African Crop Science Journal African Crop Science Society ISSN: 1021-9730 EISSN: 2072-6589 Vol. 5, Num. 1, 1997, pp. 93-98

FORUM

A green revolution frustrated: lessons from the Malawi experience

S. J. Carr

Private Bag 5, Zomba, Malawi

(Received 20 November, 1996; accepted 17 January, 1997)

Code Number: CS97012
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High population density, small farm size and a monomodal rainfall pattern are the main determinants of smallholder farming patterns in Malawi. With over 70% of farmers having total land holdings of less than 1 ha, the farming system is dominated by continuous cropping with maize without fallow and very little rotation. Consequently the nutrient capital of the soil is being depleted and yields are declining. For many years, the government's response to this situation has been to intensify technology based on the use of hybrid maize and inorganic fertilisers. Originally, the entire effort of the extension staff was devoted to this strategy, supported by subsidies on credit, input and output prices. As a result, the use of fertiliser and hybrid seed expanded rapidly and, in the 1992/93 season, this technology had been adopted on almost half of the total maize area. Yields of fertilised hybrid maize are presently about three time those obtained under traditional practices, and a number of international observers classified Malawi's experience as an example of an African "Green Revolution". Predictions were that by the end of the decade up to 70% of the maize area would be fertilised and planted with hybrid seed. Such claims and predictions took inadequate account to the cost to the tax-payer of maintaining these distortions once the technology was adopted on a large-scale. Subsidies have had to be dropped, both input and output markets have been liberalised and the currency has been floated. The result has been that the small holder sector in 1995/96 was able to purchase hybrid seed sufficient to plant only 7% of the maize area, whilst per capita sales of fertiliser for use on maize were lower than they were fifteen years ago. The rapid rise in the price of fertiliser has been unmatched by a rise in grain prices because these are controlled by the purchasing power of a poor population. Increasing fertiliser use has been the engine of growth of agricultural production in much of the world during the past thirty years. The World Bank, among others, has stressed the need for a rapid increase in fertiliser use in Africa if its expanding population is to be fed. It has stressed that the removal of subsidies, the liberalisation of markets and sound currency exchange policies are the vital pre-requisite for achieving this goal. The Malawian experience provides ominous indications that such policies may not achieve their desired results, and that Sub-Saharan Africa may only be able to make limited use of the fertiliser technology which has transformed so much of the world's agriculture. This paper provides a detailed analysis of the figures and factors involved in this frustrated Green Revolution and points to their relevance to other countries in the region.

Key Words: Fertiliser subsidies, maize, market liberalisation, Sub-Saharan Africa

RESUME

Une forte densite de population, des petites tailles des fermes et un regime de precipitation monomodal sont les determinants les plus importants pour les petits agriculteurs au Malawi. Avec plus de 70 % des agriculteurs qui possedent moins que 1 ha, les systemes agricoles sont domines par une culture continue du mais sans friche et avec peu de rotation. En consequence, la reserve nutritive du sol et les recoltes diminuent. Pendant plusieurs annees, le gouvernement a intensifie la technologie en se basant sur le mais hybride et des engrais inorganiques. Les efforts de vulgarisation se sont concentres a cette strategie, supportee par des subventions de credit, et des prix d'achat et de vente. Le resultat etait que l'emploi des engrais et des graines hybrides augmentait rapidement et dans la saison de 1992/93 cette technologie a ete adoptee par presque la moitie de la zone de production de mais. Les recoltes du mais hybride augmentaient d'environ trois fois celle obtenue par les pratiques traditionnelles et plusieurs observateurs internationaux ont classifie l'experience de Malawi comme l'exemple "d'une revolution verte Africaine". On a pronostique qu'a la fin de la decennie, plus de 70 % de la zone de production de mais serait plante avec le mais hybride. Ces predictions tenaient insuffisamment compte des depenses des contribuables pour maintenir cette distortion des que la technologie serait adoptee a grande echelle. Les subventions devaient baisser, les marches d'intrants et de produits ont ete liberalises, et le monnaie flottait. En consequence, en 1995/96 les petits agriculteurs etaient capable de seulement planter 7 % de la zone de production de mais pendant que la vente des engrais par capita etait plus bas qu'il y a 15 ans. Les prix des engrais n'augmentaient pas simultanement avec le prix du mais parce qu'ils sont controles par la capacite d'achat de la pauvre population. L'emploi eleve des engrais etait le moteur devant le developpement de la production agricole dans la plupart des pays pendant les 30 annees passees. La banque mondiale, parmi d'autres, a stigmatise le besoin d'une augmentation rapide de l'emploi des engrais en Afrique pour nourrir sa population expansive. Elle a insiste sur la reduction des subventions, une liberalisation du marche et une politique saine de taux de change comme conditions vitales pour atteindre les objectifs. L'experience Malawienne donne la preuve que cette politique ne peut pas atteindre les resultats desires et que l'emploi des engrais en Afrique sub-Saharienne est limite. Cet article donne une analyse detaillee des parametres qui se rapportent a cette revolution verte ratee et des lecons a tirer pour d'autres pays dans cette region.

Mots Cles: Des subventions d'engrais, le mais, la Banque Mondiale, l'Afrique sub-Saharienne

INTRODUCTION

Malawian agriculture embodies a number of features which make it unique in Sub-Saharan Africa and these have strongly influenced development policies in the sector over the past twenty years. These mostly derive from high population densities combined with a single fairly short rainy and cropping season each year. This paper elaborates on these features, on government response to them and the donor macro-economic policies which have impinged upon the farming sector. Although Malawi differs from many of its neighbours in terms of basic resources, there are indications that its experience with donor policies may provide lessons for other countries on the continent.

The basic scene. A useful starting point for understanding some of Malawi's problems is a comparison between a densely populated area in Kenya with one in Southern Malawi. This is given in Table 1. The differences are striking and the Malawian sample has:

- over double the population density;
- smaller farm size;
- one twelfth of the area under a cash crop;
- double the percentage of area under maize; and
- one quarter of the livestock units.

Table 1

A combination of a single short farming season, shrinking farm size and declining yields has resulted in 60% of farm households running out of home produced staple food, three to four months before the next harvest (World Bank, 1996). A majority of farm households are, therefore, net purchasers of their staple food. Because most of these do not have a high value cash crop to supply surplus cash for buying food, their purchasing power during the "hunger season" is low. This is crucial to an understanding of the current situation in Malawi.

Government response. The natural response by the government of Malawi to this situation has been to intensify landuse. This has taken two forms. The first one has been the breeding and popularisation of hybrid maize suited to both the climate and food preferences of farmers. The second has been a major campaign to encourage farmers to use fertiliser and to provide credit to help in its adoption. The following sections will consider the historical developments of each of these initiatives.

Hybrid seed. Early efforts of intensifying maize production focused on the dissemination of composite maize. This followed the same pattern as in many other countries in Africa and never achieved widespread adoption. Under situations in which a shortage of nutrients was the dominant constraint on maize yields a switch to composite seed gave too few benefits to attract great popular interest.

Small quantities of long season hybrids related to SR52 were used by farmers as a cash crop, but the area planted to these did not rise above 7% for most of the 1980s until the National Seed Company of Malawi introduced a short season hybrid (NSCM 410, related to Zimbabwe hybrid 201). This introduction coincided with some short growing seasons and, with the increased availability of fertiliser, there was a rapid farmer response and a trebling of hybrid seed sales . The government breeders then focused on the production of a hard endosperm hybrid to meet consumer preferences which further enhanced the popularity of the hybrids. The impact of this development on production was considerable given that on average the yield of fertilised hybrids in Malawi is over three times that of unfertilised local maize (World Bank, 1995). The majority of farmers who use hybrid maize also apply fertiliser. Over 90% of hybrid maize is fertilised (CIMMYT, 1995). On the richest soils, there is some advantage to using hybrid seed without fertiliser. However, with the cost of hybrid seed being 15 times the current sale price of grain, it does not pay to use unfertilised hybrid seed on soils of average to low fertility which now occupy a larger area of the country. Food and Agriculture Organisation of the United Nations (FAO) trials on such soils have yielded an average increment of 250 kg per ha by switching from local seed to hybrid. This is only two thirds of the yield required to cover the cost of hybrid seed.

Fertiliser. As farmers became aware of the steady decline in the fertility of their soils, resulting from continuous maize cropping, there was a growing interest in the use of fertilisers. Not all fertilisers sold to smallholders are used on maize so that it is not possible to give fully validated figures for that crop. It is possible to have a reasonable estimate, and this shows that the fertiliser nutrients used on smallholder maize rose from approximately 19,000 tons in 1985/86 to around 40,000 tons in 1992/93. What became clear over this period was that farmers all over Malawi were considering inorganic fertiliser as top priority in any discussion of strategies to improve the productivity of their farms. The dominant constraint to fertiliser use was not knowledge or demand but cash resources. It was for this reason that both government and donors gave increasing attention to credit in the late 1980's.

Credit. In order to foster its policy of intensifying maize production through the use of hybrid seed and fertiliser, government embarked upon an ambitious credit programme. This was based upon grouping farmers into clubs whose members were mutually responsible for repaying the loan. If a club defaults then no member of that club could obtain further credit even though their own loan had been repaid. In order to organise this major initiative, all the agricultural extension staff were diverted from other tasks to allocate 85% of their time on credit organisation and collection. In this latter task, they were assisted by officials of the ruling party. These were able to exert pressure on farmers to repay. In consequence, Malawi gained an enviable reputation of achieving smallholder credit repayment rates of over 95% for a number of years (Conroy, 1992). By 1987/88, 243,000 farmers were borrowing for maize inputs, and repayment was 94%. In the following year, the number of borrowers jumped to 301,000 but the control over repayment could not be maintained and credit recovery dropped to 79%. The slackening of repayment conditions led to a further surge in borrowing so that by 1992/93 there were almost 388,000 farmers taking inputs on credit. This represented a quarter of the total farming population.

The credit was subsidised in two ways. Firstly, the level of interest being charged was insufficient to cover the cost of inflation, bad debts and the running expenses of the Smallholder Agricultural Credit Administration (SACA). In addition, SACA had the free use of 2,000 extension staff much of whose cost should have been charged against the credit. There has been no serious attempt to quantify the level of this subsidy but there is no doubt that farmers were paying interest rates which were only a small part of the real costs of the credit.

A green revolution? The rapid increase in hybrid seed and fertiliser use which was encouraged by a sharp rise in the supply of credit to smallholders led a number of observers in the World Bank (World Bank, 1994) and in CIMMYT (Centro Internacional de Mejoramiento de Maizy Trigo) to refer to developments in Malawi as being a Green Revolution. Prominent among these are "Maize is Life: Malawi's Delayed Green Revolution" by M. Smale of CIMMYT (Smale, 1995). In this, the author describes "Malawi's Emerging Green Revolution: 1988-93". This assumption is based on the dramatic increase in the hybrid area and output over that period. Using the same time period, Smale and Heisey (1994) have predicted that, with the introduction of flint hybrids, there will be a continuing rapid uptake of fertilised hybrid technology in Malawi. The authors predicted that with a "pessimistic" scenario, 40% of the maize would be fertilised hybrid by 1996 and 48% by the year 2000. The "optimistic" scenario is given as 50% and 65%, respectively.

Similar parameters are used in CIMMYT's Research Report No. 4 which stated

that a "realistic scenario" would be an adoption ceiling of 75% with most of that gain accruing before 2005. Central to this theory is the contention that price and risk factors do not make this technology unacceptable to poor farm households and that the technology "is indeed appropriate for most smallholders". These papers have received wide attention over the past two years and given the impression that Malawi has achieved a Green Revolution under rainfed farming conditions in a difficult environment.

The reality. Unfortunately, the reality is a far cry from these glowing predictions. The rapid uptake of fertiliser and hybrid seed between 1988-92 which has been used to justify the Green Revolution estimates were the product of five main factors. The first was the overt subsidy on fertiliser which ranged from 25 to 30% during the period under discussion.The second was the large subsidy on credit, referred to above, which kept interest rates well below a realistic level.

The third was an implicit subsidy on output prices reflected in the losses made by the monopolistic grain marketing board on its maize account. This was a result of pre-set prices to growers which could not be covered by the retail price for grain which they were compelled to charge.Fourthly, towards the end of the period, there was a considerable overvaluation of the Kwacha (Malawian currency) which led to artificially lowered prices of fertiliser.

The fifth, and perhaps most important reason, was the changing political climate which allowed farmers to obtain credit even when they had defaulted, and gave them the impression that there would no longer be any coercion if debts were not paid. In 1991/92 farmers did not pay for 78% of the fertiliser which they took on credit whilst in the peak usage season of 1992/93 they only paid for 16%. Thus in the critical years for the calculations of future growth in fertiliser uptake the major part of the inputs which farmers used were given to them for free. Table 2 compares the "use" figures which have been quoted in literature with the actual purchase of fertiliser. This shows that in the key years between 1991 and 1993, the purchase of fertiliser nutrients per head of population had dropped dramatically from a decade earlier.

Table 2

The inevitable outcome of the non-repayment of loans was the almost complete collapse of SACA. The number of borrowers dropped from 388,000 in 1992 to 45,000 in 1993. This resulted in a dramatic drop in fertiliser use to a little more than half of the previous year. At this point, Malawi came under increasing pressure from donors to liberalise its economy. This impinged upon maize farmers in several ways.

Donors demanded that private traders be permitted to enter the maize trade in competition with the parastatal marketing board (ADMARC). Traders are unwilling to make the losses suffered by ADMARC and, with their selling price governed by the purchasing power of a poor rural population, they offer farmers a price between 20 and 30% lower than the "official" floor price, which government has not been able to defend. This drop in output price has sharply narrowed the profit margin on hybrid maize.

Following the collapse of SACA the donors insisted that any further help with smallholder credit would have to be linked to a commercial operation free of subsidies and with rigid standards or repayment. The result of this initiative has been a dramatic decline in the number of farmers receiving credit for maize inputs (fewer than 25,000 in the current season) and a trebling of interest rates.

The demand that the inputs markets should be liberalised led to the proliferation of private suppliers of fertiliser and seed. Under these circumstances it is not possible to subsidise inputs and farmers have to pay the full commercial price.

The floating of the kwacha resulted in a five fold devaluation with a dramatic impact on fertiliser prices. With the removal of the subsidy and a market controlled exchange rate, the cost of the most popular fertilisers for maize increased from K1,600 per ton in 1994/95 to K6,400 in 1995/96. At the same time, the price received for maize by most farmers remained unchanged. As a result, it now takes 22 kg of grain to pay for 1 kg of N (from CAN the most common nitrogenous fertiliser) at the market price, and 14 kg at the "official" price. In Malawi, it is expected that, on average the application of 1 kg of N will produce 20 kg of incremental maize when used in hybrid plants in the presence of adequate phosphate. If the cost of the seed and the P are added to the current cost of N, it is quite clear that there will be a negative return to the use of fertilised hybrid maize as a cash crop. The situation is somewhat more attractive for food deficit households buying maize at a higher price, but it is these households which do not have cash to purchase inputs. Table 2 illustrates the dramatic decline in fertiliser purchases for maize per capita which has resulted from these policies. Instead of the predicted 40 to 50% of the maize area being under purchased hybrid seed in 1996, the actual figure was 7% that of 15 years ago.

Malawi has done what was expected of it in terms of liberalisation and the elimination of distortions. The outcome has not been a Green Revolution but the collapse of government strategy of intensification of maize production. The basic reason for this is that the price of inputs is governed by international market forces and the macro-economic policies of government. The output price of maize in a free market is dependent upon the purchasing power of poor people. At the price of maize which would give a reasonable return to farmers, the poorest 30% of the rural population would be almost completely cut off from their basic food and the purchase price of a kg of maize would be less than the rural minimum wage for a day's work.

At present, neither the Malawi government nor the donors have come up with any suggestions as to how to overcome this impasse which threatens to undermine the fragile national food security which the country now enjoys. For the past two seasons, the donor community has given free fertiliser to hundreds of thousands of farmers which has offset the shock of the liberalisation. This year there are no free handouts and the country will face the challenge of feeding itself with a large reduction in the area of fertilised hybrid maize. Although Malawi embodies a number of unique features, there will be other countries which will face a similar situation as international market forces determine input prices and local purchasing power sets the limit to the farmers' income. A study of Malawi's frustrated Green Revolution could provide some salutary lessons.

REFERENCES

ASA, 1992. Government of Malawi Annual Survey of Agriculture for the period 1988. 88-92.

CIMMYT, 1995. Maize Technology in Malawi. Research Report No. 4. CIMMYT.

Conroy, 1992. The Economics of Smallholder Maize Production in Malawi with Reference to Hybrid Seed and Fertiliser. Unpublished PhD Thesis. Manchester University.

Smale, M. 1991. Chimanga Cha Makolo. CIMMYT Economics Working Paper 91/04.

Smale, M. 1995. Maize is life: Malawi's delayed Green Revolution. World Development 23: 819-831.

Smale, M. and Heisey, P.W. 1994. Maize research in Malawi revisited: an emerging success story? Journal of International Development 6:689-706.

Tiffen, M., Mortimore, M. and Gichuki, F. 1994. More People Less Erosion. Overseas Development Institute.

World Bank, 1995. Strategy Options for the 1990's. Malawi Agricultural Sector Memorandum.

World Bank, 1996. Malawi Human Resources and Poverty. Report No. 15437 MAI.

World Bank, 1994. Agricultural Extension and Planning Project. Project Completion Report.

Copyright 1997 The African Crop Science Society

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