Admarc and the smallholder farmer in Malawi

The Agriculture Development and Marketing Corporation (Admarc) is probably the most revered institution in the agriculture sector in Malawi among the smallholder farmers. They see it as the only hope for them to fairy participate in the agriculture marketing processes, TAMANI NKHONO-MVULA writes:

Admarc has been a perpetual loss-making institution

From its inception, Admarc has been used as a tool for systematic oppression and impoverishment of the smallholder farmers and if not for how the State grain trader has been used, the smallholder farming subsector could have been far much developed by now.

With its widespread network of markets in the rural areas, Admarc could have been an instrument for poverty reduction and the transfer of wealth to the rural poor smallholder farmers.

However on the contrary, it has been the channel of extracting surplus from the rural poor into the pockets of few elites in urban areas thereby increasing not only poverty among the smallholder farmers but also levels of inequality in the country.

The genesis of Admarc traces its root to the colonial era institutions that were created with a sole purpose of controlling the participation of African farmers in the lucrative markets.

Admarc is a direct descendant of the Maize Control Board (MCB) that was established in 1946. The MCB was created with the aim of controlling the sale, destruction and movement of maize in accordance with the Maize Control Ordinance number 34 of 1946.

The provisions of this ordinance created an uncertainty of supply and at the same time the board fixed the selling price for maize at a very low price and almost doubled the price at which the board resells the maize to the consumers and this in most cases culminated into maize supply challenges.

Such kind of miscalculated policies contributed significantly to the hunger crisis of 1949. In 1952, the MCB was transformed to be called the Produce Marketing Board (PMB) and extended its mandate to control the marketing of not only maize but also the other crops like rice and legumes.

In 1956, this mandate was further extended when the PMB merged with the Cotton Marketing Board to form the Agricultural Production and Marketing Board (APMB). These kind of arrangements, placed further constraints on the growth and development of the African smallholder community and these institutionalized controls only served the interests of the colonial Government and the white estates owners.

The control of markets was also a way of, by extension, controlling the production of certain crops. In 1962, the APMB was replaced by the Farmers Marketing Board (FMB) with an additional mandate of providing input markets, extension services and subsidies to increase the production of economical crops like cotton, tobacco and maize.

After the crop failure of 1969, the government reorganised the FMB to become the Agriculture Development and Marketing Board (Admarc) through the passing in Parliament of the Admarc Act of 1971.

The statutory organisation was given the responsibility of not only to provide the space for smallholder backward and forward linkage markets but to also be an investment company to facilitate the development of the smallholder subsector.

However with the passing of time, though Admarc provided a ready market for the smallholder farmers but its practices made smallholder farming less profitable as it was buying from the smallholder farmers at below market prices for smallholder grown food crops like maize and others.

The surplus realised was then transferred to the urban consumers and the estate sector in form of food subsidies. The estates sector bought most of its food requirement from Admarc. Additionally Admarc also paid below the market price for smallholder export crops like cotton and tobacco.

In order to raise the resources for the development of the estate sector, heavy taxes were being imposed on the smallholder farmers through Admarc.

For instance, the monopoly prices of Admarc amounted to approximately a 50 percent indirect tax of smallholder farmer produce during the 1970s.

The resources raised through this practice, was then reinvested into the estates sector through the commercial bank loans or through direct investments into the estate sector. However on a positive note, some of these resources were being used by the institution to provide social services like subsidising and maintaining non-profit making rural markets but also maintaining the pan-territorial and pan-seasonal prices.

You will note that from all the agriculture marketing institutions formed from the Maize Control Board in 1946 to Admarc in 1971, none had in reality an interest to develope the smallholder sector.

They all either controlled the entry and participation of the smallholder farmers or, as in the case of Admarc, allowed the farmers to fully participate but making sure they don’t benefit anything by offering very low prices.

The colonial era institutions served the interests of the settler white farmers while Admarc served the interest of the black elite estates sector. All these institutions extracted the surplus that could have aided the smallholder sector development.

The basic argument, then, is that the marketing policies, characterised by keeping purchase prices for smallholder agricultural produce low, enriched the colonial and postcolonial State institutions and  at the same time, they made it difficult for smallholder farmers to move into and expand commercial farming and remained peasants.

The saintly status accorded to Admarc by most rural smallholder farmers was as a result of ignorance of what exactly was going on.

In 1994, after many years of pressure from the World Bank under the structural adjustment drive of market liberalization to reform the institution, the government passed the Admarc (Amendment) Act of 1994, which changed the status of Admarc from a purely statutory institution to a commercial entity. This was done with an aim of leveling the marketing space to enable other players fully to participate.

This change also made Admarc to stop receiving subversions from government, though the company is still fully owned by government.

In its current status and with the loss of monopoly privileges, there was an expectation that Admarc will improve its efficiency and also serve the smallholders much better as there will be competition from the other actors.

However this has turned out not to be the case as most traders don’t find the rural markets profitable and with the loss of direct government support for most of the social functions, Admarc is also unable to operate most rural markets putting most farmers at the mercy of the vendors.

However, the systematic extraction of surplus from the smallholder farmers through Admarc is still alive today. This is done in different ways.

One of the ways is by providing resources to Admarc to procure maize for the strategic grain reserves later than the harvest time, when most producers have given away their produce to the vendors.

In most cases, Admarc is provided with these resources in the months of August or later than that. What this means is that Admarc can only buy the maize from the traders who had bought the maize from the farmers at a much lower price, in most cases lower than the government prescribed minimum prices.

This kind of arrangement creates a new layer of middlemen and traders between the Admarc and the smallholder farmers as they are unable in most cases to sell directly to the institution.

This layer is mostly made up of the politically connected who can even influence the prices at which Admarc should buy from them thereby making huge profits at the expense of the producer, the smallholder farmer.

If Admarc entered the market much earlier, it would be of huge benefit to the smallholder farmers, not only by buying directly from them but also being in a position to influence the price and enabling the Government to set minimum price to be indirectly enforced.

As long as Admarc continues this behavior of entering the market late, the smallholder farmer will always be the victim. Admarc will never be an instrument of transformation but an enabler of the perpetuation of poverty and underdevelopment.

The tendency of buying maize at high price and selling the same at a much reduced price to the consumers has resulted in Admarc being a perpetual loss-making institution, needing government bailout. I do appreciate the challenges that the institution faces but other things could be done much better.

Recently the institution has just launched its strategic plan which outlines very ambitious plans to what the institution would like to do.

However without addressing some governance and political economy issues surrounding Admarc, the institution will still fail to live up to its potential.

* Tamani Nkhono-Mvula is an expert of Agricultural Policy and Development

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