Fertiliser firms have warned that the move by government to replace the private sector with State-owned enterprises in the Affordable Inputs Programme (AIP) has the potential to disrupt the local fertiliser market.
In a letter dated June 16 2022 addressed to Ministry of Agriculture and copied to Ministry of Finance and Economic Affairs, Fertiliser Association of Malawi argues that the move could also lead to bias in the award of AIP contracts to State produce trader Agricultural Development and Marketing Corporation (Admarc) and Smallholder Farmers’ Fertiliser Revolving Fund of Malawi.
It said it will also provide preferential access to foreign currency to State firms and enable them to sell the commodity at less than the cost price.
The association further said the shortfall becomes more pronounced if the underlining price of fertiliser in US dollar terms increases in the same period as has been the recent experience.
Reads the latter in part: “It is worth noting that in the months when most fertiliser is sold in Malawi, [September to February], the Malawi kwacha is often at its most vulnerable as it matches the time the dollar inflows are at their lowest.
“It is, therefore, not uncommon, to see fertiliser prices increase by at least 15 percent in this period due to the depreciation of the kwacha against the dollar.”
With the quantity of about 250 000 metric tonnes (MT), the AIP programme dominates Malawi’s fertiliser market, estimated at 350 000MT.
Further reads a letter in part: “The accreditation of multiple competing agro-input retailers also mitigates against the risk of one company failing to supply the gap.”
In May this year, Minister of Agriculture Lobin Lowe faulted private suppliers for allegedly messing up the implementation of AIP in the 2021/22 growing season.
He said they failed to deliver or did not meet allocated amount while in other cases, they pulled out at the eleventh hour.
The minister said as a result, most fertiliser bought by farmers came from government entities.
Lowe said in the 2022/23 financial year, government has plans to address AIP inefficiencies by empowering State agencies to take the lead in procurement and distribution of farm inputs.
But agriculture policy analyst Tamani Nkhono-Mvula observed that government remedial measures will not in any way help improve the implementation of the programme as State agencies already failed to deliver during Farm Inputs Subsidy Programme (Fisp), the predecessor programme of AIP.
He warned that the situation may worsen if government goes ahead with the plan.
About 13 companies turned down AIP contracts in November last year at the eleventh hour, citing the effects of Covid-19, rising cost of fuel to import and transport fertiliser and government fixed prices. They argue these were bound to negatively affect their bottom lines in the programme.
In the 2021/22 National Budget, AIP received K109.58 billion and targeted 3.7 million farmers.