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2000/01 IFDC Corporate Report
(2001-09) IFDC
Open to the public, IFDC is a global nonprofit dedicated to carrying out its activities independently and with a strong scientific basis. IFDC was founded in 1974 with the goal of furthering the cause of global food security. The Center's goal is to advance agricultural productivity in a sustainable way by creating and sharing effective, ecologically friendly plant nutrition technology and agricultural marketing expertise. The Center has conducted technology transfer efforts in numerous countries. The IFDC has assisted countries in improving institutional capacity and human resources through more than 600 training programs. Its team of scientists and experts provides a unique blend of applied research skills and technology transfer. The Center's features include training facilities, labs, greenhouses, pilot plants, and libraries.
2003/04 IFDC Corporate Report
(2004) Amit H. Roy
The creation and accomplishments of IFDC, which was established in reaction to the world food crisis of the 1970s, are highlighted in this report. Aware that food-deficit nations must boost their food production, IFDC concentrates on creating fertilizers and fertilizer techniques appropriate for tropical and subtropical areas. The center's original objectives included increasing fertilizer efficiency, making use of locally available resources, creating suitable technologies, and offering developing nations technical assistance and training. The work of IFDC covered a wide range of topics, such as phosphate and nitrogen studies. The goal of nitrogen research was to reduce the amount of nitrogen that fertilizers lose while creating new fertilizer products and crop-management techniques for tropical and subtropical regions. Characterizing phosphate rock deposits, creating beneficiation methods, and figuring out how to use local phosphate resources profitably were the main goals of phosphate research. In nations including Colombia, Brazil, India, and Tanzania, IFDC's work has lowered production costs and raised agricultural productivity. Through the encouragement of workable private agricultural input and output marketing systems, IFDC also made a substantial contribution to market development. Restructuring Bangladesh's fertilizer industry, which resulted in self-sufficiency in rice production and significant cost savings, and developing a thriving market economy in Albania's agricultural sector, which led to higher crop yields and growth driven by the private sector, are two notable triumphs. Moreover, IFDC has taken a leading role in technology transfer programs that help nations all over the world adopt market-driven policies and boost productivity. As an illustration, consider the effective reorganization of Petroquimica de Venezuela and its shift to a market-driven business, which resulted in higher fertilizer output and notable cost reductions.
ACTIVITIES REPORT 2022: NIGERIA
(2022) IFDC
Nigeria faces numerous challenges in its agricultural sector, including poor land tenure, low irrigation farming, climate change, and limited market access. These challenges hinder agricultural productivity and contribute to declining food sufficiency levels despite the sector's significant contribution to the economy. With a rapidly growing population, enhancing agriculture productivity by adopting new technologies and innovations is crucial to ensure food and nutrition security. The International Fertilizer Development Center (IFDC) has worked in Nigeria for nearly two decades, empowering smallholder farmers and implementing various projects and programs. These initiatives include the Developing Agri Inputs Market in Nigeria (DAIMINA) program, Nigeria Fertilizer Voucher Program, West Africa Fertilizer Program (WAFP), and the 2SCALE program. IFDC's interventions focus on sustainable agricultural practices, eco-efficient technologies, digital tools, and market systems to improve crop and animal productivity, food security, and food quality and safety standards. This report provides an overview of IFDC's interventions in Nigeria during 2021-2022, highlighting the alignment of activities with the Government Action Plan and the significant results achieved. It showcases projects such as HortiNigeria, which aims to develop a sustainable and inclusive horticulture sector, and EnGRAIS, which promotes the availability and use of affordable fertilizers for smallholder farmers. The report also outlines IFDC's involvement in initiatives like TRIMING, RRA, and AfricaFertilizer, each contributing to agricultural development and resilience. Furthermore, the report emphasizes the alignment of IFDC's projects with Nigeria's agricultural policy, as demonstrated by the National Agricultural Technology and Innovation Policy (NATIP). This policy seeks to transform the agri-food system, incorporate technology and innovation, and drive economic and social change through public and private sector investments in agriculture and rural development. IFDC's interventions in Nigeria have been instrumental in empowering smallholder farmers, improving agricultural productivity, and fostering food and nutrition security. By implementing innovative technologies, market systems approaches, and sustainable practices, IFDC has made significant contributions to Nigeria's agricultural sector, aligning with the country's agricultural policy and promoting long-lasting economic and social change.
Agro-input packages for Farmers in West Africa
(2022)
Low agricultural productivity in West African countries and Chad is partly linked to low use of appropriate agricultural inputs, including improved seed varieties and appropriate fertilizers. Indeed, in this regard, it is generally mentioned that in this region the rate of coverage of needs for certified seeds is on average quite low around 25% and that the quantity of nutrients used on average in the ECOWAS zone was approximately per hectare of cultivable land of 17 kg/ha in 2017 and in 2020 of 20 kg/ha of nutrients below the 50 kg/ha advocated by the Abuja, Nigeria summit of June 2006 for the 2015 horizon and is lower than the average of 24 kg of nutrients per hectare for Africa and far from the annual average of 123 kg/ha of nutrient levels in 2017. Among the many reasons that can be cited to justify this state of affairs, training, awareness , access to knowledge and adequate information could play an important role. EnGRAIS1 and PAIRED are two projects funded by USAID2 and implemented respectively by the International Fertilizer Development Center (IFDC) and the West and Central African Council for Agricultural Research and Development (CORAF). IFDC and CORAF, as part of close cooperation between their two projects, have among other mandates to develop and make agricultural input packages (PIA) available to West African producers.These PIAs are sets: Adapted improved seeds and appropriate fertilizer recommendations accompanied by good agricultural practices (GAP) specific for each agroecological zone (AEZ) across West Africa and Chad. This desire of the two organizations is put into practice by the EnGRAIS and PAIRED projects, which both aim to contribute through their common objective: to develop and make available to producers in West Africa PIAs and a tool for decision support which will allow actors in the agricultural sector to have information on improved seeds, appropriate fertilizer recommendations, and GAP for the main crops in the region and this according to the different AEZs in order to boost yields and agricultural productivity. For this purpose they developed PIAs and the FeSeRWAM3 platform (https://feserwam.org/fr/accueil-2/), whose ancestor, focused on fertilizers, was FeRWAM4, is deployed online as well as the PIAs associated and will be available to all stakeholders. The PIAs are contained in the FeSeRWAM platform, online accessible via the internet, on cell phones, computers, and several other means of dissemination are planned. The FeSeRWAM platform helps generate PIAs including improved seeds, appropriate fertilizer recommendations, and GAPs for key priority crops in West Africa. It is on the sidelines of this collaboration that EnGRAIS has produced and disseminated more than 250 PIAs including 80 PIAs for the 2022 fiscal year, the 110 in 2021, after the 20 PIAs in 2020 and the 40 PIAs in 2019, to increase the range options always with the aim of continuing to contribute to awareness, information and training to widely disseminate these PIA. In this book, PIAs are organized by country and culture. It is a summary of the technical information selected with some illustrations to guide the technician in his dialogue with the producer so that specifically for his locality,the producer can produce efficiently through a judicious choice of crops, the appropriate fertilizers but also have a good technical route which will guide him to optimal production. This is why the PIA provides information on the crop (varieties, varietal characteristics, local names, performance, resistance to various stresses), fertilizer (nutrient recommendation, the right fertilizer, the right dose, the right period and the best location, and organic fertilizer), crop management (tillage, water management, weed management, crop residue management, management of organic manure, and organo-mineral amendments), and the locality (regional ZAE, country ZAE, localities, and much other information)
An Action Plan for Developing Agricultural Input Markets in Ghana
(2002-12) IFDC
I. Introduction The agricultural sector in Ghana employs about 70% of the labor force, contributes about 36% of the GDP, and accounts for 57% of the country’s foreign exchange earnings. Thus, the sector is an important engine for economic growth in Ghana. Despite its critical importance the sector has not performed to its potential, primarily because of the general lack of support for agriculture and the unfavorable macroeconomic conditions, particularly the high rate of inflation, high interest rates, and the rapid depreciation of the Cedi (¢). To reverse the declining trends in agricultural productivity and to increase the sector’s contribution to economic development, the Government of Ghana (GOG) set targets under its Vision 2020 program in the early 1990s; these targets were recently revised during the National Economic Forum in May 2001. The agricultural sector is once again challenged to drive the economy towards ensuring food security, reducing poverty, and protecting the environment. In fulfilling these goals, improved seeds and planting material, fertilizers, and crop protection products (CPPs) are critical, and the private sector now has the primary responsibility for procuring and distributing these inputs through sustainable agricultural input markets (AIMs). II. An Assessment of AIMs Ghana has made considerable progress toward deregulation and liberalization of the agricultural input supply systems, and in recent years the private sector has played a dominant role in supplying various inputs. Nevertheless, agricultural input markets are not operating efficiently, and farmers do not have easy access to inputs at affordable prices. Several factors continue to constrain the development of efficient AIMs. These factors can be divided into two broad groups, namely, macropolicy issues and market development issues. In the macropolicy group, devaluation of the Ghanaian Cedi, limited availability of foreign exchange, high interest rates, and poor rural roads constrain the development of input markets. The devaluation of the Cedi not only increases the prices of imported seeds, fertilizers, and CPPs, but it also discourages investments in business development due to associated risks. Limited availability of foreign exchange constrains the import of inputs. Poor infrastructure in rural areas makes the transportation of goods and services difficult and costly and thereby limits the supply of much-needed inputs. These factors have contributed to the concentration of suppliers in urban and peri-urban areas, consequently forcing farmers to travel 10-50 km to purchase inputs. The market development issues consist of policy-induced uncertainty, inadequate human capital and market information, lack of affordable finance, and poor enforcement or absence of regulatory frameworks for inputs marketing. The unresolved issues associated with well-intentioned government-supported programs such as tendering for supplying inputs by the Agricultural Development Bank (ADB) and the zoning of cotton production areas in northern Ghana create uncertainty in the marketplace. Consequently, these programs tend to discourage private-sector investment in the input business.1 Inadequate human capital (technical and business skills) and market information restrict the supply of products in the marketplace and result in high prices. There is generally a lack of input dealers in the rural areas. The seed and fertilizer markets are largely concentrated in towns and cities and are served by a limited number of enterprises. High interest rates and stringent collateral requirements, coupled with the lack of financial service providers in rural areas, severely limits the availability of finance for business development. Although Ghana has laws on seed and fertilizers, the implementation of these laws has been far from satisfactory, largely because important amendments have not yet been enacted into law and the regulatory agencies are constrained by limited human and financial resources. III. An Action Plan for Developing AIMs In developing the Action Plan, the team assessed various options available to improve the supply of inputs and concluded that a free market system should be used to supply inputs to the farmers because this approach is relatively more efficient and sustainable and does not strain the fiscal resources of the country. The team recognized that although AIMs have been liberalized in Ghana they are not operating efficiently. The team recommends that, to develop sustainable agri-input supply systems in Ghana, the liberalized markets must be strengthened by undertaking activities in the areas of policy reform and human capital development and by improving financial services, market information systems, and regulatory frameworks. The team also recommends that these activities be undertaken in a holistic manner so that the synergies of various activities can be captured. Furthermore, the team assessed the potential of the private sector in undertaking marketing activities in a competitive market environment. The private sector has latent potential to assume the responsibility of marketing agricultural inputs in an efficient and sustainable manner. However, for this potential to be realized, constraints affecting their activities need to be removed. In developing the Action Plan, special attention was paid to the alleviation of these constraints. The main activities proposed in the Action Plan are identified in the Action Plan Matrix 1 and are briefly summarized below. Macropolicy Reform Overall, the macropolicy environment should be conducive to the market development process. Macroeconomic stability and sufficient supply of foreign exchange are essential. It is recommended that the Bank of Ghana (BOG), the Ministry of Finance (MOF), and their international partners implement appropriate monetary, fiscal, and exchange rate policies. Similarly, foreign exchange availability should be ensured in that Ghana will require approximately US $45 million/year to import the necessary inputs during the 2001-2005 period. Because the poor quality of rural roads adds cost to inputs and discourages traders from penetrating rural markets, the Ministry of Roads and Highways (MRH) and the District Assemblies are encouraged to develop long-term programs for constructing and maintaining rural roads. Market Development Skills, knowledge, and information (human capital) needed to make input markets efficient are inadequate at all levels of the marketing chain. Importers do not have adequate knowledge about the conditions prevailing in the global input markets; wholesalers and retailers lack the necessary skills for enterprise management and business development; and most importantly, there are few independent dealers involved in marketing inputs in rural areas. Even the bankers are not fully equipped to effectively play their role in financing the import and marketing of inputs. Developing the human capital necessary for making input markets perform efficiently constitutes the core of the activities under this Action Plan and will be accomplished by focusing on the following activities: 1. Training programs for dealers (wholesalers and retailers), importers, and bankers. 2. Technical assistance in enterprise development to newly trained dealers. 3. Study tours for dealers, importers, and bankers. 4. Policy workshop and study tours for policymakers. 5. Access to market information. To make dealers a dynamic force in the economy, various associations of input traders will be encouraged. Training and technical assistance for associations will be essential. In addition to developing human resources for competitive markets, training and technical assistance will be needed for building technical capacity in the seed sector—training for seed growers, capacity for inspection and quality control, and enterprise development. Financial Support Services Finance is the lifeblood of any business activity. Without adequate access to and availability of finance, competitive markets cannot function efficiently. At the present time, difficulties in obtaining adequate foreign exchange to cover procurements from overseas currently estimated at about US $31.9 million/year are constraining established and new-entrant importers alike. Currently, foreign exchange available (mostly from ADB) for the importation of agricultural inputs has been maintained at a level equivalent to only 19% of the annual requirements. To make funds available, and factoring in market expansion, it is recommended that the African Development Bank (AfDB) Group, USAID, Department for International Development (DFID), International Fund for Agricultural Development (IFAD), Agence Française de Développement (AFD), and GOG (using indirect receipts from the Heavily Indebted Poor Country [HIPC]) constitute a US $45 million Agricultural Inputs Importation Fund (AIIF) over a period of 5 years for importers to supplement and generate available foreign exchange needed in establishing Letters of Credit (LCs) with foreign banks. BOG should manage the fund lodged in a foreign bank. The borrower should contribute 30% of the cost of the inputs paid in foreign exchange Cedis equivalent. Commercial banks would provide LCs for 100% financing of the cost of the inputs under a risksharing mechanism between the lender (40%) and the fund (30%). A number of stakeholders at the workshop noted that a requirement of 30% contribution from the borrower is likely to be a constraint. However, the assessment team feels that a 30% contribution from the borrower is essential to make this arrangement successful and sustainable. The fund should provide guaranteed foreign exchange support up to a maximum of US $1.5 million per importer per year. Input wholesalers and retailers similarly face financial constraints in their operations, and potential market participants without adequate financial resources are unable to enter the market. To alleviate this constraint, the District Assembly Common Fund (Poverty Alleviation Fund), BOG, and the African Development Bank Facility are to be used to constitute a ¢70 billion Agricultural Inputs Business Development Fund (AIBDF) to cover commercial bank lending to local agricultural inputs wholesaler and retailers. BOG should manage the fund. Commercial banks would provide 70% financing of the cost of the inputs with 30% guaranteed from the fund. In addition, it is recommended that training programs be organized for borrowers and lenders to minimize the risks of default, and databases for borrowers should be created at a Credit Reference Bureau. As in the case of the AIIF, a number of stakeholders at the validation workshop noted that a requirement of 30% contribution from the borrower is likely to be a constraint. As a result, the use of warehouse collateral (bonded warehouse) should also be considered during the implementation to reduce the burden of liquidity on the borrower. Market Information System (MIS) Information is crucial for the functioning of the market. Dealers and importers need information about local, regional, and global markets. Because every stakeholder will need the information about prices, stocks, and availability of inputs in various markets, MOFA’s present MIS should be strengthened and linked with other regional web-based agricultural input information systems. Other Input-Specific Issues Seed and Planting Material Apart from seed of cereals and some other food crops, most of the improved seeds, particularly vegetable seeds, are imported. Ghana can benefit from stronger linkages to the international market and access to new varieties of seeds. The seed market is thin, and it lacks the presence of large seed companies and adequate dealer outlets. Recommendations are made in the Action Plan to address these issues. In particular, efforts should be made to help potential entrepreneurs (scientists, seed farmers, seed growers’ association, and others) to establish viable seed enterprises—buying seed from farmers, packaging it with a brand name, and distributing or selling it to retail outlets for farmers to buy. Fertilizers Almost all the fertilizer used in Ghana is imported; hence, a primary bottleneck in the subsector is that of financing at the level of importers, wholesalers, and retailers. The Action Plan has therefore proposed the establishment of the AIIF and AIBDF to cater to importers and dealers, respectively. A major problem constraining the use of fertilizers is the small effective demand due to unfavorable fertilizer/output ratios arising from high fertilizer costs and low product prices. Actions have been recommended to improve the effective demand for fertilizers. CPPs With the uncontrolled status of the Ghana CPP market, a substantial quantity of obsolete and dangerous materials can be found in Ghana. Furthermore, serious adulteration and abuse of truth in labeling are common at the retail level. Consequently, a safe and environmentally sound disposal of the obsolete stock of pesticides and enforcement of laws and regulations have received top priority in the Action Plan, which also calls for proper monitoring, research, and education to avoid harm to human health and the environment. Additionally, efforts should be made to (1) strengthen the capacity of the Environmental Protection Agency (EPA) and the Plant Protection and Regulatory Services Directorate (PPRSD) to accelerate product registration and enforcement of the pesticide legislation, (2) design training programs to educate extension agents and end users about the products and their safe use, (3) conduct residue testing on food products, (4) initiate negotiations for a regional harmonization of the testing and registration of pesticides, (5) strengthen the capacity of the health services to deal with cases of pesticide poisoning, and (6) support research and extension on biocontrol and integrated pest management (IPM). IV. Potential Benefits of the Action Plan The implementation of the Action Plan will generate several socioeconomic benefits for the Ghanaian society. It will promote food security and environmental protection by lowering the prices of inputs, making inputs easily accessible to farmers in rural areas, and improving access to new production technologies. In addition, it will encourage economic activity at microenterprise level, improve smallholder incomes, and expand bank sector activity to include input markets. The contribution of the Action Plan to foreign exchange earnings will also be significant through crop diversification and increased food production. Because it focuses on the development of AIMs, the present Action Plan is an important component of Ghana’s strategy for improving food security while protecting the environment. In this regard, this Action Plan supports and complements (a) the 1998 National Soil Fertility Management Action Plan (NSFMAP), (b) the 2001 Accelerated Agricultural Growth and Development Strategy (AAGDS), and (c) the targets set for agricultural development in the national economic dialogue of May 2001. V. Implementation Arrangements In implementing the Action Plan, care must be taken to preserve the holistic nature of the proposed measures. It is recommended that core activities dealing with policy reform, dealer development, and financial services be implemented as a project. Other activities could be implemented as subproject activities. The project activities should be implemented by an autonomous project entity reporting to the Chief Director, MOFA. To facilitate the implementation of the Action Plan, an Advisory Committee consisting of stakeholders from the private sector (including farmers), donor community, and the government should be created. The Advisory Committee will provide broad policy and program guidance about the project to the Chief Director, MOFA. MOFA will make the necessary arrangements for the Advisory Committee meetings and stakeholders’ workshops.
An Action Plan for Developing Agricultural Input Markets in Tanzania
(2005-08) IFDC
I. Introduction Tanzania is a naturally rich country, but the realization of its rich potential is progressing slowly. As a result the incidence of poverty and hunger is high, food production has not been keeping pace with population growth, and nutrient depletion is excessive (more than 60 kg/ha). Several factors may have contributed to these trends, but the declining fertilizer use and limited use of other modern inputs seem to have played a key role. In confronting the twin challenges of food security and environmental protection, accelerated growth in the agricultural sector is essential and such acceleration cannot occur without adequate and timely supply of modern agricultural inputs (improved seed, fertilizers, and CPPs) at cost-effective prices to farmers in rural areas. In spite of market liberalization and private sector participation, farmers continue to face difficulty in accessing quality inputs at reasonable prices. To identify the factors responsible for inefficient input supply systems, IFDC, in collaboration with MAFS and SG 2000, conducted an assessment of agricultural input markets (AIMs) in Tanzania with a focus on the following objectives: • Assess the functioning and performance of AIMs—seed, fertilizer, and CPPs. • Identify the constraints affecting the performance of AIMs, with a special focus on policy, human capital, finance, market information, and regulatory systems. • Evaluate the potential of the private sector in supplying inputs. • Suggest actionable measures to improve the functioning and performance of AIMs. This activity is a part of the six country assessments that IFDC has conducted in collaboration with other institutions. Other countries include Ghana and Nigeria in West Africa, Malawi and Zambia in Southern Africa, and Uganda in Eastern Africa. USAID/Washington provided the seed money; whereas, other donors provided country-specific partial support for these assessments. These assessments have led to market development projects in Ghana, Nigeria, Uganda, and Malawi; project preparation work is underway for Zambia and Tanzania. II. An Assessment of AIMs in Tanzania In spite of market liberalization and private sector participation, AIMs remain underdeveloped and fragmented in Tanzania. As a result, farmers face high prices, limited accessibility, and poor quality products. It is easier to find “Coca-Cola” than seed and fertilizers in rural areas. The constraints affecting the performance of AIMs are divided into three broad groups, namely, macropolicy, market development, and technical. Macropolicy Constraints Macropolicy constraints include exchange rate depreciation, high interest rate, and poor rural infrastructures. The depreciating exchange rate of the 1990s created risk and uncertainty for suppliers and high prices for farmers and thereby discouraged development of well-functioning markets. This situation also led to high interest rates, which made input business development costly and risky. Poor conditions of rural infrastructure increase transaction cost and reduce incentive for suppliers to reach out to rural areas. Market Development Constraints Market development constraints relate to policy, human capital, access to finance and market information, and regulatory frameworks. An assessment of these factors revealed that the policy environment is non-conducive, human capital is inadequate, access to finance and market information is limited, and enforcement of regulation is ineffective, as elaborated below. These five constraints refer to the five pillars of market development. Non-Conducive Policy Environment—The policy environment confronting the private sector remains non-conducive. Actions by both government and donors (including NGOs) send wrong signals. First, there is a “mindset” problem. Some policymakers do not have faith in the efficacy of the private sector and, therefore, call for a return to distribution of subsidized inputs. Such an announcement during the 2003/04 season created uncertainty in the market and forced traders to postpone their imports and supply of inputs in rural areas. Second, the delay in the auction of KR II fertilizers and sale of inputs at below the market price by NGOs disrupt the sale of inputs by small dealers. Although the government and donor interventions are well-intentioned, they create distortions in the marketplace and thereby prevent the realization of the full potential of the private sector. Inadequate Human Capital—There is a paucity of dealers in rural areas. Most wholesalers and dealers are concentrated in cities and big towns. The four Ps of marketing (price, product, place, and promotion) imply that the product should be sold closer to the farmer. However, in Tanzania farmers must travel 20-30 kilometers to buy inputs. The unavailability of inputs near the farmgate creates disincentives for farmers. Furthermore, technical and business training of traders involved in the input business is limited. To be a successful entrepreneur, the dealer must have sound knowledge of different aspects of products and business acumen. Technical knowledge of extension workers and quality control inspectors is also limited. Thus, both quality and quantity of human resources involved in the input business are inadequate. Limited Access to Finance—Due to high interest rates and stringent collateral requirements, it is not easy to borrow funds from commercial banks to develop input business. Although the Government of Tanzania (GOT) has created an Input Trust Fund to help small input dealers, the Fund’s outreach has been limited. Consequently, most small dealers continue to depend on their own limited funds and incur high transaction costs because they cannot buy large quantities. Their frequent trips to the town to get inputs increase transaction costs and reduce the scale of their business. One dealer in Kigoma travels twice a week to the town to get 5-10 bags of fertilizers. Another has to travel frequently to Dar es Salaam to purchase a few tons2 of fertilizers. If these dealers had access to finance, they could easily purchase large quantities in one trip (rather than making several trips), save on transportation charges, and thereby sell inputs at a lower price. Insufficient Market Information—Well-functioning markets require that the actors involved in the market are fully informed about prices, quantities, stocks, and transactions in various market segments. Although MAFS collects information about prices and input use, due to funding constraints, coverage is inadequate and dissemination is limited. Many dealers and farmers are not fully informed about prices and quantities in various parts of the country. The lack of market information prevents farmers and dealers from procuring inputs from the cheapest source and thereby forces them to pay higher prices. Ineffective Enforcement of Regulations—Regulations on quality control and truth-in-labeling for seed, fertilizer, and CPPs are inadequate and not effectively enforced; as a result, farmers resort to using outdated CPPs and poor quality seeds. Enforcement of regulation at retail (point of sale) is weak, partly due to limited human and financial capital with regulatory agencies. Technical Constraints Technical constraints encompass inadequate research and extension support, limited work on soil testing for developing sound fertilizer recommendations, and insufficient knowledge with farmers and dealers about proper use and sale of modern inputs. III. Potential of the Private Sector Given the mindset problem and a general distrust of the private sector, the team paid special attention to the potential of the private sector to supply inputs and concluded that the potential of the private sector is “good but constrained.” There are many importers and retailers who could be strengthened to create well-functioning input markets. However, macropolicy, market development, and technical constraints mentioned earlier have constrained the private sector to realize its full potential. Unless a “proactive” approach is followed to build the capacity of the private sector and to create an enabling environment, the private sector may not realize its full potential and Tanzania may not develop well-functioning input markets. IV. Measures Needed to Strengthen the Functioning and Performance of AIMs in Tanzania Macropolicy and market development measures needed to strengthen the functioning and performance of AIMs in Tanzania are summarized in Matrix A. Measures related to market development are divided into two broad groups: • The Five Pillars of Market Development. • Other Supporting Measures. These measures are based on the concept of “shifting the supply curve to the right” (SCCR). A shift in the supply curve (of inputs) to the right increases supply of inputs to farmers at a lower price by reducing transaction costs. The Five Pillars of Market Development Well-functioning markets need an enabling policy environment, adequate human capital, improved access to finance, market transparency, and effective enforcement of regulatory frameworks. The following actions are proposed in each area. Policy Environment—An enabling policy environment should be created. Policymakers and donors should refrain from sending the “wrong signal” and creating distortions in the market, have confidence in the potential of the private sector, and devote resources to strengthen its capacity to perform efficiently in a competitive environment. If socially desirable interventions are needed, they should be implemented in a market-friendly manner. Rather than distributing inputs, the concerned entity should distribute “purchasing power,” so that one can “kill two birds with one stone,” namely, market development and poverty alleviation. Human Capital—The lack of independent dealers in rural areas is the single most critical constraint depriving farmers of obtaining quality inputs on time and at cost-effective prices. Human capital should be developed by focusing efforts on both quantity and quality of input dealers. Through training and technical assistance, a large cadre of independent dealers should be created. These dealers should be trained in both technical and business skills and linked to commercial banks and wholesalers for procuring inputs for farmers in the village. Training and technical assistance should also be provided to wholesalers and importers so that they can develop business linkages with global and regional partners. An association of input dealers called Tanzania Agri-input Dealers Association (TADA) should be created to help small dealers in acquiring marketing skills and information. Access to Finance—Finance is the lifeblood of business development. Although commercial banks are endowed with liquid funds, they are risk-averse and afraid to lend to small agri-business entrepreneurs. To improve access to finance by importers and dealers and to encourage commercial and development banks to lend funds for agri-input import and business development, two risk-sharing funds should be established: Agri-input Import Development Fund (AIDF) and Agri-input Business Development Fund (ABDF). Under each fund, interested importers or dealers will be required to contribute 30% of the required capital; whereas, commercial banks will provide the remaining 70% funds, but 30% of this 70% will be “guaranteed” by the AIDF or ABDF. These funds will be managed by reputable banks in the country but allow the commercial banks to venture into advancing funds to input dealers. Warehouse collateral in inputs should also be encouraged. Market Intelligence and Transparency—To promote competition and improve efficiency, MAFS’s capabilities in market information and dissemination should be strengthened by creating and operating a Market Intelligence and Transparency System (MITS). Under this system, not only will the information about prices and available quantities be collected and disseminated but also this will serve as a tool for MAFS to monitor the situation in every district so that any shortage or price hike can be corrected. Also, MAFS could monitor the arrival of imports to avert potential shortages. Enforcement of Regulation—Ensuring quality inputs to farmers is a public sector responsibility in a free market situation. Not only does capacity for enforcing regulation dealing with seed and CPPs need strengthening at the point of sale but also fertilizer legislation needs to be drafted and enacted and then capacity should be built to enforce it. Other Supporting Conditions In addition to strengthening the five pillars of market development, additional work is needed on the supporting conditions dealing with technology transfer, integration of multi-country markets, infrastructure and output market development, and market-friendly safety nets for hunger and poverty alleviation. Technology Transfer—Although strengthening input supply is essential, helping farmers to use inputs efficiently is also critical. To improve the farmers’ knowledge base, research and extension must be strengthened and soil testing should be conducted to improve fertilizer recommendations, especially for grain-legume rotations. To help poor farmers financially, grain-legume rotations should be encouraged because such rotations reduce nitrogen requirements for grain crops and give farmers a source of cash income (groundnuts, beans, and peas). Capacity for breeder and foundation seed production needs strengthening. Integration of Multi-Country Markets—Tanzania has borders with several countries, and with its port in Dar es Salaam, it is a global gateway to various landlocked countries. Such a privileged position should be used to generate economies of scale in procurement of inputs, especially fertilizers, by developing cross-border trade. For example, a wholesaler in Mbeya should plan to sell fertilizers not only in Mbeya but also in Kasama in Zambia (on TAZARA route) and Karonga in Malawi. Such regional integration of markets could create a win-win situation for all—economies of scale in procurement and reduced prices for farmers. Such cross-border trade synergies should also be harnessed in other border areas. Improved Infrastructure—Although roads in rural areas need to be improved, improvement in railway wagon capacity is urgently needed to reduce transportation costs for Southern Highland districts. The supply of covered wagons should be increased so that fertilizers can be shipped in bulk from the port to the consuming areas without hiring a security guard to protect fertilizer bags in open wagons. Also, existing storage capacity should be used to store inputs for areas far away from Dar es Salaam. Output Market Development—The demand for inputs is a derived demand; therefore, output, especially grain, markets should be developed by promoting storage, grading, standards, market information, and warehouse collaterals. Market-Friendly Safety Nets—Although resources should be devoted to make input markets function more efficiently and effectively, the needs of the resource-poor farmers who would remain excluded even from well-functioning AIMs should be addressed. For such people, the GOT should design market-friendly safety nets and empower the farmers to participate in the market process. V. Institutional Arrangements Holistic Approach—As various measures are implemented, proper sequencing and phasing should be observed. However, to realize synergy in implementation, the five pillars of market development should be implemented in a holistic manner through public-private partnerships. Linkages—The action plan has linkages with several on-going or proposed programs such as PADEP, Agricultural Sector Development Program (ASDP), and other donor programs. Improved input supply will also support producer organizations proposed by USAID/Tanzania for various commodity groups. The ASDP Secretariat should take the lead in liaising with action plan implementation. Commitment—The implementation of the action plan requires strong commitment by both GOT and donors. Resource Requirements—The implementation of the action plan will require $11.3 million in operating costs, $3 million (in local currency) for ABDF and $15 million for Agricultural Input Import Fund (AIIF) in capital funds over a 5-year period. VI. Conclusion • The development of input markets is the beginning, not the end. Well-functioning AIMs will lay the foundation for a productive and prosperous agriculture in Tanzania. • With strong government commitment and long-term donor support, well-functioning AIMS can be established
An Action Plan for Developing Agricultural Input Markets in Uganda
(2003-07) IFDC
Uganda is a predominantly agricultural economy. The agricultural sector contributes 43% to the gross domestic product (GDP), provides employment to over 80% of the workforce in rural areas, and is a main source of foreign exchange earnings (85% of export earnings). Yet, land and labor productivity is low and the incidence of poverty, especially in rural areas, is high. Nearly one-half of the population lives below the poverty level and faces food insecurity. The challenges of food insecurity and poverty are compounded by the health crisis and environmental degradation that Uganda is facing. In confronting these socioeconomic challenges, the agricultural sector has a lead role to play. However, with its current low productivity status, the agricultural sector can do little to improve the socioeconomic situation. The agricultural sector itself requires a significant transformation such that crop yields and incomes are greatly increased. Such transformation cannot be achieved without the sound application of modern technologies embodied in improved seeds, mineral fertilizers, CPPs, water management, and better agronomic practices. To transform its agriculture, the Government of Uganda (GOU) has introduced several programs. Notable among them are macroeconomic reforms of the mid-1980s, export diversification of the 1990s, and the Poverty Eradication Action Plan (PEAP) and the PMA of 2000. The PMA has become the blueprint to guide GOU’s efforts toward agricultural development and transformation. Under the PMA, the GOU has identified seven pillars for focused efforts. The pillars are national agricultural advisory services (NAADS), research and technology development, agricultural education, rural financial services, marketing and agroprocessing, physical infrastructure, and natural resource management and utilization. To strengthen the demand-driven extension activities, the GOU has already launched NAADS on a pilot basis in six districts—Mukono, Kibale, Arua, Kabale, Tororo, and Soroti. Under this pilot effort, extension services are decentralized, and local governments are allocated funds to provide farmer-demanded extension support. All these governmental efforts are important and praiseworthy. However, as the input supply systems have been privatized and liberalized, the input sub-sectors seem to have suffered from a benign neglect on the part of both policymakers and donors. As a result, farmers in rural areas do not have easy access to inputs (improved seeds, fertilizers, and CPPs), and even where these inputs are available, their prices are very high. This situation forces farmers to rely on low-productivity subsistence farming methods and thereby live in a vicious cycle of poverty and low productivity. Goal, Scope, and Objectives of the Action Plan Well-functioning agricultural input markets (AIMs) are the backbone of agricultural transformation in Africa. Only such markets can ensure inputs of good quality, easy accessibility, and lower prices to farmers. Hence, the goal of the action plan is to suggest appropriate measures to create well-functioning AIMs in Uganda. This was achieved by conducting an assessment of input markets in Uganda and then preparing an action plan for their orderly development. The assessment focused on the following themes: 1. Assessment of the structure, functioning, and performance of AIMs—fertilizer, seed, and CPP markets. 2. Identification of constraints affecting the performance of AIMs. 3. Evaluation of the potential of the private sector in supplying inputs. 4. Development of an action plan incorporating measures needed to make AIMs more effective and efficient. 5. Institutional arrangements for implementing the action plan. The action plan mainly focuses on issues related to the supply-side of the market equation for two reasons: First, the input supply system changed from a public sector monopoly to a private sector-based competitive market, and therefore there is a need to assess the potential and efficacy of the private sector in supplying inputs. Second, while input demand has been studied extensively, few studies have paid attention to the issues related to input supply and transaction costs, whereas a reduction in transaction costs is essential to lower input prices for small farmers. The action plan also focuses on technology transfer, output market development, and regional integration of markets that affect input demand directly and significantly. Because of its emphasis on improving the supply of modern inputs for agricultural transformation, the action plan complements and strengthens Uganda’s plans for agricultural development in general and its priorities identified in the PMA in particular. II. An Assessment of Agricultural Inputs Markets in Uganda The Policy Environment Due to successful implementation of economic reforms, there are few policy distortions in the input markets. Specifically, no parastatals are involved in distributing inputs, no control or regulation of prices is enforced, and no subsidies are given on inputs. However, there are concerns that should be addressed so that no impediments are created for the private sector participation. These include recent intention of the government for free distribution of seed, seedlings, and planting materials for selected crops; distribution of inputs through NGOs that do not recover full costs of inputs; and free or subsidized supply of breeder seed from NARO to the Uganda Seed Project (USP). Likewise, poor enforcement of quality control regulations poses a serious threat to an orderly development of well-functioning input markets. While there are no pricing distortions in the market, the macroeconomic environment remains rather market unfriendly. Continuous depreciation of the Ugandan shilling (USh), high interest rates, and limited access to finance are serious constraints that discourage private sector involvement in agricultural marketing. Interest rates vary from 20% to 30% in the urban areas and from 30% to 48% in the rural areas. The unwillingness of commercial banks to lend for agriculture and agribusiness operations makes it difficult for emerging entrepreneurs to start new business ventures. In addition to the aforementioned constraints, there are numerous market development-related challenges affecting private sector involvement in agri-input marketing. These include the lack of market information, inadequate access to finance, limited marketing and business skills (human capital), and poor enforcement of regulatory frameworks. Confronting these challenges will require significant xi resources and commitments. Although the GOU is not involved in direct distribution of inputs, some donors and NGOs promote the free distribution of inputs for relief or safety net purposes. It is recommended that such well-intentioned efforts should be implemented in a market-friendly way. Farmers or other intended beneficiaries should be empowered with purchasing power in the form of vouchers to buy the required quantity of inputs from the marketplace. Although there are no direct tariffs or taxes on inputs imported or used, there is a concern that taxes on packaging materials and fuel add to the cost of seed and fertilizer to the farmer. Since these items are also used in other sectors of the economy and therefore carry a uniform value-added tax (VAT) of 17%, exempting these items for agriculture may open avenues for misuse. For this reason, the International Monetary Fund (IMF) and the Ministry of Finance are reluctant to make an exception. Therefore, it was decided by the workshop delegates that a study should be commissioned to explore the possibility of exempting packaging material from VAT. Perceptions About Fertilizer Use The action plan’s main focus was on the issues related to input supply. However, some issues related to demand also warrant discussion. One critical issue is that of perception. Many small farmers feel or have been made to believe that mineral fertilizers are not needed because the Ugandan soils are rich, or simply fertilizers are harmful to the soil. Such misperceptions should be alleviated by proper education and dissemination of information. Here the MAAIF has a significant responsibility to educate farmers about proper use of both organic and inorganic inputs. The Fertilizer Market Historical misperceptions and political disruptions of the 1971-85 period have left the fertilizer market underdeveloped and fragmented but slowly evolving. Even today, many in Uganda wrongly perceive that inorganic fertilizers are not required. Consequently, the size of the market is estimated to be approximately 16,000-20,000 product tons2 (4,000-5,000 nutrient tons) consisting mainly of urea, diammonium phosphate (DAP), and nitrogen-phosphate-potassium fertilizer (NPK). Fertilizer use levels are low even by African standards and more so from the environmental angle, because 1 kg/ha nutrient application is grossly inadequate to replenish the nutrient depletion of more than 80 kg/ha that Ugandan soils are experiencing. xii Lacking domestic production of fertilizers, Uganda depends on imports to meet its domestic fertilizer requirements. Estate crops (sugarcane, tea, and tobacco) dominate fertilizer use (account for about 80%- 90% of total use) and imports. There are five to seven importers who mostly import large quantities after winning a tender from estates and small quantities for the smallholder sector. The fragmented and small size of shipments forces importers to pay relatively higher prices. Recent business linkages with importers in Kenya have helped the local importers to achieve 20%-30% lower import procurement prices. Until the size of the market becomes large (over 100,000 product tons per year), it is advisable to continue to pursue regional trade linkages (e.g., with Kenyan importers) to reduce fertilizer prices in Uganda. Dealer networks are evolving. Training efforts by SG 2000 and the IDEA Project have created a small cadre of stockists (250-300) and distributors (10-15). Although these efforts are laudable, there is a need to strengthen them both qualitatively and quantitatively. As indicated in Matrix A, human capital (business and technical skills) development at all levels is a main constraint to the functioning of markets. Stockists and distributors have limited technical and marketing skills and little access to information and finance. High interest rates and stringent collateral requirements have prevented the development of dealers in rural areas. As a result, farmers have to travel 20-30 km to buy fertilizers. Such long distances naturally discourage the use of modern inputs including fertilizers. No donors are directly involved in the distribution or procurement of fertilizers. However, there are some fears that Kennedy Round II (KR-II) fertilizers may come back to the market at below market price. It is essential that if KR-II input comes to Uganda, the GOU should put in place mechanisms to dispose of such inputs in a market-friendly manner. Fertilizer prices are market-determined and competitive. Urea prices varied between USh 29,000/bag in Mbale to USh 30,000/bag in Masaka, USh 32,000/bag in Masindi, and USh 30,000-32,000/bag in Kampala. Marketing margins are small, and given the border prices for small shipments and market risks, the prevailing prices of primary products seem reasonable. Increasing the market size, improving access to finance, and procuring in large quantities may result in further reductions in prices to farmers. Technical knowledge of farmers and dealers about fertilizer products and nutrient requirements is weak. There are few fertilizer demonstrations organized by dealers or government (SG 2000 and IDEA project are exceptions) to educate farmers about the proper use of nutrients. Fertilizer recommendations are based on the work done in the 1960s and therefore need updating. In some cases, farmers are not using appropriate fertilizer products (e.g., use of tea grade 25-5-5+5S as a basal fertilizer in maize production likely yields lower farmer profits than the use of DAP when properly applied as a basal fertilizer). The Seed Market Uganda’s seed market is in transition—moving from a public sector monopoly to a private sector-based competitive market. Before the liberalization in the early 1990s, seed production and distribution was a public sector monopoly largely operated by USP. The liberalization of the seed market in 1993 opened the market to private companies, but the lack of statutes and institutional and regulatory mechanisms needed for governing the seed operations prevented the active participation of the private sector. However, after 1998 when various institutions, such as the National Seed Board (NSB), the Variety Release Committee (VRC), and the National Seed Certification Service (NSCS), were established and the statutes governing the seed operations were promulgated, the private sector enthusiastically participated. In addition to the USP, there are several private seed companies such as Nalweyo Seed Company (NASECO), Farm Inputs Care Centre (FICA), Harvest Farm Seeds (HFS), East African Seed Company (EASCo), and others. Seed Company Ltd. of Zimbabwe and PANNAR Seed from South Africa also have an active presence in the market. The USP is in the process of privatization. Uganda’s seed market consists of both informal and formal sectors, and the formal sector includes organizations from both public and private sectors. The informal sector caters to seed and planting material requirements for banana, cassava, and other root crops. It also includes seed production by communitybased organizations and farmer-to-farmer sales. No quality control mechanisms operate in this sector. In the formal sector, public sector research institutions, such as Kawanda Agricultural Research Institute (KARI) and Serere Agriculture and Animal Production Research Institute (SAARI), have the responsibility for research and the NARO has the responsibility for breeder and foundation seed production. Because of financial constraints, NARO is not able to supply an adequate quantity of breeder seeds for various crops. Since private companies, such as NASECO, can effectively produce foundation seed, it is unproductive for NARO to spread its limited manpower and financial resources thinly on foundation seed production. Commercial or certified seed is produced by private companies and USP. Through the efforts of the Association for Strengthening Agricultural Research in Eastern and Central Africa (ASARECA)/Eastern and Central Africa Programme for Agricultural Policy Analysis (ECAPAPA), seed policies have been harmonized among Kenya, Tanzania, and Uganda. Such harmonization has helped the development of imports and seed trade between Uganda and Kenya. Vegetable seeds are imported from Europe, Asia, and South Africa. Such opening up of the market has made seed supply easily accessible in many parts of the country. Seeds are sold in 1- and 5-kg bags. Prices are fairly competitive; 1 kg of maize seed (Longe 1) was sold for USh 1,000/kg in Kampala and USh 1,200/kg in Masindi. Domestic research capacity, though financially strained, has produced several varieties of seed for various crops. Both open-pollinated varieties (OPVs) and hybrids have been developed, although OPVs dominate the market. To maintain a steady flow of genetic material, research institutions and NARO need financial strengthening. The main constraints affecting the performance of the seed market are lack of a national seed policy clearly defining the role of various stakeholders and intellectual property rights (breeders’ rights), limited supply of breeder seed, lack of pricing policy, limited access to finance for developing dealer networks, and underdeveloped output market. The CPP Market In terms of market competition, the CPP market is relatively more competitive. There are many retailers in urban and semiurban areas, but in rural areas few dealers supply products. Annual imports averaged about $8.2 million during the 1997-2001 period. Lacking domestic production or formulation capacity, all CPPs are imported from Kenya, South Africa, United Kingdom, India, China, and other countries. Insecticides dominate the CPP market, and large farms and estates account for over 80% of the CPP used in the country. There are 8 to 10 large importers who generally receive products on a supplier-credit basis. There are wholesalers and retailers in the marketing chain, but the distinction between a wholesaler and an importer or between a retailer and a wholesaler is blurred. Each entity performs some or all of the functions in the marketing chain. Although importers do not face a credit constraint, wholesalers and retailers do and therefore have not been able to develop integrated dealer networks and penetrate into rural areas. At the retail level, dealers sell all inputs and consumer goods. Marketing margins (10%-30%) are generally higher on CPP sales than on seed and fertilizer sales. Regulatory functions are performed by the Agricultural Chemical Board (ACB) and related agencies. But due to financial and staffing limitations, enforcement of regulation is weak. Technical skills of the dealers are also limited. The existence of outdated pesticides is a serious threat to both human health and the environment. The Potential of the Private Sector Although the private sector is in its infancy, it has a good potential to supply inputs in an efficient way. This potential results from the fact that there are already a few private companies involved in import and distribution of seed, fertilizer, and pesticides. These companies are supported by 250-300 stockists selling inputs. Also these companies have developed important linkages with suppliers in Kenya, South Africa, and other parts of the world. On the output market side, Uganda is increasingly becoming integrated into the global and regional markets— maize, flowers, tea, coffee, cotton, sugarcane, tobacco, and horticultural products. Recent emphasis on strengthening the export of selected commodities will further open opportunities for the private sector. More importantly, the GOU has shown an unwavering commitment to develop market-based agriculture in Uganda and is implementing programs and projects to strengthen the private sector capacity. However, the potential of the private sector will be realized only when the constraints identified in Matrix A and other market-specific constraints are removed by implementing the measures proposed in the action plan. III. An Action Plan for Developing AIMs The assessment of all three input markets in Uganda has clearly demonstrated that “deregulation and liberalization” is necessary but not sufficient to encourage private sector participation. Many factors, such as lack of human capital, limited access to finance and information, and weak enforcement of regulatory frameworks, have constrained the effective and full participation of the private sector. The removal of these constraints will help the private sector in realizing its full potential and in reducing prices and improving access to inputs. Consequently, the proposed action plan is heavily geared toward improving the supply side of the market equation in Uganda. Nevertheless, the issues related to technology transfer and output market development are also highlights. These components affect the demand side by improving agronomic (nutrient use) efficiency and economic incentives (better crop prices) and help farmers in the realization of higher yields and more incomes. The following actions constitute the action plan. The first five activities deal with supply-side issues, whereas the next two activities affect the demand side. The last activity, namely, regional integration of markets, has implications for both supply side and demand side of input markets. 1. Creating a supportive policy environment. 2. Developing human capital. 3. Improving access to finance. 4. Promoting market transparency. 5. Strengthening regulatory systems. 6. Promoting technology transfer. 7. Developing output markets. 8. Integrating regional markets. Creating a Supportive Policy Environment An enabling policy environment is essential for promoting the development of input markets in Uganda. On the macropolicy front, stabilization of the exchange rate is critical. A depreciating exchange rate not only leads to increased prices of imported inputs but also discourages business development by introducing risks and uncertainties in the investment climate. Efforts are also needed to reduce interest rates to an affordable level. Interest rates vary between 20% and 30% in urban areas and 30% and 48% in rural areas. Such high interest rates are detrimental to market development. Interest rates could be reduced significantly by stabilizing the exchange rate, controlling inflation, and developing financial infrastructures. Unless farmers and dealers can borrow funds at a reasonable rate for purchasing improved inputs, the modernization of agriculture will not be attainable. The development of roads and other infrastructures in rural areas should receive priority in development efforts because such infrastructures facilitate the integration of rural economies into national economies and help in reducing transaction costs. Ensuring physical security in rural areas also supports the development of well-functioning markets. On the market development side, well-functioning input markets require a distortion-free policy environment, adequate human capital, access to finance, market transparency and information, and effective enforcement of sound regulatory systems. Because the GOU has removed most of the distortions in pricing and marketing of inputs, the policy environment is generally conducive for input markets. However, in the case of seed production and marketing, there is a need for removing the remaining policy obstacles to private sector participation in the seed market. In particular, because USP has not been privatized, it receives hidden subsidies and public support for its operations and thereby creates distortion in the market by creating an unlevel playing field. USP should be privatized without further delay. Similarly, if inputs are imported through Japanese KR-II grants, mechanisms to integrate such imports with commercial imports should be instituted. Other pillars of market development are elaborated below. Developing Human Capital Marketing skills, business acumen, financial management, and technical know-how that are needed to make input markets function properly are severely limited. Business linkages and knowledge of global and regional markets are also constrained. To create a cadre of entrepreneurs at all levels—upstream (linking with global and regional markets for efficient imports) and downstream (wholesale and retail levels reaching rural areas)—human capital formation efforts will be needed. Human capital should be created and/or strengthened by providing training for dealers at all levels—import, wholesale, and retail. Training courses should focus on business planning and development, financial management, and technical knowledge and advice about various aspects of nutrients, products, chemicals, and seed. Training programs will also be needed for seed producers. Another area that requires efforts in human capital formation is the public sector. MAAIF’s capacity to enforce quality control regulations for seed and CPP is limited. Also, MAAIF has few resources to develop and operate market information networks. Adequate resources should be allocated to train manpower for xvi enforcing regulations and operating market information systems. Analytical capability for processing information and formulating policies and regulations is weak. Overseas training and study tours should be arranged to strengthen analytical capacity as well. Improving Access to Finance Limited access to funds for business development is another area that requires improvements. High interest rates and stringent collateral requirements make it difficult to borrow funds from commercial banks. Although some banks have started pilot efforts in lending funds to importers and dealers, such efforts have limited outreach. To encourage risk-averse commercial banks to lend to agriculture, two funds should be created. These are Agricultural Input Import Fund (AIIF) and Small Input Business Development Fund (SIBDF). Under the first fund, input importers should be able to obtain a letter of credit through commercial banks and the Bank of Uganda by putting 30% as a down payment for the needed foreign exchange. The commercial bank dealing with the importer should bear 40% risk and the Bank of Uganda, managing the credit guarantee fund, should bear 30% risk. Experience from other countries indicates that well-trained and viable importers will have little risk of default. Gradually, as business expands, commercial banks may bear a full 70% risk in financing imports. Likewise, a local currency fund should be created to support the development of small input businesses. The same risk-sharing arrangement can be created for this fund. The dealer interested in starting a business should provide 30% of the capital needed to start the business, and the commercial bank should provide a commercial loan for 70% of the required funds. However, to minimize the risk for the commercial bank, the SIBDF should provide a guarantee for 30% of the needed funds, thereby reducing the commercial bank’s exposure to 40% of the needed funds. The purpose of this guarantee fund is to encourage commercial banks to lend for business development in the short run and to develop a good clientele for their operations in the long run. Also, the fund will help to reduce collateral requirements because stringent collateral requirement makes it nearly impossible for small dealers to borrow funds for business development. To strengthen the linkage between bankers and dealers, training and consultation should be promoted. Market Transparency Through the Creation and Operation of a Market Information System (MIS) Information is crucial for the proper functioning of agricultural inputs and product markets. Dealers, importers, and other participants in the marketing chain need information about local, regional, and global market conditions for inputs and products to identify marketing opportunities and to strengthen their bargaining power to secure lower prices and quality products. The more accurate, detailed, and timely the information, the easier it is to develop market plans and make decisions. With the rapid progress in electronic data processing, it has become very easy now to collect, collate, analyze, and store data. There is also an urgent need to improve market transparency—a key to market efficiency. This can best be accomplished through creating and operating an MIS within the Ministry of Agriculture and strengthening the market information activities presently in place to include information on input markets (e.g., input and output prices, supply availability, import arrivals). The objective of this activity would be to provide accurate and timely information to all distributors and dealers on fertilizer and other market conditions. In the long term, such activities should be handled by the private sector through dealer associations. Strengthening the Regulatory System Although complaints of adulteration of seed or fertilizer products were not frequently reported, there is a need to strengthen the regulatory systems to promote “truth-in-labeling” for input sale and to prevent the adulteration and sale of outdated CPPs. The ACB Secretariat needs strengthening in terms of manpower and funding. Likewise, NSCS should also be strengthened by providing more resources. As explained earlier, the regulatory agency needs resources for building human capital. To encourage the development of breeder seed production in the country, appropriate rules and regulations should be formulated for intellectual property rights. Attention should also be given to an environmentally friendly disposal of outdated pesticides and insecticides. The educational and enforcement functions of the ACB staff should be separated. Promoting Technology Transfer Technology transfer activities should be undertaken to strengthen farmers’ knowledge about products, nutrient requirements, application rates, and timing. The principle of “seeing is believing” has a powerful influence on farmers. Demonstrations, short training courses, pamphlets, brochures in local languages, and a monthly Farmers’ News bulletin should be used extensively to promote the use of modern technologies. The action plan recommends that over time, private sector dealers should become technology transfer agents while MAAIF should focus on upstream research problems and prepare subject matter specialists to pass on new technologies to dealers who will in turn pass on to farmers thereby creating an effective public-private partnership. While NAADS is focusing on the demand side of technology transfer, the action plan will create a cadre of dealers who will be prepared to supply both inputs and knowledge about technologies on demand. In addition to promoting conventional technologies, efforts should also be made to adapt and adopt biotechnology for various crop operations such as pest control, drought resistance, and quality improvements. Developing Output Markets Like input markets, output markets are also underdeveloped and fragmented. Unless output markets are developed and integrated, increased crop output resulting from the adoption of technology could easily depress crop prices, as happened in 2001 for maize. Efforts are needed to integrate different markets nationally and regionally. Dissemination of market information, improved access to finance and storage, and development of agro-processing facilities to add value to farm produce should be promoted. In this context, efforts under the Uganda Grain Trading Limited are laudable, and the emphasis on marketing and agro-processing under PMA is desirable. Integrating Regional Markets The size of each input and output market is small in Uganda. Such small size offers little economies of scale in procurement and production. By integrating markets in Uganda with those in Kenya, Tanzania, and other east African countries, significant cost savings could be achieved. To integrate markets, harmonization of policies, standards, and practices should be pursued. By linking Ugandan markets with Kenyan markets in seed and fertilizers, dealers have already realized significant reduction in prices. More efforts are needed to promote the flow of trade under World Trade Organization (WTO) rules among these countries. Market information and training, human capacity building, and formulation of uniform standards and regulations should be encouraged. Expected Benefits of the Action Plan The implementation of the action plan will contribute to Uganda’s socioeconomic goals of food security, poverty reduction, and environmental protection by reducing input prices (20%-30%), improving access to inputs, and promoting the adoption of modern technologies for both crop production and resource manage- xviii ment. Also, it will aid in foreign exchange earnings by reducing food imports and increasing agricultural exports. IV. Institutional Arrangements To derive the benefits of synergy resulting from the implementation of different activities, various components should be implemented in a holistic manner and through public-private partnership arrangements. A strong and sustained commitment from both policymakers and donors is essential to realize full benefits of the action plan. Since the action plan covers activities handled by different entities and departments, it is recommended that the PMA Secretariat should coordinate the implementation of the action plan. The implementation of the action plan will require a 5-year program costing approximately US $11 million in project operating costs, US $7 million in the AIIF, and US $1.6 million (in local currency) for the SIBDF. V. Linkages With Donor and National Programs The proposed action plan will contribute directly to the achievement of USAID/Uganda’s Strategic Objective (SO 7) of creating “expanded sustainable economic opportunities for rural sector growth” by promoting food security and agricultural growth through policy improvement, technology adoption, publicprivate partnerships, and market development. Various components of the action plan will support the realization of “Intermediate Results” of increased food security and agricultural productivity, greater competitiveness, and stronger enabling environment. The action plan will also complement the main pillars of PMA. Although PMA has identified marketing and agroprocessing as one of the pillars for modernizing agriculture, it provided little specific guidelines about developing input markets. Hence the action plan fills that void by providing actionable programs for AIMs development. Besides, the action plan will contribute to other pillars including extension, education, technology development, and rural finance.
An Action Plan for Developing Agricultural Input Markets in Zambia
(2005-12) IFDC
I. Introduction Zambia’s agricultural transformation from traditional subsistence farming to modern commercial farming has proven to be an immense challenge. Consequently, per capita cereal production is declining, and the natural resource base is degrading through nutrient depletion and chitemene (slash and burn). Agricultural productivity is low, especially in the smallholder sector where only 20%–30% of the farming households are estimated to use modern inputs including improved seed, mineral fertilizers, and crop protection products (CPPs). Without adequate, timely, and affordable supply and use of modern inputs, Zambia’s agricultural sector cannot confront the challenges of food security, agricultural growth, and environmental protection. II. An Assessment of Agricultural Input Markets in Zambia Although private sector participation increased in the aftermath of liberalization in the early 1990s, full liberalization was never achieved, and various interventions and distortions continued to create disincentives for the private sector to realize its full potential, especially in the fertilizer and seed markets. As a result, agricultural input markets (AIMs) remain underdeveloped and fragmented. Consistent with the GRZ policy statements, the overall objectives of achieving well-functioning AIMs in Zambia are to reduce the cost of input supply and increase the use of modern inputs by making them more profitable and easily accessible to small-scale farmers. Guided by these objectives, IFDC and MSU/FSRP, in collaboration with MOA/GRZ, conducted an assessment of AIMs and prepared an action plan for creating well-functioning input markets in Zambia. The assessment focused mainly on the following themes: • Functioning and performance of input markets—fertilizer, seed, and CPPs. • Constraints affecting the performance of AIMs, with a special focus on policy, human capital, finance, market information, and regulation. • Factors affecting input demand. • Potential of the private sector to supply inputs in a cost-effective manner. • Measures needed to strengthen the performance of AIMs. Constraints Affecting the Performance of AIMs Macropolicy Constraints The development of well-functioning input markets in rural areas is hampered by a depreciating exchange rate; high interest rates and stringent collateral requirements; and the poor state of rural infrastructure. Market Development Constraints Non-Conducive Policy Environment—In spite of liberalization, interventions by various entities, including the government, continue to distort the functioning of the input markets and discourage the effective participation of the private sector by creating uncertainty and inconsistency in the policy environment. This applies specifically to the Fertilizer Support Program (FSP), which involves: fertilizer distribution through a subsidy; GRZ procurement of fertilizers through tendering; and a 15% duty on insecticides. Inadequate Human Capital—Due to the scarcity of independent dealers in rural areas, farmers do not have easy access to inputs; they typically have to travel 20-30 km to purchase inputs. Where there are retailers, they lack technical knowledge about the products they are selling and business and marketing skills. Limited Access to Business Finance—Access to finance for input dealers is made difficult by high interest rates and stringent collateral requirements and compounded by the limited banking facilities in rural areas. The high rates of loan default and poor mechanisms to enforce contracts have also discouraged the development of the retail networks. Lack of Market Transparency—The lack of timely and accurate information about different market segments has hampered the development of input markets in Zambia. Although MACO has started collecting information about selected markets, dissemination of that information remains weak. Ineffective Enforcement of Regulatory Frameworks—Although the GRZ has enacted different rules and regulations about quality, standards, and measures, enforcement remains weak because the responsible agencies are understaffed and under-funded. Constraints Affecting Input Demand Agricultural inputs are not widely used by smallholder farmers; only 20% use fertilizers and 30% use improved seeds.1 A key reason for low input use is high input/output price ratios, which keep the profitability of fertilizer use low. Other factors constraining demand include lack of agricultural credit, lack of education and extension support, and adverse agro-ecological conditions, which constrain fertilizer response and thereby its profitability. The approximately 800,000 small-scale farm households in Zambia can be divided into three main groups: Group 1 consists of approximately 200,000 farmers who have a commercial demand for improved inputs and would benefit from market improvements; Group 2 consists of another 200,000 smallholder farmers for whom fertilizer use is profitable or potentially profitable, and who have limited commercial demand for inputs, and Group 3 consists of the remaining 400,000 smallholders who have limited effective demand for inputs due to limited purchasing power. Commercial demand from Groups 1 and 2 is met by commercial supply (private input dealer). Both commercial and non-commercial demand is met by non-commercial (at cost) supplies from NGOs and government programs. Technical Constraints The key technical constraints are outdated and uniform fertilizer recommendations, soil acidity, and inadequate research and extension support. For example, although aluminum (Al) toxicity is the principal constraint in the highly acidic soils in Zambia, lime recommendations continue to be based on soil pH. The growing misconception that the application of lime alone can improve crop yields without fertilizer use is also a constraint. III. Potential of the Private Sector Many governmental interventions are justified on the grounds that the private sector is not capable of supplying inputs. Therefore, the team paid special attention to assess the potential of the private sector to supply inputs. The team’s assessment indicates that the private sector has good potential to supply inputs to Zambian farmers in a cost-effective manner. However, because of the constraints identified earlier, this potential has not been realized and will not be realized in the short-to-medium term. A proactive approach is needed to modify distorted policies and create human and institutional capacity to provide greater incentive for private sector participation in market development. IV. An Action Plan for Developing AIMs in Zambia The Approach To realize the latent potential of the private sector and create effective and efficient input markets in Zambia, various policies and programs are recommended (Matrix B). These measures can broadly be divided into five groups: A. Policy options for the role of the government in input markets. B. Private sector capacity-building programs. C. Investment environment enhancement programs. D. Technology transfer programs. E. Infrastructure development programs. Programs or options under policy reform, private sector capacity building, and infrastructure development will primarily impact the supply-side of the market equation and, thereby, contribute to a shift in the supply curve to the right (and reduce the supply price), while those under technology transfer, investment enhancement, and infrastructure development will largely influence the demand-side by improving the efficiency of input use and output marketing. A. Policy Options for the Role of Government in Input Markets There is a need to create a market-friendly environment to promote the development of competitive markets. To this end, the government, donors, and NGOs should not intervene in the marketplace. The GRZ should clearly articulate and implement its fertilizer marketing policy. Since the FSP accounts for a large share of the market (over 40%), it is strongly recommended that the government should implement a program of phased withdrawal from the market. Where government support is considered necessary for humanitarian (natural disaster or vulnerable groups) purposes, such support should be implemented in a market-friendly manner by selecting appropriate instruments. In this context, three options are proposed based on the classification of smallholders and the supply and demand scenarios discussed in Section II. Option 1: Non-Commercial Supply Meeting Commercial Demand—The government can elect to service only those farmers who are already willing and able to pay the full cost for the inputs. In addition, resources saved from FSP can be channeled into the development of commercial demand among farmers from Group 2. However, in the long-term, the government should allow the private sector to satisfy commercial demand. Option 2: Commercial Supply Meeting Non-Commercial Demand—The government can also opt to continue to meet non-commercial demand among smallholders by supplying subsidized products but start the process of developing a functioning input market by allowing commercial suppliers to conduct input distribution without governement contracts. Option 3: Commercial Supply Meeting Commercial Demand—The government can phase out the FSP and facilitate market development without the assistance of government price subsidies and distribution programs. Traders will service those farmers who can pay the full cost. For some of those farmers who cannot use inputs profitably at the full cost, complementary investments in the agricultural sector should provide relief in the medium to long term. As part of Policy Options 1 and 3, it will also be necessary to indicate what (if any) alternative poverty-alleviating, non-market distortionary measures will be implemented that would affect those farmers without commercial demand. B. Private Sector Capacity-Building Programs 1. Development of Human Capital—To improve the availability of inputs in rural areas, an integrated input distribution network should be developed by establishing a large number of skilled and knowledgeable input dealers in rural areas and linking them with wholesalers, and wholesalers should be linked with importers. Human capital development efforts will also be needed in the public sector, especially in the area of market information and quality control enforcement explained below. To sustain the efforts in human capital development, an association of input dealers called Zambia Agri-Input Dealers Association (ZADA) should be established and ZADA staff members trained in administrative and technical matters. 2. Improved Access to Business Finance—To improve access to finance by importers and dealers, two risk management funds must be created. Unlike the funds that were operated primarily unsuccessfully in the past, these funds are geared to share risks among three key stakeholders, namely, the input dealer, the banker, and the society-at-large (represented by GRZ). The first fund, called the Agri-Input Business Development Fund (ABDF) will serve input dealers and the second fund, called the Agricultural Input Import Fund (AIIF), will serve input importers. These arrangements reduce the risk for the commercial banks by spreading the risk among all the stakeholders and provide importers, wholesalers and retailers with the business capital to invest in developing dealer networks in rural areas. 3. Promotion of Market Intelligence and Transparency—To improve the flow of information and transparency in the market, a market information system should be designed, established and operated regularly. MACO should be given the official mandate to maintain and operate this system. MACO should also work with ZADA to establish public-private partnership in this area. 4. Strengthening of Regulatory Capacity—It is essential to create adequate capacity to enforce regulations in the key regulatory institutions through training and technical assistance. The activities of these executing agencies should be carried out so that they facilitate rather than hinder the agri-input business. C. Investment Enhancement Programs 1. Improve Legal Enforcement—Improvements in the rule of law are crucial for further investment by the private sector in this industry. The Credit Act is a key instrument to improve the provision of inputs on credit to smallholder farmers. 2. Facilitate Cross-Border Trade by Open Trade Policy—An open trade policy is the key to expand traders’ market area beyond the small domestic input market and for input markets to gain from economies of size. Domestic trading policies across the region will need to be harmonized to enable market integration. Maize is the main commodity on which fertilizer is used, and the restrictions on maize exports keep the producer price in the main surplus zones depressed, eroding demand for inputs. An open trade policy is therefore essential for creating effective demand for agricultural inputs. 3. Promotion of Commercial Rural Credit—Some smallholders can use inputs profitably but may not necessarily have the cash flow for pre-season purchasing of inputs. One proposal for consideration is to promote the use of crop-fertilizer barter arrangements that would allow cash-constrained farmers to pay for fertilizer with crops rather than cash. D. Technology-Transfer Programs 1. Develop Better Fertilizer and Lime Recommendations—Better fertilizer and lime recommendations based on soil type, crop and cropping system, and agro-ecology need to be developed. New fertilizer trials should be conducted in representative areas. Lime requirements of soils should be re-evaluated based on their exchangeable aluminum contents, and studies should be undertaken to correlate this criterion with field-based indicators and crop response. Educational campaigns should be launched to inform farmers about the new fertilizer, lime requirements, and alternative methods of applying lime. 2. Strengthen Research and Extension Capacity—Research capacity for the production of better seed varieties and fertilizer and lime recommendations should be strengthened. The enactment and implementation of the Plant Variety Protection Legislation are critical in attracting the private sector investment in research and variety development. Extension needs to educate farmers on the correct input use and to promote integrated pest management (IPM) for crop protection. 3. Promote Crop Diversification Through Legume-Cereal Rotations—To improve crop yields while minimizing the cost of fertilizers for smallholders, MACO should consider encouraging crop diversification through legume-cereal rotations and other crops. The promotion of higher analysis fertilizer products can further reduce fertilizer cost. E. Infrastructure Development Programs 1. Linking Chipata to Mchinji—The Nacala railway line should be extended to link Chipata to the Nacala Port. Such a link could facilitate the importation of fertilizers for the Eastern Province from Nacala and help reduce the cost of fertilizers. Since Chipata serves the border areas of Zambia, Malawi, and Mozambique, it can become a source of input supply in all three countries, and gains from scale economies would reduce input prices significantly. 2. Enlarging Market Size through Integration of Regional Markets—Integration of markets in the Malawi, Zambia, and Mozambique (MZM) triangle and the Tanzania, Zambia, and Malawi (TZM) border areas by harmonizing the policies and regulations would allow economies of scale in procurement and distribution of inputs and, thereby, reduce prices for all farmers. The country should develop infrastructure and institutions to harness benefits from such integration of inter-country markets in border areas. 3. Improving Roads in Rural Areas—The GRZ should develop rural infrastructure by allocating resources for these activities under the Road Sector Investment Program (ROADSIP) II in the development budget. This would facilitate private sector investment and enable farmers to benefit from new technologies and markets. V. Institutional Arrangements Holistic Approach These measures to strengthen the functioning of input markets in Zambia must be implemented in a holistic manner, and an optimum sequencing and phasing scheme should be developed so that the synergy resulting from the various, interrelated measures can be realized. Public-Private Partnership Both the public and private sectors have a role in creating well-functioning input markets and should work jointly in removing market development-related constraints. Government Commitment and Donor Support A strong commitment will be needed from the government for the implementation of the action plan. Above all, the government has to work with donors to raise the necessary resources to implement the action plan.
An Action Plan for Developing Sustainable Agricultural Input Supply Systems in Malawi
(2002-12) IFDC
I. Introduction Malawi is a landlocked rural economy dominated by agriculture; but the productivity of the agricultural sector is so low that nearly one-half of the population suffers from chronic food insecurity even in normal years. Approximately 70%-80% of the population is estimated to earn less than US $0.50/day. Under such conditions of poverty, food security at both the household and national levels can be ensured only through a two-pronged approach of market-based measures and well-targeted safety net improvements. In both approaches, the major focus should be on enhancing the productivity of land and labor through the application of science and technology embodied in improved seeds, mineral fertilizers, crop protection products (CPPs), and other appropriate agronomic and soil fertility-improving practices. In addition to ensuring food security, Malawi has to protect and sustain its most important natural resource, namely, the soils that feed the nation. Currently, harvested crops remove about 160,000 mt of nutrients per year while 70,000 mt of nutrients per year are replaced in the form of mineral fertilizers. Organic sources may supply another 15,000-20,000 mt of nutrients per year. Thus, there is a net loss of nutrients from the soils. This mining of nutrients must be reversed, so that the soils can be preserved for future generations. In fulfilling both socioeconomic goals, improved seeds, fertilizers, and CPPs have a critical role to play and should be supplied in a costeffective and timely manner in rural areas. II. An Assessment of Agricultural Input Supply Systems Malawi has made considerable progress towards deregulation and liberalization of the agricultural input supply systems, and the private sector has played a dominant role in supplying various inputs in recent years. Nevertheless, agricultural input markets (AIMs) are not operating efficiently and farmers do not have easy access to inputs and at affordable prices. Several factors continue to constrain the development of efficient AIMs. These factors can be divided into three broad groups, namely, macropolicy issues, market development-related issues, and technical issues. In the macropolicy group, devaluation of the Malawian Kwacha (MK), limited availability of foreign exchange, high interest rate, poor rural roads, and physical insecurity in rural areas constrain the development of input markets. The devaluation of the domestic currency not only increases the prices of imported seeds, fertilizers, and CPPs, but it also discourages investments in business development due to associated risks. Limited availability of foreign exchange constrains the import of inputs. Poor infrastructure in rural areas makes the transportation of goods and services difficult and costly and limits the supply of much-needed inputs. Physical insecurity compounds the problems associated with devaluation, high interest rate, and poor rural roads. All these factors have contributed to the concentration of suppliers in urban and peri-urban areas and are forcing farmers to travel 10- 50 km to purchase inputs. The market development-related issues consist of policy uncertainty, inadequate human capital and market information, lack of affordable finance, and poor implementation of regulatory frameworks. Policy uncertainty results from well-intentioned donor-financed and government-supported programs for supplying inputs. These programs include Agricultural Productivity Investment Program (APIP), Starter Pack Scheme (SPS), input grants under Kennedy Round II (KR-II), and the Smallholder Farmer Fertilizer Revolving Fund of Malawi (SFFRFM). By creating uncertainty in the marketplace, these programs tend to discourage private sector investment in input business. Inadequate human capital (marketing and business skills) and market information restrict the supply of products in the marketplace and result in high prices. There is generally a lack of input dealers in the rural areas. The seed and fertilizer markets are largely concentrated in towns and cities and are served by a limited number of enterprises. High interest rates and stringent collateral requirements coupled with near absence of financial service providers in rural areas make the availability of finance for business development nearly impossible. Although the country has laws on seed and fertilizers, the implementation of these laws has been far from satisfactory. The regulatory agencies are also constrained by the lack of human and financial resources needed for implementing laws and regulations. III. An Action Plan for Developing Sustainable Input Supply Systems In developing the Action Plan, the team assessed various options available for supplying agricultural inputs and concluded that the free market systems should be used to supply inputs to the farmers because these are relatively more efficient and sustainable and do not strain the fiscal resources of the country. Nevertheless, the team recognized the fact that although AIMs have been liberalized in Malawi, they are not operating efficiently. To develop sustainable supply systems, the liberalized markets must be strengthened by undertaking activities in the areas of policy reform, human capital formation, improved financial services, market information systems (MIS), and regulatory frameworks (laws related to “truth-in-labeling”). The team recommends that these activities should be undertaken in a holistic manner so that the synergies of various activities could be captured. The team also assessed the potential of the private sector in undertaking marketing activities in a competitive market environment. The team found that the private sector has latent potential to shoulder the responsibility of marketing of agricultural inputs in an efficient and sustainable manner. However, for this potential to be realized, constraints affecting their activities need to be removed. In developing the Action Plan, special attention was paid to the alleviation of these constraints. The main activities proposed in the Action Plan are are briefly summarized below. Policy Reform Overall, the macro policy environment should be conducive to the market development process. Macroeconomic stability and sufficient supply of foreign exchange are essential. It is estimated that Malawi will need approximately US $65-$80 million/year to import the necessary inputs during the 2001-2005 period. The Government of Malawi (GOM) and donors should ensure through the balance-of-payment support that these amounts are available in the market. As explained earlier, various well-intentioned donor-financed programs and government-supported activities contribute to creating uncertainty for the private sector involvement in input marketing. Both APIP and SPS are good programs because they create additional purchasing power with resource-poor farmers. However, their implementation mechanisms need improvement. Both programs should be implemented through voucher-based market mechanisms replacing donors and the government international tendering. The GOM should also use vouchers to distribute seeds for safety net purposes. Agricultural inputs received under the Japanese KR-II program should be integrated with commercial imports through transparent auctioning in the country. Counterpart funds received from such auctions should be used to establish a credit guarantee fund (explained below) for input dealers. The Agricultural Development and Marketing Corporation (ADMARC) had traditionally been a primary supplier of inputs in the country. However, after liberalization, its market share decreased substantially. In 1999, ADMARC accounted for less than 12% of the fertilizer and 1% of the hybrid maize seed markets. Nevertheless, ADMARC continues to enjoy certain advantages (e.g., free storage and transportation fleet) in the marketplace. To provide equal opportunity to all market participants, ADMARC should sell inputs at full cost and remove all implicit subsidies. SFFRFM has managed fertilizer buffer stocks in the past. Currently, there are no buffer stocks in the country. The team carefully assessed the needs for maintaining buffer stocks and concluded that there is no need to maintain such stocks. The private sector can import the necessary inputs on short notice provided they have access to finance and market information. Not only will the buffer stocks block scarce resources but also they will introduce uncertainty in the private sector planning of input supply. Because there is no need to maintain the buffer stocks, SFFRFM should be privatized. Human Capital Formation Skills, knowledge, and information needed to make input markets efficient are inadequate at all levels of the marketing chain. Importers do not have adequate knowledge about the conditions prevailing in the global input markets; wholesalers and retailers lack the necessary skills for enterprise management; and most importantly, there are few independent dealers involved in marketing inputs in rural areas. Even the bankers are not fully equipped to effectively play their role in financing the import and marketing of inputs. The Ministry of Agriculture and Irrigation (MOAI) and the Malawi Bureau of Standards (MBS) do not have adequate skilled manpower to implement the enacted laws and regulations and to monitor the quality and quantity of products for “truth-inlabeling.” Developing the human capital necessary for making input markets perform efficiently constitutes the core of the activities recommended in this Action Plan. This will be accomplished by performing the following activities: 1. Training programs for dealers (wholesalers and retailers), importers, and bankers. 2. Technical assistance in enterprise development to newly trained dealers. 3. Study tours for dealers, importers, and bankers. 4. Policy workshop and study tours for policymakers. To make dealers a dynamic force in the economy, various associations of input traders will be encouraged. Training and technical assistance for associations will be essential. In addition to developing human resources for competitive markets, training and technical assistance will be needed for building technical capacity in the seed sector—training for seed growers, capacity for inspection and quality control, and enterprise development. Improved Financial Services Finance is the lifeblood of any business activity. Without adequate access and availability of affordable finance, competitive markets cannot function efficiently. Currently, difficulties in obtaining adequate foreign exchange to cover procurements from overseas estimated at about US $65 million/year (and likely to increase to US $80 million/year by 2005) are constraining major and new entrant importers alike. If export earnings and balance-of-payment support continue at levels sufficient to ensure the availability of foreign exchange for use in procuring annual requirements, further liberalization of the market would generate significant benefits to the economy. Within the importation and internal market, vertical integration of sales and services by the principal importers and stringent security/collateral requirements imposed on all borrowers have prevented the establishment of an intermediate cadre of local dealers and traders in seeds, fertilizers, and CPPs. To foster greater competition among importers and assist with foreign exchange financing, the team recommends that an Agricultural Inputs Import Fund (AIIF) be established to supplement available foreign exchange used in raising Letters of Credit (LC) with foreign banks. The Fund will provide guaranteed foreign exchange support up to a maximum of US $1.0 million per importer per year. In addition, the team recommends that an MK 100 million Agricultural Inputs Business Development Fund (AIBDF) be established as a loan guarantee fund to cover commercial banks lending to local agricultural inputs dealers/traders. The provision of specialist training for the senior credit officers of participating banks and targeted importers and dealers would be a prerequisite for the use of both funds. Market Information Systems Information is crucial for the functioning of the market. Dealers and importers need information about local, regional, and global markets. Because every stakeholder will need the information about prices, stocks, and availability of inputs in various markets, an MIS should be created and operated by the MOAI or by the Agricultural Policy Research Unit (APRU) under a contract from the MOAI. Adequate collection and analysis of appropriate market data and information, and their dissemination through media and appropriate publications should be done regularly. Implementation of the Regulatory Frameworks Malawi has an enacted fertilizer, seed, and pesticide law, and there is a draft bill awaiting enactment to strengthen the pesticide component of this law. But the implementation of the law currently in effect and its supporting regulations remain weak due to shortage of manpower and resources. To safeguard the interests of farmers and to protect the environment and human health, proper implementation of these laws is essential. Training and technical assistance activities will be needed to strengthen the implementation of laws and to ensure “truth-in-labeling.” Technology Transfer Activities Although farmers in Malawi are aware of modern inputs such as improved seeds and fertilizers, they lack sound knowledge of appropriate technologies. Because “seeing is believing” works better than any other mechanism, large-scale demonstrations on farmers’ fields for various crops are planned in the Action Plan. These demonstrations will teach farmers about proper and environmentally sound use of fertilizers, seed, CPPs, and soil-fertility enhancing practices. These demonstrations could also be used to promote high-analysis fertilizers. To aid farmers in estimating fertilizer requirements properly, soil-testing facilities should be developed. This activity could be implemented in close collaboration with Sasakawa-Global 2000 (SG 2000) and other nongovernmental organizations (NGOs). Other Input-Specific Issues Seed—Specific efforts are required to encourage entry of new small and medium seed enterprises (SMEs) to import and/or process seeds from domestic production, with particular attention to secondary field crops such as pulses, rice, potatoes, cotton, beans, oilseeds, and others. For many of these crops, seeds are non-hybrid, so that marketing margins are going to be small and most commercial seed may be sold at 2-2.5 times the grain price. Local SMEs with low overheads could be competitive in producing and marketing such seeds. Over the last decade, government and donors have supported local seed production through small farmers and estates, but seed from these projects have not been sold by retail outlets. Instead, government projects and NGOs have bought and distributed most of this seed outside commercial channels. Hence, despite many good efforts, seed production is not linked to markets and is therefore not sustainable. Efforts should be made to help potential entrepreneurs (scientists, seed farmers, seed growers’ association, and others) to establish viable seed enterprises—buying seed from farmers, packaging it with a brand name, and distributing or selling it to retail outlets for farmers to buy. Currently, the United States Agency for International Development (USAID), with Iowa State University and Purdue University, is preparing a project to assist the small seed growers. There is room for several projects, just as there is room for dozens of new seed companies in the Malawi (and regional) seed market. Fertilizers—Some researchers have concluded that farmers do not need to apply phosphate fertilizers because the soils in Malawi are rich in phosphorus (P). However, limited soil tests have indicated that P levels are generally low in the soils. Hence, if farmers apply a small quantity of phosphate fertilizers, it is possible that the P is absorbed by the soil. MOAI should fund research on this crucial aspect of P dynamics, so that the soils of Malawi do not get completely depleted of P. Malawi has abundant phosphate rock (PR) resources. Because these PRs are of low reactivity, they cannot be used for direct application. However, PR can be compacted with single superphosphate (SSP) or triple superphosphate (TSP) for use in farmers’ fields. Research on the agronomic response of crops to compacted PR should receive priority in future work. Malawi’s heavy dependence on tobacco for export earning is nonstrategic. To promote diversification in export crops, GOM should consider promoting the use of diammonium phosphate (DAP) for basal dose and urea for topdressing for maize cultivation followed by groundnuts or pulses (both of these commodities seem to have good export potential). These crops can use residual P from basal application of DAP and fix their nitrogen requirements from the atmosphere. The country can benefit from additional export earnings at no additional nitrogen cost. In sulfur-deficit areas, supplementing the supply of sulfur should be encouraged. Crop Protection Products—With the uncontrolled status of the Malawi CPP market, it has been estimated that the country has over 30,633 L and 2.478 million kg of outdated pesticides in stock. Furthermore, several unapproved compounds, such as Dieldrin, are sold in the market and other products are inappropriately used on food crops or in various cases of suicides. Consequently, a safe and environmentally sound disposal of the obsolete stock of pesticides and enforcement of laws and regulations should receive top priority for Malawi. Similarly, proper monitoring and education are essential to avoid harm to human health and the environment. Additionally, efforts should be made to (1) promote the use of less toxic CPPs; (2) intensify research and extension on bio-control and integrated pest management (IPM); (3) develop easier, cheaper, and low-risk regulations for biopesticides; and (4) improve residue testing on food products. IV. Regional Integration While it is essential that market development activities be promoted in Malawi, input market development activities should be considered for the subregion consisting of the M-Z-M Triangle (Malawi-Zambia-Mozambique) and Zimbabwe to derive larger benefits from economies of scale and harmonization of policies. For example, one pre-shipment inspection of imported inputs, e.g., fertilizers, at the port of entry should be sufficient for input movements in these countries. Such a rule can save considerable costs incurred in pre-shipment inspection for each country and preshipment inspection of inputs involved in intraregional intercountry trade. Likewise, harmonization of policies for seeds and CPPs can contribute to efficiency in input marketing. It is recommended that a comprehensive study of policies and rules and regulations prevailing in these countries be undertaken to develop an Action Plan for promoting regional input markets. V. Potential Benefits of the Action Plan The implementation of the Action Plan will generate several socioeconomic benefits for Malawi. It will promote food security and environmental protection by lowering the prices of inputs, making inputs easily accessible to farmers in rural areas, and improving access to new production technologies. The contribution of the Action Plan to foreign exchange earnings will also be significant through crop diversification and increased food production. VI. Implementation Arrangements In implementing the Action Plan, care must be taken to preserve the holistic nature of the proposed measures. It is recommended that core activities dealing with policy reform, dealer development, and financial services should be implemented as a project. Other activities could be implemented as subproject activities. To facilitate the implementation of the Action Plan, a Task Force (TF) consisting of stakeholders from the private sector, donor community and the government should be created. The TF should have direct access to the MOAI and the donor committees on agriculture and food security. The Malawi Agricultural Sector Investment Programme (MASIP) should coordinate TF’s activities and assist in making necessary arrangements for stakeholders’ meetings.
Dissemination of Agricultural Input Packages in Pr-Pica Countries: Technical Summary Report
(2023-01)
The Regional Program for Integrated Cotton Production in Africa (PR-PICA) is an association of eight (08) cotton producing countries in West and Central Africa (Benin, Burkina Faso, Cameroon, Ivory Coast, Mali, Senegal, Chad and Togo). Within the framework of activities to optimize cotton production in Africa, PR-PICA and the International Fertilizer Development Center (IFDC) signed a grant agreement N° EnG.001-22 at the end of March 2022, for the dissemination of Agricultural Input Packages (AIPs) in the Program's member countries, during the 2022/2023 season. This partnership program with IFDC, made possible by funding from USAID through its West Africa Mission (USAID/WA), will allow for the dissemination of new production strategies for cotton and its associated crops, through the training of cotton company advisory support agents and producers and by providing them with appropriate didactic tools. In addition, it should allow for an update of the database of the Fertilizer and Seed Recommendation Map for West Africa and Chad (FeSeRWAM) with respect to cotton. The implementation of the project started with the training of researchers (2 per country) through a regional workshop. These researchers then trained the trainers of the cotton companies and interprofessions. Each trainer in turn trained at least 10 extension/management agents in his or her zone. These trained agents were then responsible for disseminating the AIPs to leading producers and to producers at the grassroots level. This report summarizes these different training courses, organized in the PR-PICA countries.
Enhancing Growth through Regional Agricultural Input Systems (EnGRAIS) Project for West Africa : FISCAL YEAR 2019 ANNUAL REPORT (OCTOBER 2018 - SEPTEMBER 2019)
(2019-10) Bocar Diagana; Emmanuel Alognikou; Porfirio A. Fuentes ; Joaquin Sanabria; Latha Nagarajan
To accomplish its four Irs related to a competitive and efficient supply system, an effective demand for fertilizer, an enabling environment, and harmonizing and supporting actions at the country level, EnGRAIS focused on the following six sub-Irs during the past year: • Sub-IR 1.1: West Africa Fertilizer Association (WAFA) and other relevant regional private sector organizations’/associations’ management capacity increased and organizations sustainable; • Sub-IR 1.2: Industry actors collaborating through multi-stakeholder platforms to improve supply chain efficiency and improve fertilizer affordability; • Sub-IR 2.1: Fertilizer and seed recommendations updated and developed for targeted crops and agro-ecological zones (AEZs) across West Africa; • Sub-IR 2.2: Comprehensive fertilizer and seed input packages promoted and marketed across West Africa; • Sub-IR 3.1: Regional Fertilizer Subsidy Guidance endorsed by ECOWAS and disseminated to policymakers and industry stakeholders in Member States; and • Sub-IR 3.2: ECOWAS regulation for fertilizer quality control published by all Member States and implemented at the regional level. The project also worked closely with its partners, including CORAF, WAFA, ECOWAS, the Union Economique et Monétaire Ouest Africaine (UEMOA), the Alliance for a Green Revolution in Africa (AGRA), and the Ministries of Agriculture of ECOWAS Member States to implement activities under the Irs and their sub-Irs during the period under review. During FY19, EnGRAIS carried out the following major activities under IR 1: • Updated the EnGRAIS and WAFA Joint Action Plan, extending it through September 2020. EnGRAIS Project FY 2019, Annual Report 3 • Assisted WAFA as they revised and finalized the new constitution and developed their fiveyear strategy. Both documents were endorsed during the Extraordinary General Meeting (EGM) in April 2019. • Supported WAFA’s facilitation of its successful Annual General Meeting (AGM) in Bamako, February 13-14, 2019. EnGRAIS also helped WAFA and Argus organize and host the third annual West Africa Fertilizer Forum (WAFF) in Lomé, April 24-26, 2019, which was attended by more than 200 delegates. • Provided assistance to WAFA board members to complete the recruitment of personnel for the association’s coordinating unit; three full-time staff were hired and trained. • Facilitated a five-year partnership agreement between WAFA and AfricaFertilizer.org (AFO) to collect, analyze, and disseminate fertilizer market information and data in West Africa. • Initiated and supervised cost build-up studies across four major fertilizer trade corridors conducted by Nitidæ. The initial results and recommendations from these studies were presented during the WAFF and the reports were finalized during August 2019 (Q4). • Supported WAFA through a grant to contract the African Fertilizer and Agribusiness Partnership (AFAP) to undertake a study on WAFA members’ access to finance that was a key element in the successful West Africa Fertilizer Financing Forum (WAFFF) co-organized in late September with the African Development Bank (AfDB)/Africa Fertilizer Financing Mechanism (AFFM). During the reporting period, the project carried out the following major activities under IR 2: • In close collaboration with CORAF/PAIRED, developed and digitized at least 40 comprehensive agri-input packages, including information on improved seeds, appropriate fertilizer recommendations, and good agricultural practices (GAPs) specific to each crop and agro-ecological zone (AEZ), and incorporated them into the Fertilizer and Seeds Recommendations for West Africa Map (FeSeRWAM). To finalize these electronic packages, EnGRAIS and PAIRED organized and facilitated multiple meetings with key stakeholders to review and validate the data that supports the packages and worked with stakeholders to approve the design and dissemination plan. • Finalized and launched the FeSeRWAM, a web-based interactive platform which provides farmers information on needed agricultural inputs and GAPs to increase their crop production. Presented the FeSeRWAM to stakeholders at the validation workshop in August 2019 in Dakar, Senegal. During the past FY, EnGRAIS carried out the following major activities under IR 3: • Transformed the Regional Fertilizer Subsidy Program Guide into a draft directive on fertilizer subsidy programs for ECOWAS’s endorsement. The directive incorporates all 13 principles and 36 recommended actions from the guide. • Facilitated a UEMOA-sponsored regional workshop, with representatives from all eight member countries, as well as Chad and Mauritania, to share experiences in implementation of the regional EnGRAIS Project FY 2019, Annual Report 4 fertilizer regulations. A similar event was sponsored and facilitated by OCP Côte d’Ivoire to review the status of the regional regulations in the country and fast-track implementation. • Collaborated with various regional/international partners to develop policy briefs on the implementation of ECOWAS fertilizer regulatory framework and quality of fertilizers traded in West Africa. • Surveyed ECOWAS, UEMOA, and CILSS or Regional Economic Community (REC) Member Countries’ on the status of adoption of Regional Fertilizer Regulation C/REG.13/12/12. Produced a summary report for the REC Members and requested their political support to expedite implementation. • Facilitated implementation and enforcement of ECOWAS fertilizer regulations and/or reforming their subsidy programs using the validated Regional Subsidy Program Guide in Benin, Chad, Côte d’Ivoire, Gambia, Ghana, Niger, Nigeria, Sierra Leone and Togo. • Organized training programs on the new regional and national legal frameworks, procedures, and techniques for fertilizer inspection, sampling, and quality control for 62 fertilizer inspectors in Niger. • Finalized the baseline assessments of fertilizer quality in Benin, Burkina Faso, Liberia, and Mali. • Provided key inputs for and feedback on the draft five-year strategic plan for an improved subsidy program and improved quality of blended products being promoted nationwide under the Ghana Fertilizer Expansion Programme (GFEP)
How to Access and Select Agricultural Input Packages: Training of the Trainers Module
(2022)
This module is designed to help train people using agricultural input packages developed to promote the combined use of improved variety seeds, appropriate fertilizer formulas, and good farming practices. The objectives are to provide participants with methods and tools of andragogy and the provision of essential information to understand AI and the FeSeRWAM platform. The target audience is researchers in national agricultural research systems, agricultural advisers, vendors, and distributors; grassroots agents and facilitators of NGOs; actors in technical agricultural education; and agribusinesses. This training aims to help participants understand AIP, the FeSeRWAM platform, the training system for the distribution of AIP, adult learning, and communication techniques. The approach that will be used is the participative one, in which learners are at the centre. The training will be conducted through a series of presentations and discussions. Self-correcting exercises and discussions will enable the trainers to test their knowledge.
How to Access and Select Agricultural Input Packages: User Training Module
(2022)
This module is designed to train on the use of AIPs developed to promote improved seed variety, appropriate fertilizer formulas, and good agricultural practices by agroecological zones (AEZ) in West Africa and Chad. This module aims to provide participants with a better understanding of the problems of agricultural yield and productivity, tools and methods to help select the best AIPs according to AEZ, and tools and methods for applying AIPs to improve agricultural yields and productivity. The target audience is producers, input dealers, and advisory agents. The objectives of this module are to help participants understand principles for selecting suitable varieties and fertilizers, the importance of AIPs, methods of AIP applications, environmental and health risks associated with using agricultural inputs, and how the FeSeRWAM platform works. A participative approach will be used, and the training will be conducted through presentations and discussions. Self-correcting exercises and discussions will enable knowledge testing.
IFDC Report, Volume 16, No. 4
(1991-12) IFDC
This report discusses the participation of the International Fertilizer Development Center (IFDC) in a study sponsored by the United States Agency for International Development (USAID) on agricultural inputs in Albania. The study focused on the production, distribution, and marketing of fertilizer and other critical agricultural inputs following the breakup of cooperative farms and the redistribution of land to individual farmers. The report highlights the collapse of the planned system for supplying agricultural inputs to state farms and cooperatives, particularly in the case of fertilizers. It emphasizes the urgent need for establishing fertilizer marketing, distribution, and credit systems to support small farmers. The report also underscores the critical role of fertilizer in restoring and maintaining agricultural output in Albania. The recommendations include launching a major fertilizer marketing and distribution effort, conducting technical and economic appraisals of fertilizer factories, and providing cost-effective production and pollution reduction assistance. The publication also briefly mentions other IFDC developments, such as collaborative arrangements with international agricultural research centers, donor meetings, and opportunities in Eastern Europe and the former Soviet Union.
IFDC Report, Volume 31, No. 2
(2006-12) IFDC
This publication provides an overview of the project "Catalyzing Acceleration of Agricultural Intensification for Stability and Sustainability" (CATALIST) in the Great Lakes region. The project aims to combat poverty, promote peace and stability, and accelerate economic growth through labour-intensive public works, such as planting trees, building terraces, and constructing roads. It establishes and strengthens farmer and agri-input dealer organizations to enhance agricultural capacities and market linkages. The region faces significant challenges, including rapid deforestation, soil erosion, and depletion of plant nutrients, which negatively impact the Nile and Congo rivers. The CATALIST project, funded by the Embassy of the Kingdom of The Netherlands and the Dutch Directorate General for Development Cooperation, collaborates with farmers' organizations, NGOs, the private sector, donors, and consortia to address these issues. The project addresses soil nutrient depletion, low agricultural productivity, and fragmented markets by promoting integrated soil fertility management. This approach combines mineral fertilizers with soil amendments to improve soil quality and increase profitability for smallholder farmers. The project focuses on the Albertine Rift and Kagera River Basin, which are vital for social and environmental stability in the region and are home to endangered wildlife and plants. The document also highlights the urgent need to address Africa's fertilizer crisis and increase fertilizer use to achieve higher agricultural growth rates. It emphasizes the importance of providing farmers with access to improved seeds, fertilizers, and irrigation to enhance productivity and meet the growing food needs of the continent. The resolution adopted by the African Union Member States at the Africa Fertilizer Summit outlines strategic measures to improve fertilizer availability, reduce costs, strengthen input networks, and support national and regional fertilizer production and trade.
IFDC Report, Volume 32, No. 3
(2007-09) IFDC
The Agricultural Input Markets Strengthening (AIMS) project, led by the International Fertilizer Development Center (IFDC), aims to address the unique challenges faced by the agri-input sector in Mozambique. Despite abundant land for farming, Mozambique struggles with low fertilizer use, resulting in low crop yields compared to other African countries. The AIMS project, sponsored by the U.S. Agency for International Development (USAID), collaborates with the public and private sectors to improve the availability, affordability, and quality of agri-inputs, including fertilizers and improved seeds. One of the critical issues in Mozambique's agri-input market is the high cost of fertilizers, exacerbated by the expensive transportation process. Most fertilizers are imported from South Africa, increasing prices due to transportation costs. Paradoxically, higher fertilizer use would contribute to lowering costs. Moreover, the lack of credit options hampers access to inputs, as farmers and dealers cannot use land as collateral. The AIMS project aims to address these challenges by providing training, encouraging agri-input businesses, and facilitating the establishment of demonstration plots to showcase the benefits of using inputs. The project also seeks to leverage Mozambique's local resources, such as natural gas and phosphate rock, to explore the feasibility of establishing a fertilizer-blending facility near the Beira port. Additionally, partnerships with organizations like IITA and ICRISAT aim to improve the production and availability of soybeans, cowpeas, maize, and groundnut seeds. These efforts target increasing local poultry production and reducing import dependence. To enhance agri-input distribution, the AIMS project explores the potential of farmer organizations, such as IKURU, to become input distributors and import fertilizers for their members. The project aims to gradually increase imports to serve larger areas and a growing number of farmers. Strengthening linkages between U.S. and African research institutes is another crucial aspect, enabling the rollout of improved technologies and practices to remote farming areas. Furthermore, the report discusses the West Africa Cotton Improvement Program (WACIP) implemented by IFDC in collaboration with various partners. WACIP aims to improve cotton production, ginning, and textile operations in Benin, Burkina Faso, Chad, and Mali. By introducing sustainable agricultural practices, alternative crops, and niche processing and marketing opportunities, WACIP aims to enhance farmers' incomes and environmental sustainability.
IFDC Report, Volume 34, No. 2
(2009) IFDC
This document summarizes the pioneering efforts of the International Fertilizer Development Center (IFDC) in implementing voucher programs for agricultural inputs in Malawi, Afghanistan, Nigeria, Rwanda, and Mozambique. These voucher programs aim to provide smallholder farmers access to fertilizers and improved seeds while building businesses for rural agro-dealers. The vouchers, often called "smart subsidies," are redeemed by farmers for agricultural products through private agro-dealers. The programs also include training and technical assistance for agro-dealers and farmers to enhance productivity and improve their livelihoods. Additionally, the report highlights the importance of designing country-specific programs, implementing security measures to prevent fraud, and gradually reducing voucher values as farm incomes increase. The report also discusses the G-8 Summit's commitment to increasing funding for food security initiatives and the shift in the international approach to supporting developing countries in growing and storing their food.
Policy Workshop on Strengthening Regional Trade in Agricultural Inputs in Africa: Issues and Options and Private Sector Roundtable Meeting on Expanding Fertilizer Markets in Africa: Issues and Options
(2010-06) IFDC
IFDC, in collaboration with the Common Market for Eastern and Southern Africa (COMESA), convened a policy workshop entitled "Strengthening Trade in Agricultural Inputs in Africa: Issues and Options," held July 1-4, 2008, in Lusaka, Zambia. The workshop was organized as part of the Hewlett Foundation-funded Strengthening Trade at the Regional Level in Agricultural Inputs in Africa (STAR) project. The workshop aimed to identify public policy, private market, and trade action areas that will improve agricultural input market and trade development. The workshop was attended by more than 70 participants representing regional and national policymakers; private sector entities involved in fertilizer importation, wholesale, and retail trade and logistics; farmer organizations; development partners; and non-governmental organizations (NGOs). Key Issues in Agricultural Input Market Development Recent Initiatives and Progress Enhancing international and regional trade has been recognized as a significant opportunity to improve agricultural input markets' performance. The Abuja Declaration on Fertilizer for an African Green Revolution calls for appropriate measures to reduce the cost of fertilizer procurement at national and regional levels. The New Partnership for Africa's Development (NEPAD) reported progress on several initiatives that address key resolutions of the Abuja Declaration. The Regional Joint Fertilizer Procurement Initiative, led by the African Development Bank (AfDB), aims to address Resolution 8 of the Abuja Declaration by encouraging and facilitating governments and private firms to place large orders on the international market. A regional meeting was convened in August 2007, which resulted in establishment of a Regional Joint Procurement Working Committee for Fertilizers to spearhead the initiative. As mandated in Resolution 9 of the Abuja Declaration, the promotion of fertilizer production is being pursued by COMESA, the Southern African Development Community (SADC) and numerous development agencies, including IFDC. SADC will commission a series of studies to establish the current production status of fertilizer in the region and recommend ways to increase production. The Abuja Declaration also calls for harmonization of policies to ensure duty- and tax-free movement of fertilizer across regions and the development of capacity for quality control. When the respective COMESA and East African Community (EAC) customs unions are in place, the Common External Tariff (CET) for all imported fertilizers has been proposed at 0 percent. This sets a good example for other Regional Economic Communities (RECs) to promote duty- and tax-free movement of fertilizer across borders. Six Economic Community of West African States (ECOWAS) member states are in the process of developing fertilizer legislation and supporting regulations. A Private Sector Perspective Before the workshop, a private sector roundtable meeting was convened to discuss issues and identify options for expanding fertilizer markets in Africa. The key issue facing the private sector is Local fertilizer production: High international fertilizer prices suggest that local and regional fertilizer production may be financially and economically viable. However, for urea and ammonium nitrate, it takes four to 6 to five years before a new plant is fully operational, so adding new nitrogen (N) manufacturing capacity is a long-term solution. In the short term, utilization of existing capacity should be improved and re-invested. Several fertilizer plants (e.g., Malawi, Zambia and Zimbabwe) are operating below capacity or have completely ceased production. While SADC and COMESA are committed to exploring the potential for rehabilitation of these facilities, the private sector encourages policymakers to create commercial investment opportunities. Finance: Sufficient cash flow is a prerequisite for successful fertilizer trade and distribution. Yet, procurement and marketing of fertilizers are constrained by a lack of finance, limiting transaction sizes, inventories and final consumption levels. It stifles total volumes traded and marketed and inhibits the achievement of economies of scale. This reflects a generally risk-averse approach of commercial banks toward agricultural lending. Capacity building among commercial bank loan officers and introducing risk management instruments and other risk-reducing mechanisms may help overcome this key constraint. Policy: First, regarding the role of government in input markets and its relationship with the private sector requires more realistic planning. When the private sector is invited to tender for supplying government programs, tender rules and procedures often require physical stocks to be positioned in-country before tendering. This requirement poses too high a risk for firms and should be addressed. Second, where government programs exist, subsidies were considered to distort markets and inhibit private sector participation in market development. Moreover, fertilizer sales through subsidy programs tend to discourage and displace commercial sales. There is a need to improve subsidy programs and include clear modalities for phasing out government market interventions. Third, COMESA's approach to regional procurement was met with skepticism because it appears to revolve around pooling public procurement among various countries. It was believed that true marketing efficiency gains could be made only by improving the private sector supply chain at various levels and encouraging economies of scale, not by facilitating procurement for government programs or placing large orders by donors. Encouraging economies of scale can include facilitating private stockholding and wholesaling at strategic ports. Resolving finance and other marketing efficiency-enhancing measures can then focus on downstream regional marketing and distribution. Partnerships are needed for this. The private sector should be more involved in COMESA's regional procurement planning process to ensure that workable solutions are developed. While regional procurement by COMESA or public sector agencies was discouraged, establishing a regional holding fertilizer warehouse in port cities like Beira, Dar es Salaam and Accra to benefit from economies of scale in procurement was endorsed. Policy analysis and capacity building among policymakers are required to overcome the current policy constraints in support of the above. Shipping and handling: Investments in infrastructure are required to allow efficient shipping, handling and transport. Without such investments, capacity limitations and other inefficiencies will continue to prevent the fertilizer sector from developing. Beira Port, which serves several countries in southern Africa, is limited to smaller vessels due to silt buildup at the port entrance. The meeting was advised that plans to dredge the port entrance are underway, and dredging is expected to occur within the next few years. There is also a lack of bulk storage capacity. Increased bulk storage capacity will allow more efficient discharge, thus reducing demurrage and more efficient bagging and handling. Port rehabilitation activities and resources should concentrate on Beira Port at this stage. Although Nacala Port can accommodate larger vessels (25,000 mt), the port's handling capacity is low, in poor condition, and will require substantial investment. In addition, the railway line and road access are in poor condition. Establishing bulk-holding fertilizer warehouses will be beneficial. Beira was identified as a priority port for such a warehouse. IFDC's pre-feasibility study on establishing a regional fertilizer-holding warehouse at the port of Beira was discussed and endorsed for further action. 7 Performance of Regional Input Markets Policy: The Kenyan fertilizer market is one of the few African success stories demonstrating how input markets can function under fully liberalized conditions. Competition, vertical integration within the fertilizer supply chain, economies of scale and overall growth in the sector have resulted in significant efficiency gains and cost reductions. During 1990–2006, marketing costs and margins have declined by about 40 percent. The success of the Kenyan fertilizer industry has been attributed primarily to a stable policy environment since 1990. For example, import licensing quotas and foreign exchange and retail price controls were eliminated. Importantly, no large subsidy programs have been implemented, and market distortions caused by artificially low fertilizer prices offered by donors or the government have been kept to a minimum. This has undoubtedly boosted the confidence in the market by the private sector. Regrettably, in 2008, the Kenyan government engaged directly in the market by importing fertilizers. Reducing marketing costs: Besides market-friendly policies and competition among market participants, other measures are required to reduce costs along the agricultural input supply chain. Marketing costs in Sub-Saharan Africa (SSA) are extremely high compared to countries in Asia. Ocean freight and land transport costs are two to three times higher than those incurred in Asia, caused by smaller vessel sizes due to port capacity constraints and the poor quality of inland road and rail infrastructure. Tariff and non-tariff barriers for imports and goods in transit add to the marketing costs. In addition, the relatively small market and the use of many specialized NPK compounds prevent economies of scale from being achieved through bulk procurement. Establishing a bulk warehousing facility at Beira Port can potentially reduce the cost of fertilizer imports by $30–$60/mt. Stimulating local fertilizer production is high on the regional and national policy agendas. The company Minjingu Mines and Fertilizer, based in Tanzania, represents a good example of how a former state-owned company was successfully privatized. Regulatory issues: Regulatory frameworks governing intra-regional trade in fertilizer, seed and crop protection products (CPPs) are either absent or not implemented. Regarding seed and CPPs, regulatory frameworks have been developed at the regional level (SADC, ECOWAS), and the challenge now is to ensure implementation and enforcement. The absence of a regulatory framework for fertilizer constitutes a significant non-tariff barrier that impedes trade and hinders investment and market development. In international trade, non-tariff measures are dealt with under specific World Trade Organization (WTO) agreements, such as the Agreement on Agriculture and the Agreement on Technical Barriers to Trade (TBT). WTO defines technical trade barriers as regulations, standards, testing and certification procedures which could obstruct trade. If regulations are set arbitrarily, they can be used as an excuse for protectionism or disadvantage market participants. The WTO's TBT Agreement seeks to minimize technical barriers to trade by encouraging members to adhere to several basic principles and recognizes that members must ensure quality control; protect human, animal and plant life or health; protect the environment; and prevent malpractice. However, it also states that technical regulations should not create unnecessary obstacles to trade. Under this principle, fertilizer regulations should refrain from prescribing specific nutrient compositions or granule sizes. Private Sector Development Developing agricultural input markets cannot be achieved without stimulating private sector activity. In countries where government programs are responsible for distributing subsidized fertilizer and seed, the private sector cannot compete and remains underdeveloped. Therefore, market support mechanisms that add to, not displace, commercial activity are required. Rather than reducing the product's price, farmers' purchasing power can be boosted among targeted farmers, creating effective demand and generating market activity. However, long-term sustainability must be taken into account. Voucher programs have been developed to transfer purchasing power support to targeted beneficiaries. To ensure that farmers will eventually be able to use fertilizer profitably under normal, non-subsidized market conditions, any subsidy or income transfer program should be complemented by programs that, among other things, aim to reduce marketing costs and enhance commercial credit availability. 8 An important dimension of increasing fertilizer use in SSA is the need for improving acidic soils that prevent efficient nutrient uptake. Improving acidic soils by adding lime or reactive phosphate rock can be seen as a public responsibility for which public investments must be made. Identification of Actions on Key Themes The outcomes of the presentations and subsequent discussions resulted in an action agenda that addresses short-term and longer-term agricultural input development issues. The following eight action areas have been identified: 1. Improve the policy environment by strengthening the policy-making process. 2. Remove trade barriers. 3. Improve access to finance. 4. Increase African fertilizer production capacity. 5. Enhance the performance of fertilizer procurement from international markets. 6. Facilitate identification of private sector business opportunities. 7. Promote market development. 8. Promote fertilizer technology development and transfer. For each action area, one or more actions have been identified that will guide ongoing market development efforts at COMESA, EAC, SADC and other RECs, mostly requiring public-private partnerships.
Quarterly Newsletter/ vol.2 June 2022
(2022) IFDC
The MURIMI quarterly newsletter showcases the progress and impact of the Transfer Efficient Agricultural Technologies through Market Systems (TEAMS) program, funded by the Swedish Embassy. TEAMS is a continuation of the Food Security through Climate Adaptation and Resilience (FAR-Mozambique) project and is implemented by a consortium of four organizations in partnership with the Mozambican government. The program, from January 2021 to December 2022, focuses on three results areas: Scaling Improved Smallholder Productivity, Scaling Agro-Dealer Networks, and Scaling Proven Technologies. TEAMS employs an inclusive markets approach to enhance smallholder linkages with input and output markets, improve farm productivity, and increase access to income and nutritious foods. The newsletter features inspiring stories of beneficiaries, including Ana Maposa, a rice farmer whose life changed through climate-smart agriculture practices introduced by the program. It also highlights the successful reintegration of ex-combatants, like Fernando Mapinde, into agricultural activities. The TEAMS program empowers women farmers through savings groups, facilitating access to inputs and boosting agricultural productivity. The newsletter exemplifies the program's efforts to address climate change, enhance food security, and uplift rural communities in Sofala and Manica provinces.
Review of Fertilizer Use by Crop And by Product in Ethiopia 2017
(2018-06)
This report examines the agricultural input sector's critical impact on agricultural productivity in Ethiopia, focusing on fertilizer consumption. Despite heavy reliance on rainfed agriculture and dispersed cropping areas, timely access to inputs is crucial for achieving production targets. The study highlights Ethiopia's efforts to increase the use of modern fertilizer and seed technologies to boost agricultural productivity and meet economic development goals. The challenge lies in promoting cost-effective, sustainable, and environmentally sound use of productivity-enhancing inputs. The report reviews the literature and secondary data on the fertilizer sector's development in Ethiopia, addressing supply and demand constraints. It discusses the gradual shift from using two fertilizers (urea and DAP) to incorporating multi-nutrient fertilizers and highlights the gap between recommended and actual fertilizer use by farmers. The report also explores the diverse agro-ecological zones in Ethiopia and the government's investment in agricultural development. It emphasizes the need for continued efforts to improve knowledge dissemination, efficient input value chains, and accurate data collection for informed policy decisions.

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