Four programs implemented by MoFA (AMSEC, fertilizer subsidies, block farms, and NAFCO) account for the bulk of the Ministry’s expenditures. Upon recommendation from the Joint Sector Review, the Ministry asked a team of researchers from IFPRI, GIMPA, and Smartteam to carry out an assessment of these 4 initiatives to guide government policy and improve their performance. A draft of this report was completed this week and MoFA is circulating it for feedback. A few key findings and recommendations are shared below and the full draft report can be found here.
Fertilizer subsidy program
- There has been increase in application of fertilizers due to the subsidy program
- Farmers who applied fertilizer on their farms obtained not only higher yields but a positive net income over those who did not use fertilizer
- The program led to an increase in the volume of trade and number private-sector actors in the market
- The overall future economic return of the program is positive, with an estimated benefit-cost ratio of 1.7
- To forestall delays in the fertilizer importation and distribution, it is recommended that government starts the negotiations with the importers early so that the fertilizers are in stock in the regions and districts prior to the planting season
NAFCO program
- The evidence shows that there was stabilization of maize price in 2010 compared to preceding years’ prices, but additional data is needed for further research on the role of NAFCO in this stabilization
- Although NAFCO is financially viable under current conditions projected in the short term, a decline in its revenue could pose problems and likely force the government to spend more on its operations than intended
- NAFCO should carefully track it revenues, make realistic projections, and find ways to minimize its variability
- NAFCO should also put in place a transparent information system about its prices, identification of its buying agents, and the location of any buying and selling depots
Block farms program
- Participating farmers have attested to the benefits they received including access to low-cost credit in the form of inputs and mechanization services, which have led to greater productivity, production, and incomes.
- Farmers need to be encouraged to pay back their loans to raise the currently low recovery rates, otherwise it is difficult to see how the government can sustain the program
- Similarly, it is difficult to see how farmers will be able to buy and pay for such inputs and services on their own
- Contrary to expectations, the youth have not been a strong focus of the program as it was conceived, because, being relatively inexperienced, the youth are considered a riskier venture in terms of being able to properly manage the farm, obtain decent yields, and pay back loans
AMSEC program
- The program has contributed to improving the access by all farmers to those services and raised the average area mechanized by the surveyed farmers from 5.3 acres per farmer in 2008 to 7.8 acres per farmer in 2010, representing a 21 percent increase per year in the area mechanized
- Because the demand for mechanization services far outstrips the demand, the program has not crowded out private-sector investments in the market
- The newer tractors associated with the AMSEC program seem to break down more frequently (17 – 64% more) than those operated by non-AMSEC agents, which is due to lack of skilled operators, mechanics and spare parts for the newer brand of tractors imported via the program
- Expanding and deepening the training offered by the Agricultural Engineering Services Directorate (AESD) of MoFA is inevitable, particularly when different brands of tractors than what is commonly used are imported on such a large scale
Program interaction effects and overall economic viability
- The presence of NAFCO seems to enhance the positive effects of the other programs.
- The important implication of this is that, by offering a fixed and assured output price when farmers make resource allocation decisions at the beginning of the production stage, it lowers farmers’ uncertainty about future prices and permits higher purchases of inputs.
- The roles of the AMSEC, fertilizer and block farms programs seem to be inherently linked to the success of the NAFCO program by ensuring higher yields and outputs
- Even more importantly, how much the fertilizer subsidy for example may also be contributing to more stable production growth to meet the growing consumer demand remains an important question to address when trying to isolate the direct effects of NAFCO activities on prices