IFPRI Malawi together with the MwAPATA Institute recently organized a roundtable discussion to facilitate a conversation around the key drivers of the surge of fertilizer prices recently experience by Malawi and potential policy options available to the Government. This comes on the back of current discourse in the media on the same and with the realization that if the increase in fertilizer prices reduces the availability of fertilizer in Malawi, it could lead to a poor harvest in the upcoming growing season. The key presentations were given by Dr. Christone Nyondo, Research Fellow at the MwAPATA Institute, and Dr. Jan Duchoslav, Research Fellow at IFPRI Malawi. The panelists were Dr. Godfrey Ching’oma, Director of Crop Production at the Ministry of Agriculture, Mr. Dimitri Giannakis, Chairman of the Fertilizer Association of Malawi, Mr. Jacob Nyirongo, CEO of the Farmers Union of Malawi (FUM), Hon. Rhino Chiphiko, General Manager of ADMARC, Mr. Levison Chirwa, Deputy Director, Ministry of Finance, and Hon. Gladys Ganda, Chairperson of the Parliamentary Committee on Budget and Finance. The concluding remarks were made by Dr. Joseph Nagoli, Director of Knowledge and Learning at the National Planning Commission and Dr. Joachim De Weerdt, IFPRI Malawi Country Program Leader.
To start off the event, Dr. Nyondo underscored that the increase in fertilizer prices is a cause for concern because the Government will not be able to implement as planned the Affordable Input Program (AIP) through which it subsidizes fertilizer and seeds for smallholder famers, and farmers will not be able to afford fertilizer at an unsubsidized price. This makes high fertilizer prices a food security problem for the farmers and a policy problem for the Government. He cited rising global prices of fertilizer and fuel as the main contributors to the increase in retail prices in Malawi. With causes of high fertilizer prices mostly beyond the Government’s control, Dr. Nyondo offered some long-term policy options to reduce Malawi’s dependence on imported fertilizer, including 1.) investing in infrastructure, 2.) improving fertilizer efficiency, 3.) promoting alternatives to chemical fertilizer such as intercropping and using manure/compost 4.) establishing domestic production of fertilizer.
In his presentation, Dr. Duchoslav illustrated why the Government’s options to curb fertilizer prices are limited by breaking down the components of the fertilizer procurement process, showing how each contributes to the final retail price in Malawi. The largest components of the final retail price of fertilizer in Malawi are the price of bulk fertilizer at the port of origin and the cost of transporting it to Malawi, which together makes up over 85% of the retail price. Changes in these costs, which are beyond the Government’s control, have contributed 60% and 10% respectively to the overall rise in fertilizer prices in Malawi over the past year. Moreover, they are incurred in US Dollars, and the depreciation of the Kwacha to the Dollar has contributed a further 28% to the increase of domestic prices. Dr. Duchoslav pointed out that since the Government’s ability to quickly reduce fertilizer prices is very limited, one or more of the following modifications to the AIP will be necessary 1.) reduction of the number of AIP beneficiaries, 2.) increase of the subsidized price that those beneficiaries pay, 3.) increase of the AIP budget. He stressed that action should be taken quickly so that fertilizer imports can resume in time for the looming growing season. He also suggested that to utilize available fertilizer stock efficiently, distribution should be aligned with the agricultural calendar, thereby starting with the south of the country, and moving north as more fertilizer is imported.
Speaking on behalf of the Ministry of Agriculture, Dr. Ching’oma expressed concern about the rise in prices and asserted that the ministry is doing all it can to negotiate lower prices with suppliers. He also shared that the ministry is assessing the feasibility of a fertilizer manufacturing plant in Malawi.
Mr. Nyirongo, speaking for FUM, also expressed concern over the price surge, especially because not all farmers in Malawi are covered by the AIP. Because farmers depend on fertilizer to produce maize seeds, the price surge then raises the issue of food insecurity. He argued that it is now crucial to critically look at the issue of food diversification and guaranteed that FUM is willing to promote diversification and disseminate information to sensitize farmers on other value chains that can bring them a secure source of income.
Mr. Chirwa was not able to confirm if the Treasury can allocate more funding to the AIP. He did however affirm the treasury’s commitment to making foreign exchange more readily available for fertilizer imports. He further pointed out that in the future, it will be easier to start preparations for fertilizer procurement on time as the fiscal year will now begin in April instead of June..
Hon. Chiphiko proposed that it is the lack of competition in the fertilizer market that is driving prices up. He shared that ADMARC is strongly considering taking further advantage of its dense network of depots by becoming an importer and distributor of fertilizer.
Hon. Ganda recognized the drivers of the fertilizer price surge are mostly outside of the Government’s ability to control. She however pointed out several areas which the Government can proactively influence, including a move from a national budget that heavily relies on imports to one that is focused more on manufacturing, which it is doing but at slow rate. She also suggested the long-term solution of domestic fertilizer production and improving fertilizer trade within the Southern African Development Community.
This sentiment was shared by an online participant who also suggested that policy response should address price instability rather than high prices alone.
Giving the final remarks of the event, Dr. Nagoli noted that the roundtable discussion emphasized an important pillar of the Malawi 2063 vision – agricultural commercialization and productivity. He also stressed that it is crucial for Malawi to reduce its vulnerability to global fertilizer prices by investing in appropriate infrastructure and improving the macroeconomic environment of doing business in the country. Finally, Dr. De Weerdt concluded the discussions by emphasizing the need for policy to be informed by rigorous research and acted upon with the utmost urgency.
