Admarc and smallholder farmers’ development in Malawi

Admarc is better placed to help the development and transformation of the smallholder subsector, probably than any other institution. But this is only possible when other institutional factors are rearranged, writes Tamani Nkhono-Mvula:

Last week, I gave a brief background of the Agricultural Development and Marketing Corporation (Admarc) and how historically, the institution and its predecessors have been used as instruments of underdeveloping the smallholder farmers in Malawi.

The colonial marketing boards, the postcolonial and the current Admarc could have played a more pivotal role in the process of agricultural and rural transformation in Malawi if there was a fair incorporation and integration of the smallholder subsector in both the production and marketing process of agricultural produce.

However, this has not been the case as the institution has regrettably played the role of extracting surplus from the smallholder farmers resulting in Malawi having a smallholder subsector growth without development.

Having a wider reach to the rural areas through its market network, Admarc is well placed to play a pivotal role in rural development and food security.

It can be an instrument of transferring wealth to the rural households, though this has not been the case over the past years with the reverse otherwise happening.

Additionally, the numerous investments that Admarc made in several companies and corporations, its investments in banks and estates, had very little multiplier effect on the smallholder subsector.

As such it will not be very unfair if I conclude that much of what the smallholder subsector is today is an outcome of decades of abuse and systematic neglect.

Over the past few years, there have been calls from different quarters to reform Admarc to serve the farming community much better.

Some have been calling for it to reform and conform to the prevailing liberal and pluralistic marketing discourse while others have been calling for Admarc to be reformed and regain its lost ‘glory’, meaning it has to play by the rules of the old book.

Let me point out here, at the outset, that it will be difficult for Admarc to operate in the way it used to in the 1970s and 80s because the operating environment has changed.

However Admarc can be reformed to serve the interests of the poor smallholder farmers within the context of a liberal market without causing much stress on the government resources.

It has to be appreciated that Admarc is a very strategic institution to the country’s agricultural transformation and food security, which is still a very important issue in Malawi.

As such Admarc is crucial politically, socially and economically. I, therefore, understand the dilemma that government faces to heed to the calls to fully privatise it and I do agree that for any caring government in a similar State as Malawi, such a decision on an important issue such as food security must be avoided.

Therefore, when there is a crush between market liberalism and the human right to food or any other right, the government as a duty bearer is required to protect the rights of the people.

In a case of a food crisis, and where the private sector is irresponsibly hoarding the maize as has mostly been the case in Malawi over the past few years, it is the government and nobody else that will have to face the people.

As such every economic reform done by government or suggested to government has to have a human face and in as much as market liberal reforms are necessary but the government has to play it safe.

For Admarc to truly live by its slogan of Bwenzi la Alimi, indeed a lot of reforms need to be done. I would like to present my thoughts as a contribution to this process.

In the 1970s and 80s, Admarc enjoyed monopoly and monopsony privileges over the input and output markets, respectively, in the agricultural sector and other crops.

This status, in some cases, was provided for by law; hence, there was a need to repeal the Admarc Act (1971) to change the status of the institution.

However, though this change was done, Admarc still remained a wholly State-owned company with a governance structure still entrenched in state bureaucracy. This kind of arrangement has not helped the institution to grow as it gives room for the kind of abuse are currently seeing.

I would like to suggest that there should be a serious reform to the institutional and structural arrangements of Admarc by, among others, reducing the shareholding of government to less than 50 percent.

Government must only maintain its stakes in Admarc to protect the public interests and ensure continuation of its social functions but must not have total control over managerial decision-making.

The challenge we recently had of Maizegate was a typical example of political interference over managerial decision-making in the institution and that was possible because of the existing Admarc’s institutional arrangements and which in my view, the biggest problem with Admarc.

The recently launched strategic plan of Admarc will never achieve anything as long as the structural arrangement still gives powers and leeway to the Minister of Agriculture, who is a politician, to call the shots even on managerial decision-making processes. Good governance is key for the success of any institution.

There is also need for government to put in place a clear mechanism of administering social marketing functions that are currently being done by Admarc.

The institution is indeed well positioned to do these functions, but in some cases I have observed that social functions of Admarc that are supposed to be done using public resources, are being done using government guaranteed bank loans.

It is wrong to provide social services with loans from a commercial bank. Admarc buys maize at a higher price using a bank loan and sells the same to the consumers at a lower price and in the end makes loses.

In my view Admarc has been a perpetual loss-making institution, always needing government bailout because of wrong expectations that Admarc still has to perform these functions although it has not been adequately supported through public resources.

The social marketing service must be the sole responsibility of government and could use Admarc as a channel for such functions.

On another note, it is good to notice that the recently launched strategic plan of Admarc is putting some emphasis on turning the company from a predominantly trading company as it is today to a trading and processing company it used to be.

Admarc can play a crucial role on various value chains development if it becomes the forward linkage market of choice for farmers.This is if it uses it’s wider market network as aggregation points for produce.

The presence of a stable market is probably the greatest incentive for production, which Admarc can provide to the smallholder farmers.

Currently, the Admarc input market is almost non-existent and if not for the government sponsored Farm Input Subsidy Program (Fisp), it would have been dead.

Going forward, I would like to see a strong partnership between programmes such as Agriculture Commercialisation Programme, Greenbelt Initiative and the Shire Valley Transformation Programme with Admarc where Admarc will process the produce coming from these programme.

There will be, therefore, a need to consider the further (state or private) capitalisation of Admarc to be a processing entity if it will meaningfully contribute to value chains development.

Additionally, I would like to see a strong partnership between Admarc and farmers’ groupings where contracts shall be developed for Admarc to provide the marketing and processing of the outputs from farmers.

Furthermore, I would like to suggest that 75 percent of all National Food Reserve Agency (NFRA) grain procurements be should bought directly from the farmers through Admarc outlets to incentivise and boost smallholder labour productivity.

 Admarc should also innovate with new marketing systems that are coming up like the warehouse receipt system. Admarc has an advantage in the sense that it has the largest warehouse space in Malawi, which currently stands at 300 000 square meters but much of this is not being used and is decaying. n

* Tamani Nkhono-Mvula, Expert of Agricultural Policy and Development