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What is the role of policy in Africa’s fertilizer market?

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What is the role of policy in Africa’s fertilizer market?
Jones Govereh
What is the role of policy in Africa's fertilizer market?

Policies incentivise both the demand and supply sides of the market. On the demand side, policies can influence the optimum profit application rates per crop and overall consumption levels through:

  • input prices levels
  • output price levels

On the supply side, policies directly affect the delivery efficiency by influencing:

  • Investments in manufacture, importation and distribution
  • Cost of doing business
  • Competition at all stages of the chain
  • Operating margins
  • Business practices

Policy Instruments

  1. Trade protection of domestic industry and individual participants
    1. Restrictive tariffs
    2. Non-tariff barriers eg., import permits, roadblocks, border delays and fees
  2. Business regulations
    1. Price controls
    2. Registration of firms and products
  3. Operating taxes
    1. Corporate tax
    2. Levies
    3. Value added tax
  4. Macroeconomic
    1. Exchange rates
    2. Interest rates
    3. Inflation rates
  5. Land tenure
    1. Registration and titling
  6. Subsidies/transfers
    1. Parallel state supply schemes

Unclear and non-transparent state operations

Jones Govereh
Subsidies

When social support and equity considerations take precedence over efficiency and sustainability, fertiliser subsidies could be a cost effective policy instrument. There are fewer public expenditure programs that can generate the same or more payoff in one season than fertilizer subsidies. If implemented in "smart" way, fertilizer may deliver food security in the short term. The examples of Zambia and Malawi are worth paying close attention to.

Shahidur Rashid
Fertilizer policy

Hi Jones: Good to see you here. I agree with all of your comments re policy instruments for input promotion, but I have to disagree with this point. Let's not mix up "social protection" and "productivity growth" objectives. We need safety nets program to protect the poor, not input subsidies. On the other hand, input subsidies are meant to enhance productivity, which will come from more productive farmers, not from the poorest. So, these are two policy instruments with two very different objectives. Does that make sense?

 

Demba
Demba's picture
Put it in writing first then going about it...Policy is a must.

Policymaking in such an area of critical impotance to SSA Agricultural infrastructure is the most needed... Without a ground work laying out the facts affecting agricultural productivity, resilience and adaptation, there cannot be a strong committment for a shift meant to addressing the fertilizer sector.

The above, among other issues must be at the forefront of local development plans within the larger matrix of any given NDP (National Development Plans)...

Aligning public and private actors around a sincere policy dialogue is sought to drawing from these practical areas of concerns actually jeopardizing the very sustainability of the whole national agricultural systems infrastructure in SSA, such statement itself can and should assuredly drive momentum manifold!

S.Allen
Subsidies

In many locations, subsidies are utilized to increase use of fertilizers for smallholders but in many situations, it appears to not be very effective.  Why is this the case?  Where has it worked or are there other policy instruments that work better in the medium term? 

Maximo.Torero
Subsidies

With subsidies we need to be carefull, they need to be:

1. For short periods to promote use and access

2. Should be well targetted, here we need not only to target the poorer farmers but also to target the content of what is subsidized. Not all fertilizer inputs are the same for all locations. We need to have proper soil maps to give the correct incentives to use what is needed.

3. We need to be careful they don't crowd-out the private sector

Finally, there are innovative ways to do this like the e-voucher experience in Zambia.

Maximo.Torero
Subsidies
Shahidur Rashid
Fertilizer Policy

Prof Thom Jayne of MSU and I did a synthesis of experiences with input subsidy programs in Africa for a special issue of Agricultural Economics in 2013, which is available here: http://onlinelibrary.wiley.com/doi/10.1111/agec.12073/abstract 

Jones Govereh
The e-vouchers in Zambia

The e-vouchers are being piloted this season in 12 Districts of Zambia. The past problems of fraud and leakages could be minimized but not eliminated. Such innovations will work in areas with mobile phone networks and where there is an established dealer network.

Joshua Ariga
Subsidies, policies

Prof and team, I agree and it is becoming increasingly clear that having the right policies and harmonizing them across countries is necessary for market development. On subsidies; a number of studies have been undertaken (Rashid mentioned Jayne et al, there is also IFDC, IFPRI, AFAP, etc);  it is about time we took stock of the different models and recommend a hybrid model with the good  minus the bad from these models. We know some governments are keen on trying subsidies and we can provide them with recommendations on how to go about it in a better way and avoid obvious pitfalls. Thanks

R.Mkandawire
Subsidies

The role of policy in fertilizer market cannot be overemphasized.  Sadly many countries  do not have a fertilizer policy let alone a law. Not surprisingly fertilizer remains unregulated,  fertilizer policy itself revolves around subsidies. Fertilizer subsidies therefore have    emerged as the overall preoccupation of senior public servants .  This has in turn  undermined the focus of the ministries of agriculture  in other important agricultural development related priorities such as extension, support with output markets, research and technology development ,  food processing  support activities among others.

Shahidur Rashid
Subsidies

I couldn't agree more with you, prof Mkandawire! This is indeed sad that fertilizer policies are centered around subsidies. However, as you know, Ethiopia has been doing it very differently. They don't have input subsidy programs; they have developed a comprehensive soil information systes (EthioSIS); revised blanket recommendation of Urea and DAP; and started blending fertilizer with micro-nutrients. I think we will have a lot to learn from these programs. Don't you think?

Happy holidays!

Maximo.Torero
Subsidies

Another good attribute of the e-vouchers, which as mentioned is a pilot still and hope carefully being evaluated, is that it allows farmers to discuss with dealers on the best inputs needed rather than just getting fixed packages of fertilizers. This will work as loong as there is good information on soil maps presented in a simple way for small farmers to be able to profit from them. Clearly a role for the government is to create this public good of good quality and easily accesible information.

Jones Govereh
Preoccupation of senior public servants

Yes, distribution of fertilizers is the only local game senior civil servants can play. These are implementation modalities. In principle, if well targeted and goals clarified, subsidies will have a role. Civil servants are being drawn in because they stand to benefit from weak administration and monitoring. If civil servants are successfully prosecuted for fraud, few would contemplate dipping their hands. Fortunately for civil servants, there are numerous loopholes to exploit. They are simply responding to options and sanctions presented to them.

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