Agricultural risk poses a significant challenge for Malawi, in terms of both its food security and its overall economic development. Looking at two studies conducted in 2014 and 2015 in collaboration with the Government of Malawi, a 2015 World Bank Agricultural Global Practice Note examines the major risks facing Malawian agriculture, how those risks could hurt both individuals and the country as a whole, and what potential steps could be taken to better guard against agricultural losses.
According to the report, 80 percent of Malawians live in rural areas and 78 percent are employed in the agricultural sector, making agriculture a primary source of employment and income for a majority of the country. Droughts, pests, and disease pose the most significant risks to Malawi’s agricultural sector; in recent decades, droughts have been particularly prevalent. The report estimates that agricultural losses due to production risks (including pests, disease, and weather-related shocks) averaged US$149 million per year from 1980 and 2012.
Price volatility forms another important source of risk, particularly for vital crops like maize, tobacco, and cotton. The report finds that cotton prices tend to fluctuate based on global price movements, while maize and tobacco prices respond more strongly to domestic market price movements and policies. Regardless of whether they stem from global or domestic markets, however, price fluctuations make it more difficult for producers to plan what and how much to plant and make it less likely for producers to invest in improved crops, agricultural techniques, and export opportunities.
Agricultural losses have clear implications for individual households and for the country as a whole. With nearly 3 million households engaged in farming, agricultural losses equal lower food security and higher poverty. During the country’s last severe drought in 2005, 40 percent of Malawi’s population needed emergency food aid. Crops like maize and cassava tend to suffer greater losses when shocks occur; for example the 2005 drought led to a 50 percent loss in maize value. At the same time, other crops like tobacco and tea suffer losses more frequently. Such losses – whether they are greater in magnitude or greater in frequency – can have significant negative impacts on rural households’ income levels and food security.
The same 2005 drought resulted in a loss of nearly US$900 million, or 24 percent of the country’s total agricultural production value based on the 2006-2008 average. This is costly for the Government of Malawi as well as for the people of Malawi. The government allocates 10 percent of its national budget to agriculture, as recommended by the CAADP, meaning that it spends approximately US$250 million on agriculture annually. Thus, a loss in the agricultural sector equates to a loss of public investments.
The report finds that in its efforts to deal with agricultural risks and losses, the Government of Malawi tends to favor risk management over risk mitigation. In other words, policies tend to respond after a shock has already taken place, rather than plan ahead before a shock occurs to reduce potential losses. Reallocating government funds to risk mitigation strategies could prove more cost-effective and successful in preventing agricultural loss. The report highlights three broad strategies to increase risk mitigation interventions.
First, steps must be taken to understand and address why farmers tend not to adopt improved agricultural practices, particularly pest and disease management strategies. A lack of market access, affordable inputs, and extension services all reduce farmers’ incentives to invest in practices that will take their agricultural production beyond the subsistence level. Another challenge is gender disparity in agricultural and financial decision-making; female farmers may not have the power to adopt new technologies, even if they were so inclined. These constraints can be addressed by establishing best practices for agricultural extension services and pest and disease management, disseminating messages regarding improved agricultural practices via mass media accessible to both men and women, implementing surveillance and reporting programs for crop and livestock disease outbreaks, and designing risk mitigation projects that also provide farmers with increased access to reliable markets, processing activities, and export opportunities.
Second, food security policies must be based on clearly established rules and priorities, and government agencies must work more closely to coordinate long-term development goals. Malawi currently has in place several policies that have served to distort markets, increase price volatility, reduce incentives to invest in agriculture; these include maize export restrictions and import taxes on inputs. Both food security policies and agricultural trade policies need to be made more transparent and predictable, and reliable information regarding prices, stocks, and production needs to be made more accessible to farmers. In addition, the activities of Malawi’s Agricultural Development and Marketing Corporation (ADMARC), Department of Disaster Management Affairs (DODMA), and the Malawi Vulnerability Assessment Committee (MVAC) need to be better coordinated; this will ensure that disaster relief programs do not take up an unnecessarily large share of the government’s budget and draw funds away from social safety net programs and other agricultural investments.
Third, agricultural information systems need to be improved, as gaps in information lead to poorly targeted and even harmful policies. In order to fill these gaps, the government needs to develop a clear framework for its agricultural goals and to strengthen its monitoring and evaluation procedures to ensure that its policies are meeting those goals. In addition, it needs to work more closely with donor organizations to ensure that donors’ plans and the government’s overall development plans are in line with one another and are not duplicating efforts. Finally, the role of women in Malawi’s agricultural sector needs to be taken into account in order to improve gender equity in the agricultural sector. This will require the inclusion of gender indicators in data collection, monitoring, and evaluation. (Read more about the importance of including women in agriculture, both in SSA and globally.)
By: Sara Gustafson, IFPRI