to spray when it was very hot or windy. But he had seen other farmers with itchy skin after using pesticides.

Box 2 continue:



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cent modeling exercise predicted that,even under the best conditions, averageper capita income in 2002 will be no morethan at independence in 1964, in realterms.44 Another UK study from 2002noted that thirty years of neglect, dys-functional markets, weak supply responseand fragile fiscal foundations are manifes-ting themselves in widespread economicstagnation while the enthusiasm of theWorld Bank and IMF in pushing for contin-ued reform is further hurting the economyand pushing the regime into a crisis ofconfidence.45

In Zambia, following the collapse of stateinstitutions previously providing servicesin the rural areas, studies suggest increa-sing food insecurity among smallholderfarmers, due to poor roads, lack of inputs

and the collapse of channels for providingcredit. Before liberalization, inputs weredelivered to farmers by parastatals des-pite poor roads; after liberalization, thetask fell to private traders to perform thesame functions, which depended uponprofitability, in turn depending on roadconditions and proximity to large centersof consumption. Private sector activity hasthus been limited to areas where there aresufficient volumes of production wheretransaction and transport costs are lower- those farmers benefiting from the out-grower schemes have been limited to afew areas along the line of rail, puttingmany farmers in outlying areas at a disad-vantage.47

The 1990s was also a lost decade for Zam-bia. Over the period, the countrys growthrate was just one per cent; per capita in-comes halved from their value in 1975,employment fell by 75,000 affecting thelivelihoods of 600,000 people, and high in-flation eroded livelihoods. World Bankloans were conditional on a reckless pri-vatization program that was not adequa-tely monitored for its economic and socialeffects on the people, in the words of theZambian NGO, Jesuit Centre for Theologi-cal Reflection (JCTR).48

The Ethiopian Economic Association (EEA) an independent organization which hasproduced numerous studies on the per-formance of agriculture in the reform pe-riod - has consistently argued that theperformance of Ethiopian agriculture hasbeen disappointing over the reform periodand that the 1990s economic reformsdidnt bring a notable impact either in rai-sing agricultures contribution to the ex-port sector or in generating surplus to thedevelopment of the non-agricultural sec-tor. On the other hand, the relative pricefor agricultural products compared to theprices of non-agricultural commoditieswas not in favor of agriculture.50 Follo-wing the liberalization of the agriculturaloutput and input markets in the 1990s far-mers have not been guaranteed good pri-

ces for their outputs at the same time asfacing high costs for inputs (such as fertil-izers and seeds). The input markets cont-inue to be monopolized by a small numberof traders and market infrastructure re-mains undeveloped, while marketing in-formation provided to farmers is poor andfragmentary.51

Various positive changes can be recordedover the reform period, and are also in-cluded in the sections below. As regardsEthiopia, the EEA notes that in compari-son to the decade that preceded the re-form of the 1990s, Ethiopian agriculturehas been doing better. Agricultural out-put has increased, the rate of decline in

farm productivity has been slowed and theuse of fertilizers and seeds has improved.Overall, however, the EEA notes: But allthose improvements have not been suffi-cient to lift up agricultures role in the de-velopment process of the Ethiopianeconomy.53

Some diversification of cropping awayfrom a dependence on maize has occur-red in Zambia and Malawi. In Zambia,there has been some diversification intorelatively more profitable crops such asbeans, groundnuts, sunflower, cassava

and sweet potatoes, although maize re-mains the overwhelmingly dominant crop.Over the 1990s, the area devoted to maizecultivation dropped from around 70 percent of the cropped area in the 1980s toaround 55 per cent. Farmers diversifica-tion has come most likely in response tothe decline in subsidies on maize produc-tion and marketing in the 1990s. TheWorld Bank notes that a major reason forthis decline [in maize production] was theabandonment of the policy of pan-territo-rial prices and large-scale governmentprocurement, which reduced price incen-tives for maize cultivation, particularly inmore remote areas. It also notes that fol-lowing liberalization in the 1990s the areacultivated to groundnuts doubled and cot-ton increased by 50 per cent. In Malawi,

although maize also remains by far thedominant crop, the production of burleytobacco and the area grown to groundnutsand pulses has increased and dramatic in-creases in the production of cassava andsweet potato have occurred. However,there has been little diversification of theeconomy away from a dependence onagriculture for nearly 40 per cent of GDPand 80 per cent of export earnings.54

The impact on poverty

Most studies show that poverty in Malawihas remained static or deepened for manywhile life and livelihoods in rural Malawihas become ever harder. The FAO hasnoted a worsening situation of food inse-curity while a study for USAID states thatMalawi has grown increasingly vulne-rable to food insecurity55 with a gradualbut steady deterioration of agriculturalproductivity per capita while eroding liv-elihoods56. The World Bank states thatthere has been virtually no progress inreducing poverty and inequality over thepast decade with poverty levels unc-hanged since 1998.57 The countrys GDPper capita has declined from US$ 210 in1992 to US$ 200 in 1997 to around US$160 in 1999, while income inequalities

have significantly grown from 0.48 in 1968to 0.62, as measured by the Gini ratio. FAOfigures show that per capita energy con-sumption declined from 2,018 kcal per dayin 1985-9 to 1,899 in 1990-4, before risingto 2,081 in 1995-9. Protein consumptionhas declined from 57 grams per day in1985-9 to 53 grams per day in 1995-9.58

Most studies also suggest deteriorating li-ving standards and conditions for most ofZambias people over the past two deca-des. The country was reclassified in 1985from a low-middle-income country to a

World Bank officials interviewed by theresearcher in Lilongwe refused to acceptthat liberalization had harmed Malawiansor that the Bank had provided bad advice.Since 1996, the Bank has provided US$850 million to Malawi along with a num-ber of analytical products. Yet recentinternal evaluations concluded that theperformance of the World Bank programsin Malawi has produced limited results.It explains this principally by the lack ofeconomic growth over the last decadeand high population growth.46

Liberalization of domestic maize mar-kets benefited consumers in deficit ruralareas since it enabled flows of maizegrain (formerly banned) to these areas,where it could be milled at low cost atsmall local hammer mills Small far-mers in remote areas suffered incomelosses due to the liberalization, however,not only because of the end of high-pricedgovernment procurement of maize, butalso because of less access to inputs andcredit. World Bank report on the 1990s49



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low-income country and in 1999 it slippedstill further to a least developed country.Per capita GDP was US$ 1,494 in purcha-sing power parity in 1976, declining to US$877 in 2003.59 The UN noted in 2000 thatthe average percentage of household in-come being spent on food was rising, in-dicating that Zambian households werefinding it increasingly difficult to feedthemselves.

Zambian Government figures show thatthe percentage of people living in povertyincreased from 70 per cent in 1991 toabout 74 per cent in 1993, decreased to 69

per cent in 1996 and then rose again to 73per cent in 1998.60 Other studies show thatwhile poverty in urban areas has risenover the whole reform period, poverty inrural areas may have declined over thewhole reform period, rising from 88 percent in 1991 to 92 per cent in 1993 but thenfalling to 83 per cent in 1998 and 74 percent in 2003. The authors note that thatthe current rural poverty level may be hig-her than in the 1970s and 1980s, althoughdata is not available from that period.61

Some Ethiopian government sources sug-gest a slight decline in the poverty head-count since 200062, yet this is hard to

square with the apparent increases in vul-nerability and the steady increases in thenumbers of people needing food aid. Ana-lysis by the EEA shows that during the lastdays of the imperial regime of Haile Se-lassie in 1974, 1.5 million people (or 5 percent of the population) required food aid;by the mid-1980s, under the Mengistu dic-tatorship, this had risen to 7 million (17%of the population); whereas now around14.5 million people (22 per cent of the po-pulation) are unable to feed themselves intimes of drought.63

Box 3: Changes in poverty over the 1990s

MalawiA Harvard University analysis of 2004 considered changes in income and poverty levels between 1986 and 1997. It concluded that for the po-pulation as a whole incomes rose by 59 per cent but that most of the benefits from the policy reforms accrued to the richest quartile. Hou-seholds in the poorest quartile of the population suffered an income decline in absolute terms over this period, evidenced most clearly in thefact that they were spending a higher proportion of their income on maize in 1997 than a decade earlier, due food prices rising faster thanincomes under structural adjustment. Inequality also rose dramatically; in 1986, the poorest quartile of the population was three times po-orer than the richest; by 1997, they were 11 times poorer. Those that gained were principally tobacco growers who expanded into productionof burley tobacco; most households not growing tobacco were worse off over the period. 64 A previous study in 1996 by the same author conc-luded that liberalization in Malawi provided new income opportunities (through tobacco and maize sales) that disproportionately benefitedthe better-off households. The poorest 25 per cent experienced a relative worsening in income and food security despite increasing the pro-portion of maize harvest retained and the share of their cash budget spent on purchasing maize. 65

ZambiaStudies show that in the 1990s poverty increased in urban areas and reduced somewhat in rural areas. The University of Sussex in the UKsuggested that poverty rose by 16 per cent among those below the poverty line from 1991-8 and that, while poverty reduced in 1996-8, thiswas not enough to offset the rise over previous years. The rise is explained by deepening poverty in urban areas in rural areas, poverty le-vels were slightly lower in 1998 than in 1991. The rise in poverty in 1991-6 was due to the combined effect of stabilization, subsidy removaland parastatal restructuring. The removal of pan-territorial maize pricing and maize subsidies in urban areas is likely to have benefited maizeproducers close to the line of rail whilst harming maize producers in the more remote areas. The authors also note the near collapse of maizemarketing and fertilizer and credit provision to some rural areas between 1993 and 1995, which is likely to have increased poverty for some.Although rural poverty declined slightly over the period, this was mainly due to gains by medium and large-scale farmers; poverty amongsmall farmers, who are net consumers of maize, rose slightly in the 1991-6 period, for example. 66 Other studies show that the slight overalldecline in rural poverty masks a differentiation in rural areas in some provinces rural poverty markedly increased over the 1990s. 67

EthiopiaA study by the Norwegian University of Life Sciences of the period 1993/94 to 2000/01 concludes that the increased use of fertilizer and le-arning by doing raised output in areas with the potential for more productive growth, but that productivity declined in less productive areas.In recent years, population growth, land fragmentation and the continuous cultivation of lands without measures to restore soil fertility andsoil erosion have led to a high degree of land degradation which, combined with frequent droughts, have resulted in increasing food insecu-rity and risk of hunger. Overall, it is therefore clear that the reforms have not been successful in reducing the widespread poverty in the coun-try and farmers became more and more vulnerable to famine due to natural factors.68

A study by Stefan Dercon at Oxford University of six villages to assess changes in poverty during 1989 and 1995 concludes that about half

the poor at the end of the 1980s benefited, about half did not. Poverty declined in four villages but increased in two, decreasing by 16 percent overall but with levels remaining high overall, at around 50 per cent. Inequality increased, although the very poorest households expe-rienced the highest growth rates.69 The reforms were pro-poor for only some of the poor. The study distinguishes between two groups of poorpeople. The first group - which has experienced good rains, is farming generally good land, receiving high crop producer prices and with goodaccess to roads and towns contributed 80 per cent of the estimated reduction in poverty. The second group - with small land endowmentliving in remote areas with poor road connections - benefited little or not at all from the reforms, and failed to experience substantial outputprice increases.70



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4.1 OUTPUT AND PRODUCTIVITY

Increasing productivity is one of the keysto ending hunger in all three countries. Yetstatistics show that while overall food pro-duction is tending upwards, productivity isdeclining. Low productivity results from anumber of problems, principally smalllandholdings, inadequate inputs, especi-ally fertilizer, lack of access to credit andunfavorable prices, as well as droughtsand floods.

In Ethiopia, for example, overall produc-tion has increased over the past decadebut this is due to an expansion in the areaunder cultivation, not through productivityimprovements.71 Zambias agriculturalGDP grew at an average of nearly 4 per

cent per year in the 1990s, but this slowedto 1.7 per cent during the 2000s. In the1980s and 1990s population growth washigher than production increases, whe-reas in the last decade food production in-creases have marginally outstrippedpopulation growth. The production of thestaple, maize, has, however, fluctuatedbetween high and low output over the re-

form period but has generally been fallingover the past decade and has regularlybeen below national requirements, mea-ning that large quantities of grain havehad to be imported to meet the deficit.72

Productivity has been declining in allthree countries:

In Zambia, statistics on productivity varywidely, with figures for average maizeyields estimated as being between 400-800 kg per hectare this compares to thepotential to produce between 2 and 4 tonsper hectare.73 After remaining static in the1990s, yields have been falling for allmajor crops except one in the three yearsfrom 2002/03 to 2004/05.74

In Ethiopia, agricultural growth hasbeen slightly below population growth inthe past decade, with productivity per per-son low by African standards and amongstthe lowest in the world.75 The EEA notesthat rural labor productivity has been de-clining for the last four decades and thatproductivity in the primary sector (i.e.principally agriculture) is declining by

around 0.2 per cent each year. The princi-pal explanation for this is the increase inpopulation in rural areas rather than anabsolute decline in productivity.76 Accor-ding to the EEA the rate at which produc-tivity is declining has been reduced sincethe reforms were introduced in the 1990s.

For Malawi, maize productivity, after in-creasing in the late 1990s, is now lowerthan in the early 1990s. Over the whole re-form period, tobacco yields have fallen,while that for groundnuts has increasedand sugar remained static. Maize yields in2004/05 were 809 kg per hectare, a declinefrom 1,137 in 2002/03 and 1,700 in1999/2000; comparing 2004/05 with2002/03, yields for other main crops suchas cotton, groundnuts and soya beans

were also all lower with only cassava re-gistering an improvement.77 It has beenestimated that maize yields in the smallfarm sector in Malawi are around just onethird of their potential.78

Box 4: Fertilizers and the importance of organic farming

Organic farming is a form of agriculture that avoids the use of synthetic fertilizers and pesticides and which relies on environmentally sus-tainable methods such as crop rotation and animal manures to maintain soil productivity. A major debate still rages about the relative me-

rits of using fertilizers versus low-input organic farming. According to the FAO, many organic agriculture methods can provide higher yieldswith minimum dependence on external inputs by using better management practices as the major improvement and input. It notes that fer-tilizers are only cost effective under good soil and water regimes and appropriate commodity prices79 none of which are present in the threecountries under study in this report. Indeed, the FAO notes that in rain-fed systems, organic agriculture has demonstrated to outperform[sic] conventional agricultural systems under environmental stress conditions.80 Increasing independent research shows that organic far-ming can achieve dramatic increases in yields while being more environmentally sustainable.81

Declining soil fertility is a major cause of declining per capita food consumption in Africa while soil erosion through continuous cultivation ofcrops, particularly maize, coupled with low application of external sources of nutrients, is a major cause of nutrient depletion (declining soilfertility) in the region. However, since the high price of fertilizer is beyond the reach of most poor farmers, soil nutrient improvement prac-tices that require less use of chemical fertilizer, more organic fertilizer and other cheaper practices can be recommended for maize and othercereal crops. Organic fertilizer can be produced with locally available natural resources such as animal droppings and plant materials andis environmentally sustainable compared to chemical fertilizer which is expensive to produce, unsustainable and harmful to the natural en-vironment in the long run. Inorganic fertilizer can be profitable on crops like maize and cotton but often it is not. Risks can be high if weat-her and soil and crop management practices do not enable crop responses to the fertilizer. Under the scenarios where inputs are not availableor late, where there is a lack of resources for adequate weeding, weather risk and initial soil fertility constraints, the use of fertilizer may beunprofitable.

The World Bank and donors remain overwhelmingly focused on promoting high-input, fertilizer-based agriculture as the solution to food se-curity, alongside recognizing the importance of other factors such as improving institutions and markets. Global research in agriculture hasoverwhelmingly focused on maximizing yields under chemical fertilizers and conventional agriculture, to the extent that, as the FAO has sta-ted, no global evaluation on the contribution of organic agriculture to food security exists, essentially due to the small place it occupies wit-hin the agriculture sector as a whole.82 The World Banks major analysis of agricultural strategy, produced in 2005, devoted only four linesout of nearly 200 pages to low input, sustainable agriculture. 83

Aprodev NGOs believe that the donor community, and indeed Southern governments, need to invest much more in promoting organic far-ming techniques and that green revolution-style technological fixes such as depending on expensive inputs such as fertilizers cannot bethe magic bullet solution to hunger. That said, in the following analysis, we devote considerable attention to tracking changes in access tofertilizers under liberalization since fertilizer use has been central to the agricultural strategies of those promoting economic liberaliza-tion and therefore shows how far they have been failing even on their own terms.


Edited by Foxit ReaderCopyright(C) by Foxit Software Company,2005-2007For Evaluation Only.


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4.2 ACCESS TO FERTILIZER AND OTHERINPUTS

Although the use of chemical fertilizershas generally been seen as critical by theadvocates of liberalization, access to fer-tilizer has generally declined over the re-form period.

In Malawi, the price of fertilizers and hy-brid seed rose massively after the removalof subsidies and the devaluation of thekwacha under liberalization. The MalawiEconomic Justice Network, an NGO, sta-

tes that prices have risen by 400 per centover the reform period. In 1998, the go-vernment estimated that high prices re-duced access to less than one third of allsmallholder farmers. The proportion wasestimated to be the same in the threeyears from 2000-2003 and those that didbuy fertilizer, tend to buy only smallamounts. Total fertilizer use therefore re-mains very low, with data suggesting thatthe level of usage in the past decade hasbeen lower than in the previous decade.84

In Ethiopia, the government abolished fer-tilizer subsidies in 1997 as a condition fora World Bank loan, after introducing them

two years earlier to contain rising prices.The complete removal of the subsidy,according to Debela et al, resulted in apersistent low level of fertilizer usage infarming and subsequent productivity de-cline.85 The governments extension pro-gram has resulted in fertilizer use morethan doubling in volume between 1992and 2004.86 However, in recent years, fer-tilizer use has been stagnant. Between60-70 per cent of households has used in-organic fertilizer in the past year, but withwide variation between regions (i.e. insome remote areas farmers have no ac-

cess to fertilizer).87 However, Ethiopia usessmall quantities of fertilizer in comparisonwith other countries, suggesting that theincrease in fertilizer used over the pastfew years has been due to the expansionof the area under cultivation and not in-tensified application.88

In Zambia, the number of farmers usingfertilizer declined from 31 per cent in 1991to 22 per cent in 2000. The proportionusing hybrid seed declined from 44 percent to 17 per cent.89 Exorbitant fertilizerprices and high interest on loans have re-

sulted in only a minority of farmers beingable to afford fertilizer. Now, according togovernment figures, the largest percen-tage of farmers applying chemical fertili-zer in their maize fields was 27 per cent inSouthern province and 23 per cent in Eas-tern province.90

A 2000 World Bank study of Zambia notedthat the removal of all subsidies on maizeand fertilizer under structural adjustmentled to stagnation and regression insteadof helping Zambias agricultural sector.Similarly, an UNCTAD study noted thatagricultural credit and marketing by theprivate sector turned out to be uneven and

unpredictable, and once market forceshad eliminated the implicit subsidies toremote and small farmers, many farmerswere left worse off.91 Partly owing to thedisastrous adverse impacts of their remo-val, fertilizer subsidies were recently rein-troduced. In 2002 the government beganimplementing the Fertilizer Support Pro-gram (FSP), which is managed by the go-vernment but implemented by variousNGOs. It provides subsidized agriculturalinputs (whereby farmers pay 40-50 percent of the price) such as fertilizers andseeds (mostly maize seeds) to small far-

mers. However, government policy, underdonor pressure, has been to consistentlyscale down the program, and since its in-troduction the number of recipients hasdeclined. The FSP reached around 150,000farmers in 2004, declining to 134,000 in2005.92 In addition to the FSP, another go-vernment program funds the distributionof food security packs by the NGO, Pro-gramme Against Malnutrition (PAM). In2006, these were reaching around 20,000farmers, a small number which is a con-sequence of very low levels of fundingfrom the government.93

Thus only a small proportion of Zambias800,000 small farmers receive subsidizedfertilizer. Nearly half of all the fertilizerused in 2004/05 was by commercial orlarge-scale farmers owning more than 20hectares, who are a small proportion of allfarmers. However fertilizer use has beenfairly constant in recent years, which, ac-cording to the FAO, means that with thereduction in the number of beneficiariesunder the FSP, an increasing number ofsmallholders may be buying unsubsidizedfertilizer.94 This is, however, likely to be thebetter-off farmers.

Subsidies have often been critical for rai-sing output..

Experience shows that subsidies have so-metimes been critical in raising output,but they can also suffer from numerousproblems producing little positive impact.

A study of Ethiopia simulated the effectsof a removal of the 20 per cent subsidy onfertilizers that was present up to 1997. Itshowed that the reduction in fertilizersubsidy reduced household incomes by1.62.3 per cent. Cereal production decre-

Left to Right Cathrine Banda, TiselukoCombe and Esme Miale, Sisinje, Zambia



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ased in most cases and also had a nega-tive effect on livestock production becausefodder production (crop residues) becamemore costly. The reduction of the subsidyalso caused a fall in the demand for fertil-izer by 1824 per cent and a decrease inthe marketed surplus (i.e. that exportedfrom the village) of teff but an increase inthe export of other cereals and of pulses overall, exports were reduced by 1.3 percent. The authors also factor into theirstudy the effect of output price increaseson farmers and conclude that: Our modelsimulations for a village economy withhigh agricultural potential and fairly goodmarket access in the Ethiopian highlandsindicate that both the output price incre-ase and the removal of fertilizer subsidiesthat were implemented in the late 1990s

lead to more rapid land degradation meaning a more rapid decline in landproductivity.95

Many academic analysts put down thestagnation in smallholder production inMalawi in the 1990s to reduced access tohybrid maize and fertilizers.96 The collapseof the state agricultural system resultedin low harvests in 1997 and 1998.97 It wasas a consequence of rising food insecuritythat subsidies were reintroduced in theform of Starter Packs in the 1998/99 sea-son, which provided free packs containingfertilizer and seeds to 2.8 million ruralhouseholds. These packs contributed totwo good harvests producing 2 milliontons of maize (a level considered suffici-ent to meet the countrys demand), com-pared to 1.5 million tons before theirintroduction. Donors, however, insisted onscaling back the program because thesubsidies were general rather than targe-ted. Renamed the Targeted Inputs Pro-gramme (TIP), subsidized inputs reacheda smaller number - 1.5 million house-holds - in 2000/01, resulting in a fall inproduction to 1.5 million tons. Furtherdonor pressure scaled back the programto 1 million beneficiaries in 2001/02, whichcoincided with a further fall in production

to 1.3 million tons (with a food gap esti-mated at 600,000 tons). With the countryfacing another food crisis, the TIP wasscaled up again to reach 2.8 million hou-seholds in 2002/03.98 Since the ending ofthe TIP, the government has introducedother subsidy programs. Village authori-ties currently allocate vouchers to house-holds who are entitled to buy two 50 kgbags of fertilizer from ADMARC salespoints for 950 kwacha (US$ 7.3), equiva-lent to a 70 per cent subsidy on the marketprice.

Evaluations show that these subsidy pro-grams have been critical for food securityand production. Maize yields achieved bypoor beneficiaries of subsidies were foundto be 40 per cent higher than those achie-ved by better-off non-beneficiaries. As thefigures above suggest, studies also showthat the implementation of StarterPacks/TIPs coincided with greater maizeproduction than before they were introdu-ced or since they ended. In 2002/03, forexample, it has been estimated that

around 20 per cent of total maize produc-tion came as a result of the TIP inputs pro-vided to farmers.99

Problems with government programs

However, there are also major problemswith the subsidy programs in Malawi andZambia and the extension program in Et-hiopia:

Political patronage. Since independence,heads of state have relied on subsidizedinputs to promote their candidacies andpolitical agendas and to maintain popularsupport. Subsidies are open to abuse atvillage level with many of the beneficiaries

being the better off and not the poorestfarmers.

Reaching better-off farmers. WhileZambias food security packs are targe-ted at the poorest farmers, the beneficia-ries of the governments subsidy programare likely to be better-off farmers who canafford to pay the price. The cost of evensubsidized fertilizer is currently beyondthe reach of most farmers, as the resear-chers interviews showed. So even thecurrent level of subsidy which alreadysuffers from many problems is not

enough to significantly reduce hunger. AZambian NGO study notes that while far-mers felt that the FSP was critical for in-creasing maize production, the amountprovided per household was not adequateto make any meaningful contribution tomaize yields.101

Cost and capacity. The programs arecostly to implement and involve a largedrain on the budget, though it is a crucialpoint as to whether it is more costly not toimplement them than to do so. Capacitywithin government to manage these pro-grams effectively, and to ensure good tar-geting, is limited. The 2004 TIP in Malawiwas so poorly implemented that DFID, themain funder, decided to end its support forthe program.102

Crowding out private suppliers. In the2005/06 season in Malawi, the govern-ment relied on parastatals to distributethe fertilizers, and precluded a role for theprivate sector role in this, which crowdedout private sector suppliers. This reducedprivate sales of fertilizer by 60-70 percent.103 This has serious impacts - theFAO noted in 2005 that commercially verylittle fertilizer was available in the mar-kets, which also significantly contributedto the reduced harvest.104 Under pressurefrom donors the government has allowedprivate suppliers to participate in the2006/07 program.

Uncertainties. The Malawian and Zam-bian government have been advocating forcontinuing widespread subsidy programswhile donors have generally insisted inscaling these back and ensuring more tar-geting. This battle shows the deep divisionbetween government and donors overfood production and has resulted in a my-riad of different free input and subsidyprograms in recent years. Together withuntransparent and often sudden govern-ment policy decision, massive uncertain-ties as to future policy exist, making longterm planning impossible.

Although Ethiopia does not apply fertilizersubsidies and its fertilizer sector has beenderegulated and opened for private com-petition since the mid-1990s, the marketis far from liberalized in practice and isgenerally regarded as uncompetitive, in-accessible and untransparent.105 Around25 per cent of all fertilizer sales in 2005were made by one parastatal agency theAgricultural Inputs Supply Organisation(AISO) - while the other 75 per cent weresold by nine (state-backed) cooperativeunions and two (ruling party-backed) pri-

Only in two years (1999/2000 and2000/2001) in the past decade has themaize production level [in Malawi] excee-ded the estimated demand. This wasmainly due to government interventions,notably the agricultural productivity in-

vestment program, which expanded ac-cess to credit, and the starter packprogram, which provided limited quanti-ties of free inputs to smallholder farmers.Cost implications and sustainability con-cerns forced the government to reorientthe starter pack program towards re-source-poor and disadvantaged segmentsof the rural communities, thus signifi-cantly reducing the number of beneficia-ries. The reduction in size of the free inputprogram was a major factor contributingto the decline in maize production in the2001/2002 season. FAO100



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vate companies. Only a few private retai-lers are involved in fertilizer sales and dis-tribution.106 Ethiopias alternative tofertilizer subsidies the governments ex-tension program, PADETES appears tohave had little positive impact on reducinghunger in the country (see Ethiopia chap-ter).

The World Bank has gone along with thereintroduction of subsidy programs in Ma-lawi and Zambia, a change from its previ-ous complete opposition. In theresearchers interviews with officials in Li-longwe, the Bank claimed it would cont-inue to support subsidies in Malawi aslong as the government could provide jus-tified economic arguments for continuingthem. Yet they also said that they were se-

eking the phase out of subsidies within 3-5 years. After this point, officials told us,the private sector will be sufficiently deve-loped, and the road infrastructure impro-ved, to provide fertilizer at affordableprices to smallholders.107 This is a deeplyworrying conclusion it recalls the opti-mism expressed in the 1990s about thespeed with which private supplies replacethe state.

4.3 AGRICULTURAL MARKETS AND PRICES

Agricultural prices have different impactson farmers depending on whether they areprimarily consumers or purchasers offood. Many farmers practice subsistenceagriculture producing principally for theirown needs, and are therefore more con-sumers than producers of food. In Zambia,the poorest third of the rural populationspend 77 per cent on food, mostlymaize.108 They are thus hit by higher foodprices for staples like maize. For farmersselling some of their produce in the mar-ket, which includes many hunger-pronepeople, a major problem is the fluctuatingand sometimes very low output price fortheir farm produce, even in years of goodharvest. The prices obtained by these far-mers for their agricultural produce help

determine their income, and thus theirability to buy inputs that can in turn leadto productivity increases. Getting pricesright is therefore difficult, and oftenamounts to a political choice, but one cri-tical aspect of this is stability and predic-tability of price. However, all threecountries have been plagued by volatileprices and often non-strategic govern-ment interventions to help stabilize prices(see further below).

The researcher interviewed many farmerswho go hungry for large parts of the year

but who at harvest time are able to pro-duce enough food to feed their familiesplus to sell a little at the market. For themthe small income difference between re-ceiving a good or bad price can be greatindeed. But our visits to farmers showedthat poor farmers are often at the mercyof exploitative private traders offering lowprices when it comes to selling their pro-duce a direct consequence of unregula-ted liberalization. Farmers lack bargainingpower to negotiate higher prices and thereis pressure to sell quickly after harvestwhen prices are lowest, which is causedby inadequate storage facilities and fewalternative sources of income. Poor roadsin more remote areas also constrain theability of private traders to offer inputssuch as fertilizers at affordable prices. The

private sector has generally failed to moveinto the less profitable rural areas to pro-vide services previously provided by thestate.

A particular problem is the price of out-puts compared to the high price of inputssuch as fertilizer. One study in Ethiopiacompares prices over the reform periodfor the years 1991 and 2001. It shows thatthe ratio of the price of DAP fertilizer tothe price of teff increased from 0.6 to 1.8over the ten year period. This means thatonly 0.6 quintal of teff was required to buya quintal of DAP in 1991 but that 1.84 wasrequired ten years later a threefold in-crease in the amount of teff required tobuy a quintal of DAP.109 Another study notesthat Ethiopias reforms have resulted inhigher grain prices in the major grain-pro-ducing areas and lower prices in thegrain-deficit areas. There was a reductionin marketing costs for grain - which aresignificant, accounting for 40-60 per centof the price consumers pay for staple ce-real commodities representing a gain forfarmers. But the authors note that Ethio-pias grain marketing system faces nume-rous problems, and in particular pricevolatility has not been reduced.110

A major problem in all three countries hasbeen the lack of good market informationsystems. Farmers knowledge of prices inthe market can be critical for maximizingincome. Yet the EEAs analysis in Ethiopiais that a massive 96 per cent of farmersreceive no market support from anyagency.111 Farmers receive most of theirinformation about the market throughtheir own interactions with traders andneighbors; they can be unaware of pricesin other markets, even those close tothem. Traders, in turn, get most of theirinformation from brokers and transpor-

ters with knowledge of prices in the AddisAbaba market. The Ministry of Agriculturedoes have plans to implement a marketinformation system but this is under re-view.112

The prices of agricultural commodities formerly set mainly by the state havebeen liberalized and are set primarily bymarket forces. The major exception ismaize (in Zambia and Malawi) and grain(in Ethiopia), where the government inter-venes. Such government intervention hasboth helped and harmed the poor in diffe-rent ways.

In 1995, the Zambian government esta-blished the Food Reserve Agency (FRA) topurchase maize from small farmers

around the country at favorable prices andto attempt to stabilize market pricesthrough sales of maize to selected maizemills at below market prices. In 2005, theFRA purchased 84,000 tons of maize at atotal cost of K73 billion (US$ 18.2 million),which was aimed at building the countrysnational strategic food reserves targetedat 120,000 tons. Other crops purchased in-cluded rice, cassava, groundnuts and soyabeans.113 Yet government purchases areseriously limited by the funding available.The combi

the role of southern governments and the world bank in the rise of hunger

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