ZNFU REACTION TO THE CHANGES INTRODUCED BY THE GOVERNMENT ON THE FERTILIZER INPUT SUPPORT PROGRAMME AND THE FOOD RESERVE AGENCY FOR THE 2013 MARKETING SEASON AND BEYOND
The 2012/2013 crop forecast results were announced against a cloud of uncertainty that a reduction in maize production was eminent, the reasons for this being the early stoppage of the rains, effects of army worms / replanting and late delivery of the Farmer Input Support Programme (FISP) inputs in most of parts of the country. We must therefore thank God almighty and the farmers, that the Agricultural Production Survey estimates carried out by the Union and subsequently re-validated by the government crop forecast projected that the country had produced just enough maize for consumption. Furthermore, because of the huge carryover stock, a surplus of about 453,995 MT was also declared after compiling the food balance sheet.
Following the Government announcement of policy changes on FISP and FRA, the Union held lengthy and countrywide consultations with its membership. Consequently it has now become necessary and imperative to state the Union position in respect of the recent Government radical reforms on the Farmer input Support Programme and the Food Reserve Agency (FRA) operations. Additionally, to clarify the Union position, on government decision to discontinue the consumer subsidy on mealie meal which was being extended through the millers and the FRA.
FARMER INPUT SUPPORT PROGRAMME (FISP)
Farming in Zambia is still beset with many factors which lead to high costs of production such as high cost of finance, poor extension services, lack of access to finance and credible agricultural research , fees, levies, numerous taxes, etc. The Union would like to state from the onset that it is not a crime for farmers to enjoy any form of subsidy being provided in the Agriculture sector because in the world today both poor and rich countries do subsidize their agriculture sectors in one form or another. Therefore the Zambian farmers do not need long lectures about how good or bad the subsidies are. Even within the region, subsidies to the agriculture sector are being provided. Therefore farmers must not be made to feel guilty for receiving subsidies in order to produce food for every citizen.
It is very easy to remove subsidies because anyone can do it but what is simultaneously and urgently required is to put in place bridging measures to avert a food security calamity and more importantly to find solutions to the challenges facing our poor small scale farmers in the rural areas in order to keep them alive. An in-depth analysis and full appreciation of what it takes to be a farmer in a rural area where basic social amenities and services are nearly absent and even sophisticated business models flop should have been done, and in full consultation and dialogue with those that such a decision was going to affect.
Farmers are cognizant of the fact that subsidies are not a charitable and perennial gift from Government; it is merely a cushion to the[ir] difficult business conditions where[brcause] the prevailing circumstances and environment are so harsh that no business model can flourish for one to make a living while alternative approaches and platforms are being incubated. Remember that not all the food produced by the farmers is consumed by them; it is used to feed the nation, thereby guaranteeing food security. Therefore from the onset Zambian farmers are not ashamed of receiving subsidies, because firstly they are not the only ones in the world receiving subsidies, and secondly and most importantly they really deserve it under the circumstances at this stage.
Provision of subsidies to agricultural production in a country like ours, is not only necessary but imperative if we are to reap the full benefits and multiplier effects agriculture has to the economy. The Union knows no country in the world today that developed its agriculture sector sustainably without a strategic and positive intervention to its agriculture sector. Certainly the removal of subsidies has also the downside of it; what are the opportunity costs? As such, the relevance of the FISP programme is unquestionable because there is general agreement that a majority of small scale farmers are not able to access credit from banks or other formal lending institutions. However, reforms to improve targeting of beneficiaries have been demanded by stakeholders, the Union inclusive for some time to eliminate all forms of abuse or any rent seeking behavior.
To streamline this, the Union has been a proponent of the implementation of the E-voucher system as it would save government resources by eliminating procurement, transportation and other administrative costs associated with FISP administration. We therefore, welcome the Ministers’ pronouncement that 241,000 farmers will be serviced through the E-voucher system. To this effect, Government should expedite the work of the service provider engaged in designing this system and attach time frames to the action plans that should lead to implementation of the E-voucher system.
IMPLICATIONS AND CONSEQUENCIES TO THE ILL-TIMED REDUCTION OF SUBSIDIES TO FARMERS
The Minister announced that the farmer contribution to FISP has been increased from K50 to K100 which means Government resources towards the FISP has reduced. Furthermore, the Minister announced that farmers would be weaned off FISP. Although this concept is not new as acknowledged by the Minister, in the past, it has not been possible to wean off farmers because of the absence of alternative programmes for small scale farmers to access finance. Therefore, our timely warning is that maize production would decline drastically and the national food security situation would be put at risk if small scale farmers are weaned off FISP without putting in place new alternative programmes for financing agriculture. This would in turn see many more households slide into the social security safety net category and ultimately increase expenditures on social welfare schemes.
Already in the current season maize production declined partly due to poor handling of FISP by Government. Rural households should be supported to engage in productive farming and contribute towards job creation through the multiple effects throughout the value chain. Providing support to poor rural farmers in form of agricultural inputs is not a subsidy but a mandatory responsibility on the part of Government. To run away from this responsibility without providing an alternative condemns the farmers to untold poverty and misery and puts the agriculture sector as a whole on a dangerous path.
In view of this, it is difficult to envisage that the reduction in government expenditure towards FISP will encourage crop diversification. The Union has been advocating for crop diversification under FISP and the E-voucher would serve farmers better in that farmers engaged in different crops including livestock could redeem the E-voucher against inputs of their choice to reduce the cost of production thus encouraging diversification.
The Union position is that government cannot afford to reduce FISP or indeed wean off farmers from FISP without an alternative institutional framework to support small scale farmers countrywide. This is where really work begins if it has not yet and strategic thinking is required, because the easier part, which is the reduction of subsidy, pending ultimate removal, has already been done. The Union makes itself available to work with Government to providing solutions as to the way forward if consulted upon. It is in the interest of the Union to see to it that Zambian farmers continue producing enough food for the country and also prosper as practitioners in their own farming business and the Union is convinced that this is equally the desire of the Government as well. As stated earlier, development of agriculture the world over, where it has grown has sprung from deliberate government positive interventions including production subsidies. The Union does not support subsidies on consumption thus we support Government position to remove the subsidies on mealie- meal. But, the Union supports the Government intentions to reduce and subsequently remove subsidies to the agriculture sector ONLY IF alternative financing programs targeting our rural poor farmers are in place, such as rural banks where farmers can access agricultural inputs without requirements for collateral as security to loans. The Union holds a passionate view that agriculture sector must not be run like a corporate entity because of the serious nature of issues entangling the sector such as high levels of poverty, poor markets, food insecurity and difficult life generally in rural areas. Therefore it is Government social responsibility to look after its own people including those in rural areas who are found at the tail-end of social services/amenities and living standards.
FISP BARTER ARRANGEMENT SCENARIOS
Re-modeling FISP, the Minister of Agriculture and Livestock, Hon Sichinga presented 3 scenarios through which farmers will be able to access FISP. To understand the implications of the Government proposed changes, the Union considered the presented options as follows;
1st Scenario; two (2) bags of maize in exchange for one (1) bag of fertilizer (worth KR200). Using this barter system a farmer ends up paying KR130 per bag of fertilizer after parting with 100 Kg of maize while government contributes K70 as subsidy.
2nd Scenario; a farmer pays KR100 cash towards a bag of fertilizer (costing KR200), and government pays the other KR100. The cash paid by the farmer is equivalent to 75 Kg of maize.
3rd Scenario; a farmer pays KR100 in form of maize as FISP contribution. In this case, a farmer would pay 1x 50kg bag of maize and top up by a 25Kg bag of maize equivalent to K35 to reach KR100. Under this scenario a farmer parts with 75 Kg of maize for 1 bag of fertilizer.
THE ZNFU POSITION;
Clearly scenario 1 is expensive as the farmer pays K130 as contribution towards the one bag of fertilizer in comparison to scenario 2 or 3 where a farmer pays K100 in cash or 75 Kg of maize in exchange for the same bag of fertilizer. Besides this, the variation in fertilizer prices entails that the contribution will not be on a 50:50 basis but a moving target depending on the fertilizer price. The Union also questions as to whether the fertilizer will be positioned in the FRA depots for collection as FISP farmers supply the maize. In this regard, it is evident that the FISP barter policy was not properly thought through and will only confuse and send wrong signals to farmers. The Union is a strong ardent proponent of stakeholders’ consultations. This approach has not only worked for the Union in terms of soliciting views of members in coming up with consolidated positions, but it has worked in many institutional setups as it is globally accepted business norm. The lack of consultation with a huge constituency of the farming community expected to be affected by such a drastic policy shift in maize marketing has left the farming community shocked and confused.
BARTER SYSTEM AS MODE OF PAYMENT FOR ACCESSING FISP INPUTS
The proposal for farmers to barter their crop for fertilizer is rather unattainable due to the fact that farmers use maize incomes to meet other spending needs other than fertilizer, and that spending decisions should not be decided by government. Besides this, the time value of money has been ignored completely because farmers cannot use fertilizer as a store of value as the monetary value tied up in form of a bag of fertilizer has an opportunity cost, such as, interest that could be earned on the money in a bank.
The Union is also aware that government is encouraging farmers to open bank accounts in their respective districts with a view to facilitating payment transactions and create linkages with lending institutions. Therefore, making it mandatory for a majority of FISP beneficiaries to barter maize for fertilizer is demeaning to farmers and is simply not smart agricultural practice in modern times when farmers are being encouraged to think of farming as a business. Springing up such a policy just like that in this era is tantamount to taking farmers back to the Stone and Iron age in pre-colonial times where money was not a media of exchange. The farmers do acknowledge that change is constant but not this kind of change where farmers are forced to be reminded of the kind of commerce which was practiced by their ancestors.
It is clear that if the barter system is implemented, where 2 bags of maize will be exchanged with one bag of fertilizer farmers will be subsidizing Government. The farmers have produced maize under very hard conditions, and then forced to part way with an additional K30. This kind of primitive approach no doubt will breed untold corruption and will be difficult to implement. Already FRA struggles to provide security to it s maize stocks due to capacity constraints. Where is capacity going to come from to secure both maize and fertilizer at the same time? The Union envisages that the same maize from FRA depots will be stolen and exchanged several times over for fertilizers. This is unfair and misplaced policy and it is NOT too late in the day to reverse this policy decision for the sake of preserving the farmers’ commitment to continuously produce food for the nation and most importantly to make them feel that they are part of the modern times of doing commercial transactions in Zambia today.
FREE 10KG BAG OF MAIZE SEED
The Government plans to subsidize the 10kg seed pack by 100 percent in order to encourage farmers not to reduce their production of maize while diversifying into other crops.
This is a good move in that while sustaining maize production, it will also sensitize farmers on the importance of using certified seed. However, the Union is of the view that government should consider introducing free seed distribution of many other crops to encourage farmers diversify to other crops.
FOOD RESERVE AGENCY (FRA)
Government announced that operations of the Food Reserve Agency (FRA), would be restricted to securing strategic reserves in line with the Act, as well as to purchase any excess maize that may remain after private sector participation. Furthermore, the FRA maize floor price was pegged at KR65 per 50kg bag for the 2013/2014 crop marketing season. The FRA price is intended to encourage farmers to continue the production of maize and to ensure that FRA is able to buy the desired quantity.
The Union supports the move by government to limit the maize buying activity of the FRA to securing the national strategic reserve (of about 500,000Mt for the 2013/2014 crop marketing) in line with its original mandate. However, ZNFU is of the view that unpredictable government policy on maize exports will not encourage private sector participation which could improve producer prices as exporters take advantage of the higher maize prices in the export markets. This will not only raise farmers’ incomes but also contribute to poverty reduction.
On the other hand, pricing of maize should result in a positive economic return to a farmer to incentivize farmers to continue farming. The tough conditions that farmers faced in the past season and the rise in maize export parity prices should translate into better maize prices for farmers hence the FRA price of K65 per 50Kg is quite low in comparison to the prevailing export parity prices. The Union is aware as well as Government that poor marketing arrangements are partly responsible for the continued decline in maize production because farmers are always paid late by FRA for their commodities. Therefore the Union demands that this season farmers must be paid on time, because it is painful and degrading to farmers when they spend nights in the cold at FRA depots and banks to sell and get paid for their crop.
REFORM OF MARKETING LEGISLATION
Reforms of the FRA have been anchored on consultations which will culminate into the enactment of the Agricultural Marketing Act. However, the entire agriculture community is concerned over the delay in enactment of this Act.
The Agriculture Marketing Act provides a framework for a greater role for the private sector participation in agricultural commodity marketing in Zambia and has been awaiting enactment for over five years now. ZNFU is therefore frustrated by the Ministers’ statement that “in the medium to long term, Government is likely to enact legislation that will govern the marketing of agricultural commodities” which suggests apparent lack of commitment by government to implement the Act in the short term. ZNFU would like to urge government to expedite implementation of the Agriculture Marketing Act.
ZAMBIA NATIONAL FARMERS’ UNION