Farm input subsidy programmes remain popular but problems of financial sustainability are faced

22 January 2012

The new government of Zambia has committed itself to continuing with the Farmer Input Support Programme (FISP), but with strengthened monitoring mechanisms to ensure that programmes objectives are efficiently attained.

The government has also committed itself to rehabilitating feeder roads, bridges, dams, canals, dip-tanks and on-farm storage facilities, as well as improving market opportunities for farmers. The Food Reserve Agency is to act as a purchaser of last resort, complementary to the role of private sector efforts. The government further committed itself to strengthening agricultural research and extension services as well as animal disease control programmes.

Elsewhere in the region, it was announced in June 2011 that over 800,000 communal area farmers in Zimbabwe would be assisted through an EU-financed US$100-million input support scheme for the 2011/12 crop season. The selection of farmers supported under the scheme is to be transparent, with measures to ensure that the programme is not politicised and inputs are not distributed according to political allegiance. The programme is also aimed at assisting in the rehabilitation of irrigation systems.

These commitments form part of a wider system of targeted input subsidy programmes across the eastern and southern Africa region, which it is hoped will help to boost agricultural production.

However, in October it was reported that the government of Malawi was reducing the scope of its Farm Input Subsidy Programme (FISP), reducing eligibility from the 1.6 million farmers that in 2010/11 ‘received vouchers to buy heavily subsidised fertilizer and maize seed’, to only 1.4 million farmers in the 2011/12 season.

Government officials claim that the reduction in the size of the programme ‘reflects its success in lifting the beneficiaries out of poverty’. However, civil society groups question this interpretation. It is expected that the downsizing of the programme will adversely impact on levels of production, particularly in the face of lower tobacco prices, the principal cash crop from which smallholder farmers can generate revenues to purchase non-subsidised inputs.

In part the downsizing of the programme is linked to withdrawal of financial support by major donors on the back of wider governance concerns. The situation is compounded by government fuel shortages which are hindering the distribution of inputs under the FISP.

Further south in Swaziland, problems with government financing are reported to have ‘forced the government to put on ice the agricultural input scheme’, affecting 7 out of 10 Swazi farmers, all of whom farm on Swazi Nation land. This land tenure system means land cannot be used as collateral by farmers, and hence loans cannot be raised for the purchase of inputs or for investment in land improvements (e.g. irrigation).

Editorial comment

Input subsidy programmes can play an important role in overcoming production constraints on smallholder farmers, thereby boosting productivity. However, by fuelling input cost inflation they can over time begin to place an insurmountable burden on the state budget, unless other measures are taken to improve the functioning of supply chains to enhance the revenues retained by farmers from their commercial transactions.

This can in some instances require government policy measures to strengthen the functioning of supply chains (e.g. through supporting the development of strong farmer organisations, providing an appropriate regulatory framework for contract farming, or using trade policy tools to encourage greater local sourcing of foodstuffs), as well as trade policy measures to reduce the impact of global and regional price volatility on national markets.

The deployment of these complementary measures can over time reduce farmer dependence on input subsidies, thereby containing the financial costs of input supply programmes and eventually enabling them to be scaled down.

This provides an important background both to the ongoing EPA negotiations, where certain provisions would inhibit the use of traditional trade policy tools and intra-regional trade negotiations dealing with the elimination of non-tariff barriers to trade.

Copyright 2018, CTA. Technical Centre for Agricultural and Rural Cooperation (ACP-EU)