IFDC Publications

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Accès inclusif des Acteurs aux Marchés Rémunérateurs
(2021) IFDC
L'accès aux marchés représente un défi significatif pour augmenter les revenus agricoles. La croissance des revenus des acteurs agricoles dépend fortement de l'accès au marché. Pour relever ce défi, une approche holistique est nécessaire, intégrant l'accès au crédit, l'agrégation d'approvisionnement de qualité pour des ventes collectives, et l'inclusion de tous les acteurs. Le warrantage permet la mobilisation d'approvisionnements considérables et de qualité, facilitant l'accès au crédit. L'expérience du Programme ACMA2 a été couronnée de succès en agrégeant de grands volumes de produits et en établissant un crédit aux acteurs. Le warrantage peut favoriser l'inclusion des femmes et des jeunes dans l'accès au marché. Les campagnes annuelles de warrantage ont montré une augmentation significative de la participation des femmes et des jeunes, démontrant la faisabilité du développement inclusif dans les chaînes de valeur agricoles. Le warrantage améliore les revenus agricoles des acteurs, avec des bilans globaux indiquant des marges positives à la fin des campagnes de warrantage. La transparence dans la gestion des campagnes de warrantage est cruciale pour la durabilité du système. Malgré des résultats positifs, des défis persistent, notamment la nécessité de renforcer les capacités et d'apporter un soutien technique aux organisations pour améliorer la transparence et la gestion professionnelle des campagnes de warrantage. L'article aborde les défis rencontrés, les leçons apprises et les recommandations pour améliorer le warrantage.
Agricultural Input Markets in Nigeria: An Assessment and a Strategy for Development
(2001-08) IFDC
Because of various distortions in the input supply chain, this assessment focused primarily on the issues related to the input supply system. Nonetheless, measures proposed for technology transfer and supply system improvements will strengthen input demand by improving the efficiency of input use and reducing input costs. The main objectives of the assessment are: 1.To review the structure and functioning of the agricultural input markets. 2.To assess the potentials of the private sector to supply agricultural inputs efficiently and in a sustainable manner. 3.To identify constraints to the private sector participation in input markets. 4.To develop programs and policies for strengthening the functioning of agricultural input markets. 5.To prepare an action plan for implementing the proposed policies and programs.
Agricultural Production and Soil Nutrient Mining in Africa: Implications for Resource Conservation and Policy Development
(2006-05) Julio Henao; Carlos Baanante
The economic development of Africa, more than any other region, depends on the development of the agricultural sector and the agro-industry, which is fundamentally affected by the productivity of land resources. This is particularly true for countries in sub-Saharan Africa. Agriculture accounts for more than 25% of the gross domestic product (GDP) of most African coun- tries, and is the main source of income and employment for at least 65% of Africa’s population of 750 million. Thus, agricultural development is vital to Africa’s economic growth, food security, and poverty alleviation. By 2020 Africa is projected to import more than 60 million metric tons (t) of cereal yearly to meet demand. Africa’s food security situation has deteriorated significantly over the past two decades. With population growth of about 3% yearly, the number of malnourished people in Africa has grown from about 88 million in 1970 to more than 200 million in 1999–2001. Agricultural production in much of Africa is also hampered by the predominance of fragile ecosys- tems, low inherited soil fertility, and low use of modern inputs such as mineral fertilizers and improved crop varieties. Crop production in a region can increase through higher production per unit of land, or by increasing the area cultivated. The dramatic increases in agricultural production in Asia—known as the Green Revolution—were mostly through higher yields. But Africa’s far lower increases have mostly been through expansion of the cultivated land (Figures 2 and 3). Farmers in sub-Saharan Africa have traditionally cleared land, grown crops for a few cropping cycles, then moved on to clear more land, leaving the land fallow to restore soil nutrients and regain fertility. But population pressure now forces farmers to grow crop after crop, “mining” and gradually depleting the soil of nutrients. With little access to fertilizers, the farmers are forced to bring less fertile soils on marginal land into production, at the expense of Africa’s wildlife and forests. The fact that fertilizer use in Africa is less than 10% of that in Asia explains much of the contrasting trends in these regions. The declining fertility of African soils because of soil nutrient mining is a major cause of decreased crop yields and per capita food production in Africa and, in the mid to long term, a key source of land degradation and environmental damage. Methodology The methodology for monitoring of nutrient mining is based on the estimation of soil nutrient balances. We determine the sum of nutrient inputs such as through fertilization, use of organic residues and manures, nitrogen fixation, and sedimentation. We then subtracted nutrient losses such as through erosion, leaching, and volatilization. Crop uptake is another important loss of nutrients which are then exported from farmers’ fields for human and animal consumption. Balances are evaluated at spatial scales that range from small soil aggregates to regions, countries, and even the African continent. The evaluation process includes use of spatial analysis through geographic information systems to identify crop areas, analyze and classify production, predict erosion and leaching, interpolate nutrient mining, and display regional assessments. Simulated modeling and transfer functions were used to evaluate nutrient losses in soils, assess current yields, and estimate and predict potential yields and nutrient uptake across Africa. Management information systems allowed the interaction and consolidation of data series with primary and secondary information on soils and crops, input consumption and use, and crop production. In this paper we assess the status of food production associated with land degradation and estimate indicators of soil nutrient mining by country and region. We examine factors and circumstances that affect nutrient mining by predominant crop production systems in key agro-ecological zones and re- gions, and we review policy measures and investment strategies that can reverse current trends in nutrient mining and increase land productivity in a sustainable way. We also evaluate evolving trends in crop productivity in different regions and in land degradation caused by nutrient mining. Agricultural Production, Soil Nutrient Mining, and Land Conservation Soil nutrient mining, the result of overexploitation of agricultural land, is in fact consumption of a key component of the soil’s natural capital. The propensity for nutrient mining of Africa’s agricultural land and the severity of its consequences are the highest in the world. Soil nutrient mining is usually associ- ated with low agricultural production and land productivity under severe constraints of poverty in terms of physical capital (infrastructure) and human capital (health and education). Continued nutrient mining of soils would mean a future of even increased poverty, food insecurity, environmental damage, and social and political instability. The findings and conclusions of this paper result from the monitoring of nutrient mining in agricul- tural lands of key agro-ecological regions and countries of Africa, and have implications for policy development. Sound policies and investment strategies are key contributors to the joint goals of in- creased agricultural production, food security, economic development, land conservation, and environ- mental protection. African countries today face not only the challenge of increasing agricultural production with scarce overall resources but must raise productivity in a way that conserves the natural resource base and prevents further degradation that has characterized African soils for generations. Agricultural production has particularly stagnated or declined in important food crops such as cere- als, tubers, and legumes. Crop yields and productivity in most African countries are about the same as 20 years ago. African cereal yields, particularly in the Sudano-Sahelian region, are the world’s lowest (Figure 10). In 1998, cereal yields in sub-Saharan Africa averaged 1 ton per hectare (t/ha)—15% lower than the world average of 1.2 t/ha in 1965. Africa’s low crop productivity, especially in densely popu- lated areas, is seriously eroding its economic development and the competitiveness of its agriculture in the world market. Africa’s share of the total world agricultural trade has fallen from 8% in 1965 to 3% in 1999–2000. During the 2002–2004 cropping season, about 85% of African farmland (185 million ha) had nutri- ent mining rates of more than 30 kg/ha of nutrients yearly, and 40% (95 million ha) had rates greater than 60 kg/ha yearly. These 95 million ha are reaching such a state of degradation that to make them productive again would frequently require investments so large that it will not be economically feasible to implement. Escalating rates of soil nutrient mining make nutrient losses highly variable in agricultural areas in the Sub-Humid and Humid savannahs of West and East Africa, and in the forest areas of Central Africa. Depletion rates range from moderate, about 30 to 40 kilograms (kg) of nitrogen, phosphorus, and potassium (NPK)/ha yearly in the Humid forests and wetlands of Southern Central Africa and Sudan to more than 60 kg NPK/ha yearly in the Sub-Humid savannahs of West Africa and the highlands and Sub-Humid areas of East Africa. The lands in these areas are typical for the tropics: weathered soil, with low productivity. Estimates by country show that nutrient mining is highest (more than 60 kg NPK/ha yearly) in agri- cultural lands of Guinea, Congo, Angola, Rwanda, Burundi, and Uganda (Figure 5, Table 7). Fertilizer use is low in those countries, and the high nutrient losses are mainly the result of soil erosion and leaching. Other regions, such as most countries of the North Africa region and South Africa, although constrained by harsh climate, have lower nutrient depletion rates, varying from 0 to 30 kg NPK/ha per year. Agriculture in the coastal areas of Libya, Egypt, Tunisia, and Algeria is characterized by high mineral fertilizer use and appropriate crop management. Nutrient mining across Africa ranges from 9 kg NPK/ha per year in Egypt to 88 kg in Somalia in East Africa. Nitrogen losses range from 4.1 kg/ha yearly in South Africa to 52.3 kg/ha in Somalia in the Sudano-Sahelian of East Africa. Losses of phosphorus range from none or minor losses in the Mediter- ranean and Arid North Africa to 9.2 kg/ha per year in Burundi and Somalia in East Africa. Potassium losses range from 6.5 kg/ha per year in Algeria to 30.4 kg/ha in Equatorial Guinea and Gabon in Humid Central Africa. The main factors contributing to nutrient depletion are loss of nitrogen and phosphorus through soil erosion by wind and water, and leaching of nitrogen and potassium. Nutrient losses due only to erosion in African soils range from 10 to 45 kg of NPK/ha per year. If erosion continues unabated, yield reduc- tions by 2020 could be from 17% to 30%, with an expected decrease of about 10 million t of cereals, 15 million t of roots and tubers, and 1 million t of pulses. Based on nutrient mining estimated by country, total annual mining of nutrients (NPK) is about 800,000 t for Humid Central Africa; 3.0 million t for the Humid and Sub-Humid West Africa; 600,000 t for the Mediterranean and Arid North Africa; 1.5 million t for the Sub-Humid and Mountain East Africa; 1.7 million t in the Sudano-Sahel; and 1.4 million t in Sub-Humid and Semi-Arid Southern Africa. Total nutrient mining in the sub-Saharan region may be about 8 million t of NPK per year. The evidence leaves no doubt that the very resources on which African farmers and their families depend for welfare and survival are being undermined by soil degradation caused by nutrient mining and associated factors such as deforestation, use of marginal lands, and poor agricultural practices. About 50,000 ha of forest and 60,000 ha of Africa’s grassland are lost to agriculture yearly. Intensifica- tion of agriculture with low fertilizer use and the clearing of forest lands are the main causes of nutrient mining and land degradation in the tropical forests and savannahs that are characteristic of the Humid and Sub-Humid regions that predominate in Cameroon, Ghana, Nigeria, Gabon, Congo, Sudan, and parts of Uganda. Most soils are fragile and low in plant nutrients. The nutrient recycling mechanisms that sustain soil fertility are insufficient to support increased production without fertilizers. Land is being degraded, and soil fertility is declining to levels unsuitable to sustain economic production. Indicators of Soil Nutrient Mining, Population, and Nutrition Population growth and migration associated with drought, food shortages and land overuse have accel- erated degradation of agricultural land. Figure 11 gives estimates of the actual supporting capacity of land, calculated by use of crop suitability data and assuming limited use of inputs (rainfed production without mechanization, mineral fertilizers, and conservation practices). The average estimates of popu- lation density range from less than 0.1 to 5.0 persons/ha. This means that high population density in many countries already exceeds the long-term population carrying capacity of the land. Variation in population density is highest in the very fragile soils in the Semi-Arid areas of West and East Africa. Population density varies from as low as 5 persons/ha in Semi-Arid areas of East Africa to as high as 150 persons/ha in some Semi-Arid areas of West Africa. Population densities are also high in Humid and Sub-Humid areas in the west coastal areas and in some east fertile areas in Ethiopia, Kenya, Uganda, Mozambique, Tanzania, Burundi, Rwanda, Namibia, and Angola. Correspondingly, these ar- eas have high rates of nutrient mining. The production of cereals expressed in kilograms per hectare is particularly low in countries with high rates of nutrient depletion such as the Sudano-Sahelian and the Humid and Sub-Humid areas in west central and east Africa. Countries such as Congo, Gabon, Liberia, Sierra Leone, Eritrea, Rwanda, and Botswana continue importing large quantities of cereal food. Africa imported about 43 million t of cereals at a cost of $7.5 billion in 2003. The sub-Saharan African countries (excluding South Africa) imported 19 million t at a cost of $3.8 billion. Assuming that the current situation in agricultural land management will not change dramatically, Africa is pro- jected to import about 60 million t of cereals, at a cost of about $14 billion, by 2020. The sub-Saharan countries (excluding South Africa) will import about 34 million t of cereal at a cost of $8.4 billion by 2020. A part of the imports is used as animal feed, but most is to satisfy demands of an increasing popula- tion. The imports of cereals, along with imports of other food, have a great impact on economies of African countries, and make food security strategies difficult to accomplish. The influence of nutrient mining on the land’s capacity to sustain population and production has long-term impacts besides loss of soil productivity and the consequent exodus of farmers. About 33% of the sub-Saharan population is undernourished compared with about 6% in North Africa and 15% in Asia. Most of the undernourished are in East Africa, where nutrient mining rates are high. Malnutrition rates in these regions are from 10% to 50%. The nutritional level as measured in calories per person/day is lower than the basic level of 2,500 kilocalories. Crop cereals provide more than 60% of these calories in the Semi-Arid and Sub-Humid areas, while animal products provide 5% to 30%. Roots, tubers, and plantation crops provide most of the calories in Humid regions. Low yields in nutrient-mined areas seem to contribute to poverty and malnutrition. Soil Nutrient Mining and Policy Development Information about the extent and intensity of soil nutrient mining and a better understanding of its main causes are essential to design and implement policy measures and investments to reverse the mining and subsequent decline in soil fertility. Restoration of soil fertility is necessary to increase crop yields and food production in order to combat the worsening food security situation in Africa. Thus, these policy measures and investment strategies must be viewed as key contributors to the joint goals of increased agricultural production, food security, economic development, land conservation, and envi- ronmental protection. A better understanding of the economics of nutrient mining and of the agro-climatic and socioeco- nomic factors that explain why farmers mine and deplete the soil of nutrients provides the rationale for designing effective policy and investment strategies to reverse current trends. The main goal of such strategies is to prevent soil nutrient mining by making the use of external plant nutrient sources, par- ticularly mineral and organic fertilizers, more economically attractive. This implies implementation of policies and investments that increase the cost of mining plant nutrients from the soil while decreasing the cost and increasing the profitability of mineral and organic fertilizer use. These sources of essential plant nutrients, and other improved technologies, must be made available to farmers efficiently and timely. Key factors determining the extent of nutrient mining in many areas of sub-Saharan Africa are pre- vailing land tenure arrangements and the lack of plant nutrients as mineral or organic fertilizers. There are differences between the cost of nutrient mining to individual farmers and to society as a whole caused mainly by land tenure arrangements that make the farmers indifferent to the loss of future economic returns to land. When the farmers’ possession of agricultural land is well established through property rights or land tenure arrangements, and there is a functioning market for agricultural land, farmers internalize costs associated with the loss of the land’s productive capacity. That significantly increases the cost to farmers of the mined soil nutrients. The opposite occurs when land tenure rights are not well established and there is no functioning market for agricultural land. Then, costs associated with the loss of the land’s productive capacity become an externality and thus, a social rather than a private cost. Then, from the farmer’s point of view, soil mining is perceived as the least expensive source of plant nutrients. This is particularly true for farmers who practice shifting cultivation. They often perceive that they are not significantly affected by the declining land productivity associated with nutrient mining. Design and Implementation of Policy and Investment Strategies—Policies and investment strat- egies to reverse soil nutrient mining should be designed and implemented nationally, and sometimes locally, but always in context, and as a key part, of a comprehensive policy approach to economic development. To facilitate the selection of a set of policy measures and investments as key components of an effective strategy to reverse soil nutrient mining, it is useful to describe and pre-assess them in terms of (1) expected outcomes; (2) impacts on the countries’ capital endowments (their natural capital, physical man-made capital, and human capital); and (3) change in the incentives or disincentives to mine soil nutrients. Summaries of key policies follow: Broad Scope Development Policies. These include investments in roads and associated infrastruc- ture, investments in schools and education, and measures to control corruption and promote good governance. Expected outcomes of these broad scope development policies are increased availabil- ity and lower costs of fertilizers and other agricultural inputs and significantly improved access of farmers to information and markets for their products. Land Tenure Policy. Measures or legislation to improve farmers’ long-term rights to own the land they use can significantly affect the importance of the benefit streams that farmers receive as a result of the long-term use of the land. This seriously affects farmers’ decision making in management and use of agricultural land, and in nutrient mining. Policies to Improve Agro-Inputs Supply Efficiency. The timely and efficient supply of agro-inputs such as seeds and fertilizers can be improved through provision of credit and technical assistance (TA) to farmers as well as the producers, importers, wholesalers, and dealers involved in the pro- curement and distribution of seeds, fertilizers, and other inputs. In this context, TA involves provid- ing technical and managerial assistance, as well as training and the dissemination of relevant infor- mation to business entrepreneurs and farmers. Policies to Expand the Demand for Agricultural Products and Stabilize Prices. The goal and expected outcome of this policy is to expand the demand for agricultural products that farmers can efficiently produce in a competitive environment and in a way that is consistent with price stability. Growth in demand for agricultural products that is consistent with stability in the prices that farmers receive for their products promotes the profitability of fertilizers and modern inputs and increases the productivity of agriculture and the incomes of farmer households. Expansion in the demand for agricultural products can be attained as a result of (i) policies and investments that increase the domestic demand for agricultural products and (ii) policies that increase the demand for exports of these products. Policy measures and investments include, but are not limited to, the following: Investments in marketing infrastructure for farmers, wholesalers, and retailers of agricultural products. This involves construction of properly located facilities for product trade among farm- ers, wholesalers, retailers, and consumers. Measures to facilitate credit and technical and managerial assistance to marketing intermediar- ies of agricultural products such as wholesalers and retailers, including those interested in in- vesting in marketing infrastructure. Provision of credit and technical and managerial assistance to exporters of agricultural products, and to agribusinesses involved in the processing and then the marketing of processed products in the domestic and export markets. All of these policies involve direct investments by the public sector and measures to create a policy environment that stimulates investments and dynamic participation of the private sector. Growth in demand for agricultural products that can stimulate sustainable growth in agricultural production and productivity can be a powerful source of agricultural and economic development. This is par- ticularly evident when demand growth is due mainly to expansion in demand for processed agricul- tural products. Then the growth in demand can result in rapid development of the agricultural sector and agribusinesses involved in product processing. Some countries in Latin America and Asia have experienced this kind of development as a result of growth in the export demand for processed agricultural products. Social Support Programs for Poverty Alleviation and Public Health. These programs are needed to combat poverty and malnutrition among both rural and urban populations, and to alleviate the HIV/AIDS epidemic. Policies that are primarily directed to promote economic development should be implemented, along with social support programs. These programs should be designed to reduce malnutrition and hunger, provide health care to combat the HIV/AIDS epidemic, and offer basic education and information to fight these two problems. Conclusions and Recommendations on Policy Development—To reverse and prevent soil nutri- ent mining, policies and investment strategies must be designed and implemented at the national level, focusing on well-defined target areas. Furthermore, it is evident that these measures must successfully promote the judicious use of mineral fertilizers in conjunction with sound soil conservation practices. Given the complex nature of the multiple constraints affecting the use of fertilizers, a well-integrated strategy involving the simultaneous implementation of all or some of the policy measures described above should be adopted to achieve the goals of increased fertilizer use and soil fertility conservation. Key conclusions and recommendations on policy development to combat soil nutrient mining and depletion in some agricultural land areas of Africa can be summarized as follows: Well-designed policy measures and investment strategies that target specific agricultural areas where soil nutrient mining is extensively occurring in a country can successfully increase the judicious use of fertilizers and the adoption of sound soil fertility management practices. These policies can re- verse soil nutrient mining and provide important and substantial benefits to farmers, on-farm work- ers, marketing intermediaries, consumers, the land resource base, and the countries’ economies. In the target countries, the implementation of policy strategies to reverse this process through mea- sures and investments that promote fertilizer use and soil conservation practices should be a national priority. To develop national policy reform and investment strategy programs for target countries, strategies must be tailored to overcome the constraints and circumstances prevailing in well-defined target areas within a country. Then, ex-ante assessments of alternative pre-designed policy strategies can be conducted to select or design policy and investment strategies with the highest probabilities of success in terms of impact, benefits, and costs for the target country. Results of ex-ante assessments can also be useful to derive estimates of the magnitude and bound- aries of the total expenditures that a country could incur in costs of implementation of a policy strategy in order to have satisfactory levels of expected benefit:cost ratios on those expenditures. Finally, it is important to note that national policy and investment strategies must include details about geographic coverage, the chronology of policy interventions and investments, and the specific modus operandi to be used in the implementation of policy measures, such as the provision of technical assistance and credit. Thus, the proper design of national policy and investment strategies to reverse soil nutrient mining in African countries can, in some instances, be involved and demanding. This paper represents a significantly enhanced update of a 1999 publication produced by IFDC, an International Center for Soil Fertility and Agricultural Development, as part of its efforts to provide additional information and develop strategies and policies for improved crop production in Africa. The dissemination of this information is crucial for the design and implementation of policy interventions that can prevent the continuous mining of nutrients and associated damage to the environment and the resource base. The information, methodologies, databases, and procedures described in this report should be viewed as components of an evolving process of continuous improvement and refinement. IFDC is interested and actively involved in developing and enhancing innovative approaches to improve the scope and quality of data, information, and technologies that are crucial for improving agricultural production and preserving the environment in developing countries. The monitoring of nutrient mining and the evalua- tion of fertilizer requirements for sustainable crop production in agricultural lands of the developing world is part of this effort.
Agricultural Transformation, Developments, and Strategies in Africa
(2022-08-04) Oumou Camara; Bindraban, Prem S.; William Adzawla
This article discusses agricultural transformation, developments, and strategies in Africa, highlighting the challenges and opportunities facing the continent. It examines the importance of agricultural development in Africa's economy and its role in achieving food security and reducing poverty. Despite various initiatives and commitments by African countries and international organizations, progress in agricultural transformation has been slow. The article emphasizes the need for sustainable approaches to address challenges such as land degradation, climate change, and inefficient fertilizer use. It also calls for improved infrastructure, technology adoption, and policy support to boost agricultural productivity and ensure food security for Africa's growing population.
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.
Assessment of the Effectiveness of Agro-dealer Development Activities Conducted by USAID-AIMS Project in Mozambique: Agricultural Input Markets Strengthening (AIMS) III: June 2015.
(2015) Latha Nagarajan; Alexander Fernando; Leonardo, W; Aniceto Matias; Ginga Goncalvez
Agro-dealer development was one of the key components of the USAID-funded Agricultural Input Market Strengthening (AIMS) project implemented by the International Fertilizer Develpoment Center (IFDC) in Mozambique. AIMS focused on creating an extensive network of input suppliers/retailers, equipping them with business and technical knowledge and strengthening their capacity through credit, information and policy to meet the demand. Since 2006, AIMS has directly trained 201 agro-dealers covering both Beira and Nacala corridors. AIMS-IFDC staff in Mozambique conducted a rapid impact assessment of agro-dealers during July-September 2014. The purpose of this assessment was to profile and document the contribution of the AIMS project toward establishing sustained agricultural input networks and providing inputs accessible to smallholders in Mozambique. This was done on a limited scale by comparing a few key parameters with the baseline conducted in 2006 before the start of the program, and subsequently by a detailed survey assessment among dealers who were trained by the USAID-AIMS project vs. those who were not trained but are operating agro-input businesses in the project areas. In general, the agro-dealers have observed an increased demand for agricultural inputs among farmers in the last five years. Sixty percent of the sample in the survey (both trained and non-trained) said their businesses have doubled in the last three to four years. Demand for improved varieties of maize and beans have gone up along with use of fertilizers (NPK and urea) for these crops. Distances traveled by farmers to access farm inputs have reduced substantially with improved dealer networks. There were significant differences among the constraints faced by trained vs. non-trained agro-dealers in expanding their business operations.
Boosting Local Certified Seed Production in Burundi through Private Seed Sector Development
(IFDC, 2022) IFDC
Burundi is a strongly agricultural and densely populated country, with 257 people per square kilometre. Rapid population growth has decreased average land holdings from 1.04 hectares to 0.5 hectares per household between 1973 and 2009.1Additionally, agricultural production is low compared with other countries of the region. To solve this problem, IFDC has come up with a project, the Private Seed Sector Development (PSSD) project (2018-2022), which is funded by the Embassy of the Kingdom of the Netherlands in Burundi and aims to double the production and income of 178,000 farm households in Burundi by ensuring sustainable access to high-quality seed and agricultural advisory services.
Cartographie et Caracterisation des Fournisseurs D’engrais au Senegal
(2020-12) IFDC
Le projet Dundël Suuf Feed the Future au Sénégal, financé par l'Agence américaine pour le développement international (USAID), s'inscrit dans le cadre de l'initiative Feed the Future Enhancing Growth through Regional Agricultural Input Systems (EnGRAIS) pour l'Afrique de l'Ouest. Mis en œuvre par le Centre international de développement des engrais (IFDC) sur une période de trois ans (d'octobre 2019 à septembre 2022), le projet vise à améliorer la fertilisation des sols, augmenter durablement la productivité agricole et renforcer la sécurité alimentaire au Sénégal. Les objectifs spécifiques comprennent le développement et la diffusion de formules d'engrais améliorées, la promotion de produits et de technologies d'engrais respectueux de l'environnement, ainsi que l'amélioration du cadre politique et réglementaire du secteur des engrais. Ce rapport se concentre sur la cartographie et la caractérisation des fournisseurs d'engrais au Sénégal, réalisées dans le cadre des activités du projet. L'étude a couvert l'ensemble du pays, avec 321 agrofournisseurs enquêtés dans différentes régions. La méthodologie a impliqué la collaboration avec les directeurs régionaux du développement rural, un échantillonnage en boule de neige pour la sélection des participants et une formation rigoureuse des enquêteurs. L'analyse des données a été effectuée à l'aide de SPSS et Excel, fournissant des informations sur les caractéristiques démographiques, les expériences et les caractéristiques commerciales des fournisseurs d'engrais. L'analyse des données révèle que les technologies MD et PPU sont mal connues des acteurs du secteur des engrais, avec seulement 13% et 14% de notoriété, respectivement. Cependant, 74% de ces acteurs ont exprimé leur volonté de suivre une formation dans la production et la commercialisation des super granules d'urée (USG). Une analyse plus approfondie fournit des informations sur la localisation et les types d'acteurs qui sont au courant ou prêts à être formés et à s'engager dans la commercialisation des USG. En termes de sensibilisation aux technologies, le PPU est plus connu dans la vallée du fleuve Sénégal, avec 27% des agrofournisseurs, alors qu'il est totalement inconnu parmi les fournisseurs d'engrais en Casamance. De même, le MD est mieux connu dans la vallée du fleuve Sénégal mais totalement inconnu en Casamance. L'étude identifie que les grossistes, les grossistes-détaillants et les détaillants, représentant plus de 85% des agrofournisseurs, sont les plus disposés à produire et à commercialiser les USG. Ces acteurs sont principalement des hommes (97%), exploitent des entreprises formelles (61%) et ont l'approbation pour la vente d'engrais (70%). Ils sont principalement situés dans le bassin arachidier et la région des Niayes, constituant près de 75% de ces acteurs. Les recommandations pour améliorer le secteur des engrais et sa commercialisation incluent la mise à jour des formules d'engrais en fonction des conditions pédoclimatiques et des cultures, la garantie d'une disponibilité en temps opportun des engrais, le renforcement de l'organisation du secteur et la régulation du transport des engrais pour éliminer les problèmes routiers. De plus, les recommandations en matière de renforcement des capacités se concentrent sur la formation et la sensibilisation aux technologies MD et PPU, la promotion de la collaboration entre les acteurs et la garantie du contrôle de la qualité des engrais.
Collaborative Research Programme for Soil Fertility Restoration and Management in Resource-Poor Areas of Sub-Saharan Africa
(2002)
This report presents results from experiments and dissemination activi- ties carried out in West and southern Africa over the past 3 years. The activities and results reported are for two to three growing seasons and concern Togo and Niger in West Af- rica and Malawi, Zambia, and Zim- babwe in southern Africa. The objectives were to develop methodologies and practical interven tions for improving the efficiency of organic matter (OM), other soil amendments, and inorganic fertiliz- ers through integrated use. The inte- grated soil fertility management (ISFM) concentrated on a cover crop (mucuna) and on compost and ma- nure in West Africa. In southern Af- rica manure management and the determination of fertilizer equivalency of manure received the most atten- tion. Most of these studies were implemented in partnership with partners/network members. Farmer participatory trials were established as part of the dissemination activities.
Effets Covid-19 sur le Secteur des Engrais au Senegal
(2020) IFDC
L'étude se concentre sur l'impact de la pandémie de la COVID-19 sur le secteur des engrais au Sénégal. Menée entre avril et mai 2020, la recherche couvre l'ensemble du territoire national, impliquant 45 participants répartis en quatre groupes : les principaux fournisseurs d'engrais (importateurs, grossistes et fabricants), les détaillants d'engrais, les organisations de producteurs et certaines organisations non gouvernementales (ONG) sélectionnées. L'étude explore les effets de la pandémie sur la production, les importations, le transport, la distribution et la commercialisation des engrais, en tenant compte des défis rencontrés par différents acteurs. Les résultats mettent en lumière des perturbations dans la production en raison de pénuries de main-d'œuvre, des défis liés aux importations internationales, des contraintes dans le transport et la distribution, ainsi que des fluctuations des prix des engrais. L'étude souligne la vulnérabilité du secteur des engrais et appelle à des interventions visant à renforcer la résilience des acteurs face aux effets de la pandémie.
Empowering Farmers for Effective Participation in Decision-Making
(2002-04) Debrah Siegfried Kofi; E. Suzanne Nederlof
In the publication the urgent necessity of involving farmers in decision-making processes pertaining to agricultural development is explored. Acknowledging farmers as indispensable stakeholders possessing invaluable knowledge and experiences, the publication emphasizes the imperative of empowering them to actively contribute to shaping policies and practices that directly impact their livelihoods. The material delineates multifaceted approaches aimed at enhancing farmer participation across diverse levels of decision-making, ranging from grassroots community initiatives to overarching national agricultural policies. By advocating for inclusive and participatory methodologies, the publication endeavors to cultivate sustainable agricultural development trajectories and uplift the socioeconomic well-being of farming communities worldwide.
Estimation of Water-Limited Maize Yield using the LINTUL-2 Model and Spatial Analysis of the Yield Gap in Ghana
(2023) K.B.D. Simperegui; Bindraban, Prem S.; Anselme K. K. Kouame; D.H. Peluffo-Ordóñez; Williams K. Atakora
Maize holds a significant position within Ghana’s cereal production, contributing to 45% of the total cereal production. Despite this, the average maize yield of 2.4 metric tons per hectare (mt ha-1) between 2017 and 2019 falls well below its potential range of 5-6 mt ha-1. To comprehensively grasp the dynamics of the maize yield gap in Ghana, we employed the light use efficiency(LINTUL-2) crop model alongside statistical and geospatial analyses. This allowed us to assess the variability of maize water-limited potential yield and yield gap across 10 designated study sites, extending our evaluation to a national scale. Utilizing random forest regression, followed by ridge regression, we endeavored to uncover the principal drivers behind maize yield gap in Ghana. Our findings reveal a water-limited yield gap ranging from 18% to 74% across the 10 study sites and diverse fertilizer treatments. The combined approach of random forest and ridge regression, explaining 87% of the yield gap variability (RMSE = 472.6kg ha-1), highlights noteworthy trends. Notably, at a 5% confidence level, soil organic matter, soil carbon content, base saturation, and soil nitrogen content emerge as the most influential factors, explaining 13.81%, 13.80%, 11.56% and 10.25% of the maize yield gap variability under water limited conditions, respectively. The Ridge Regression underscores the significance of soil organic matter, base saturation, soil nitrogen content, nitrogen application, phosphorus application, potassium application, and sulfur application for reducing the maize yield gap. Our research also emphasis the potential of sulfur application as a secondary nutrient to effectively decrease the maize yield gap, particularly when integrated with macronutrients (NPK) and the kriging interpolation reveals high potential for maize production in the northern part of the country.
Etude de Marche de L’uree Super Granulee (USG) au Senegal
(2020) IFDC
Le projet Feed the Future Senegal Dundël Suuf vise à accroître la disponibilité et l'utilisation d'engrais de qualité grâce à des systèmes d'approvisionnement efficaces dirigés par le secteur privé. Ce rapport se concentre sur l'étude de marché de l'Urée Super Granulée (USG), un produit clé de la technologie du Placement Profond de l'Urée (PPU). L'étude évalue et cartographie l'offre potentielle et la demande pour l'USG, détermine le prix que les utilisateurs sont prêts à payer, et fournit des informations et des outils de prise de décision pour les acteurs du secteur privé.
Evaluation of Portable Soil Test Kits Promoted for Use by Smallholder Farmers to Make Site-Specific Fertilization Decisions
(2017-05) IFDC
Recently, there is growing interest in updating fertilizer recommendations for crops in most developing countries, particularly in sub-Saharan Africa (SSA) and southern Asia. Many farmers in this part of the world have been correctly advised that investment in fertilizer inputs should be preceded by proper analysis of soil chemical and physical properties in order to ascertain which nutrients are suboptimal. Currently, the most frequently used approaches to soil analysis are those offered by standard soil analytical laboratories, mostly through wet chemistry, using various extraction and digestion methods. Given the constraints associated with standard soil analytical labs for smallholder farmers, a simpler and quicker approach is needed for soil tests at the farm level in the developing countries. Portable soil test kits with their mobile features and low costs offer attractive options capable of providing tailored and real-time fertilizer recommendations for smallholder farmers in remote regions and in areas without functional laboratories. Many soil test kits are available on the market in most parts of SSA and southern Asia. Their predictive capacity of soil fertility is not consistent, which suggests the need for proper testing, calibration, and validation of the kit outputs against reference wet chemistry laboratory data and response curve of the crop to fertilizer. The overall objective of this work was, therefore, to evaluate selected soil test kits in terms of their performance against standard soil analytical labs to ascertain the reliability of data generated with these kits. Specific objectives were to: (a) evaluate selected soil test kits with respect to their ability to accurately analyze the macronutrients (nitrogen [N], phosphorus [P], and potassium [K]) and pH; (b) compare them with respect to crop performance (dry matter and nutrient uptake and (c) based on the results obtained, make recommendations for smallholder farmers, taking into account the above objectives. The following soil test kits were evaluated against standard laboratory tests: Hach, SoilDoc, and Kasetsart University soil test kits. The Kasetsart and Hach soil test kits were chosen based on their ease of use, performance, and cost. They have been used in several different projects in Rwanda, Ghana, Afghanistan, and Thailand and are currently being promoted by several projects in SSA and southern Asia. The third kit – SoilDoc – was added due to its widespread and aggressive introduction and use in SSA. Eight benchmark soils of different physicochemical properties were used to evaluate the soil test kits. During the second half of the FY16 project year, the soils were characterized by IFDC’s soil analytical lab and validated by Auburn University’s soil testing lab. Additionally, 40 archived soil samples from the North American Proficiency Testing (NAPT) Program (Soil Science Society of America quality control program for soil testing) were obtained from Auburn University. These samples were strategically selected to capture variations in soil texture, pH, and organic matter content and used to evaluate the accuracy of the portable soil test kits. Finally, a greenhouse experiment was set up to validate the soil test results coming from both the wet chemistry procedures of the soil analysis lab and those of the portable soil test kits by matching the soil nutrients, as determined by the soil test kits, to plant nutrient uptake. The study confirmed that the Kasetsart soil test kit was user friendly for most smallholder farmers. Proper use of the SoilDoc kit, on the other hand, would require the user to have considerable chemistry knowledge and experience in soil testing. The accompanying training manual did not provide some specific, detailed steps. This oversight could have led to erroneous results for people inexperienced in soil testing. However, it should be noted that SoilDoc advocates that its users participate in an intensive one-week training course prior to independent use. At the current stage of development, the SoilDoc kits should be handled by professional chemists familiar with soil testing or by personnel well-trained in using the kit. Results obtained from the analyses of the IFDC benchmark soils showed a good correlation (between the soil test kits and the standard wet chemistry analyses) for soil pH. Nitrate-N (NO3-N) showed reasonable correlation between standard chemistry and the soil test kit. However, in acidic soils, NO3-N values obtained with all three test kits were outside an acceptable range as determined by the KCl method for standard wet chemistry analysis. The results obtained for “available” P did not produce good correlations and were highly pH dependent. With soils of near-neutral pH, all three soil test kits produced P concentration values that were within an acceptable range of values for the standard lab analysis, but the kits performed poorly in acidic soils. The Hach soil test kit performed reasonably well for P with alkaline soil, whereas the other two performed poorly. Only the SoilDoc soil kit performed well for the determination of K. For the archived NAPT samples, the pH values determined using the three soil test kits were not significantly different from the pH values obtained by standard laboratory procedure. Of practical significance, the soil test kits more accurately differentiated among strongly acidic soils, acidic soils, near-neutral soils, and alkaline soils represented in the NAPT soil samples compared to IFDC’s benchmark soils. Although there was a very high correlation of the results of the nitrate analysis done with the SoilDoc soil test kit with those of the standard soil chemistry procedure (R2 > 0.96) for the NAPT samples, the actual values obtained from the SoilDoc soil test kits were consistently orders of magnitude greater than those obtained from the standard wet chemistry procedure. On the other hand, there was a poor correlation of the P concentration values with the standard laboratory Pi procedure. However, for the soil samples with near-neutral pH, there was a rather strong correlation of the “available” P values between the SoilDoc results and those of the standard laboratory procedure. Similarly to the soil nitrate determination with SoilDoc soil test procedure, the actual phosphorus values obtained were orders of magnitude (an average of six times) greater than those obtained from the standard wet chemistry procedure. For potassium determination, the SoilDoc was the only test kit that produced relatively good results, relative to the other two soil test kits. However, contrary to the results observed for nitrate and phosphorus, the actual potassium values obtained with the SoilDoc soil test kits were consistently smaller (about one-half) than those obtained from the standard wet chemistry procedure. The combined results suggest the need for a critical look into the extraction procedures for the various elements and the algorithms being used for the calculations within the SoilDoc software. As observed with the benchmark soils, the pH of the NAPT soils had a significant effect on the nitrate analysis using the Hach soil test kits. With the exception of the soils having strongly acidic pH, there was a very high correlation between the values obtained with the Hach soil test kits and those of the standard wet chemistry procedure. However, the actual soil nitrate concentration values from the Hach soil test kits were relatively smaller (an average of 65%) than those obtained with the standard wet chemistry procedure. For “available” P determination, the Hach soil test kit was the only one that produced good results. With the exception of the strongly acidic soil, determinations on most of the weakly acidic, near-neutral, and weakly alkaline soils produced values that were within the limits of those observed with the standard wet chemistry procedure. However, as observed with the benchmark soils for exchangeable K, the Hach soil test kit was not good enough to produce acceptable K values, compared with values obtained with the wet chemistry analysis. The results obtained with the Kasetsart soil test kit for the archived soil samples were rather inconsistent, as observed for the benchmark soils. For soils with medium to high nitrate concentrations, there was a partial match with the results of the standard wet chemistry procedure. However, there were several soil samples that were classified by the Kasetsart soil test kits as having very low to low nitrate concentrations that were contrary to the values obtained with the standard wet chemistry procedure. Similarly, for “available” P and potassium determinations, the kit produced good results for the soils with high concentrations but not for those with low to medium concentrations. There were samples with inherently low P and K concentrations that were designated as having high to very high concentrations when the Kasetsart soil test kits were used (and vice versa for some samples). This anomaly could be attributed to the soil pH and the organic matter content of the soil. The acidity of the soil likely affected the chemical extraction of the nutrients from the soil, but since the procedure used by the Kasetsart kit for analysis is entirely colorimetric, the organic matter content of the soil likely compromised the color of the soil extract, which affected the reading of the extract to determine elemental concentrations. Thus, the ranges of pH and organic matter content of soils within which the Kasetsart soil test kits produce accurate and acceptable values must be evaluated and specified in the user’s manual. Also, it is important to align the “available” P level designations by the Kasetsart soil test kits with the range of “available” P concentration values to be consistent with levels assigned by researchers for most soils. Thus, for now, soil fertility recommendations using portable soil test kits are not realistic. The value of these three kits is limited to giving baseline information on soil properties, particularly for pH, NO3-N, and “available” P for soils with a near-neutral pH. Also, by using the kits, farmers could, at least, identify the limiting and abundant nutrients within their field, assuming costs were minimal. Even if a consistently well-performing kit is eventually identified, before it can be widely used, field validation should be required based on a soil test kit approach that includes the blanket recommended fertilizer as a control to which the soil test kit recommendation is compared in terms of yield-enhancing efficiency and economic profitability. The economic feasibility of such an approach is questionable, particularly in light of the recent focus on spectral analysis as a replacement for standard wet chemistry. Regardless, for the immediate future, laboratory wet chemistry will remain the standard for identifying soils’ fertility and for improving fertilizer recommendations.
Existing and Potential Business Models on Last Mile Delivery of Seeds
(2021) Latha Nagarajan; Thomas Musembi; Alexander Fernando
The first part of this report builds on insights developed from the review of existing models of seed delivery systems available in sub-Saharan Africa (SSA) that serve most smallholder farmers. The first chapter begins with a summary of what the various models seek to address in the smallholder farmer operating landscape. A description of the various operating models identified in the formal1 and informal2 seed sectors is reviewed. The greatest responsibility for the model to function is borne by the principle or anchor entity that brings together other supportive partnerships to make the model function in seed delivery to farmers. The review recognizes that no one entity can satisfy all farmers’ needs identified in delivering quality seed at the last mile, but a series of formal and informal working relationships between various players in the seed value chain is necessary, each with different roles and responsibilities in the entire process. The report further identifies the dominant models as those operating at the informal seed system level, driven by commodity traders and community-based seed producers. Models operating in the formal seed system are responsible for the distribution of certified seed and are also captured in their various forms; they are described as government-backed models that include seed parastatal-based models and relief-based models that encompass seed aid, seed vouchers, and trade fair approach. Models based on aggregation are also described, and these include formal and informal farmer groupings, such as cooperatives that deal with input and output aggregation models that take the form of off-takers, contract farming, or out-grower schemes. The report further recognizes the agro-dealer model as being at the core of the certified seed delivery system, driven by a network of rural-based brick-and-mortar agro-dealer enterprises with varying capacities and operating structures. The Village-Based Advisor (VBA) model is also captured as one that helps to combine seed delivery together with on-the-ground extension service support.With access to finance being identified as a major factor affecting farmers’ productivity, various organizations have developed innovative models that offer agricultural inputs and other bundles of services on credit. These models are described in detail and include the One Acre Fund (OAF) social enterprise model, with other new and upcoming organizations taking an almost similar basic approach of input credit but with a distinctly different marketing route involving digital financing, intermediaries, and local networks. These include models by Apollo Agriculture, Tulaa, and Agri-wallet that recruit small-scale farmers every season with similar input supplies (seed and fertilizer), crop insurance, and extension services. Models that involve vegetatively propagated crops, namely Irish potato, sweet potato, and cassava, have been described separately so as not to diminish their importance and the special characteristic of this group. The seed systems in this category are farmer and trader-dominated, highly dependent on public research and development, and less formally regulated, with most of the delivery models taking a decentralized multiplication process approach to increase localized availability of disease-free planting material to farmers. The fodder seed systems have been described as underdeveloped due to limited progress in the livestock sector in which animals are kept on subsistence. There is, however, growing interest in this sector with the increase in demand for livestock products and the presence of new market actors for fodder seed in the market. The second part of the report proposes potential models that can be adopted and gives basic guidelines that should be embedded in them. These include scalability, sustainability, quality standards, incorporation of technological advancements, and the creation of a local ecosystem around the solution considering its inclusivity nature, i.e., considering gender, age, and disability of the population involved. Input into these models has also borrowed from the Fast-Moving Consumer Goods (FMCG) industry, which is very efficient in delivering goods from producers to consumers, even in very remote areas. Some solutions have been tailor-made to suit the special conditions and regulatory framework in the seed industry. The review further proposes and describes the Business Model Canvas 3 as a tool that will aid in understanding the proposed models systematically and concisely. The outcome will be insights about last-mile customers, important partnerships required, the value proposition offered, and through what channels the models hope to generate revenues while managing costs for sustainability. Various models have been proposed, which all focus on last-mile delivery solutions. These are labeled as the micro-franchising model; Regional clean seed producers with hub entrepreneur model; Dry legumes production financing model; Seasonal Rural Aggregation and Distribution Kiosks model; and the Motorcycle Distribution Agents model. The rationale for proposing each model is explained in-depth with an accompanying business model canvas. No one model will be able to deliver on all the needs of rural small-scale male and female farmers; what is required is a combination of different ingredients incorporating a market-based systems approach, learning from previous projects, multiple partnerships, borrowing successful models from other industries, taking advantage of technological advancements, and eventually taking calculated risks. Through experimentation with different approaches, we will eventually produce models that can drive more quality seed and related inputs sustainably to most small-scale male and female farmers in rural SSA.
Healthy Soils Change Lives
(2023) IFDC
Over the next few decades, global population growth will lead to a significant rise in food demand, with the world needing to feed nearly 10 billion people by 2050. This increased demand for nutritious food comes amidst escalating risks to global agriculture from climate change and dwindling land and water resources. To address these challenges, fundamental changes in food systems are necessary to sustainably nourish a growing population while minimizing agriculture's environmental impact. IFDC (International Fertilizer Development Center) plays a crucial role in tackling these issues by focusing on soil health improvement and technology transfer. Through partnerships with various stakeholders, including governments, private sector entities, and local entrepreneurs, IFDC works to develop and disseminate technologies that enhance soil fertility, increase agricultural productivity, and strengthen market linkages. By prioritizing long-term impacts and bridging the gap between research, smallholder farmers, and markets, IFDC aims to address global food security challenges and promote environmental sustainability.

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