The move means that government will no longer be inviting tenders for the supply of fertiliser and seeds under Fisp as beneficiaries will choose which agro-dealer to buy from, according to Treasury spokesperson Nations Msowoya.eforms in the Farm Input Subisidy Programme (Fisp) have—effective in the 2015/16 National Budget—cut out suppliers and transporters, The Nation has established.
The projected efficiency gains from the reforms—expected to help government save around K19 billion (US$42.2 million) from the actual Fisp expenditure of K59.7 billion (US$132.7 million) during 2014/15 financial year—means that farmers will buy the subsidised inputs directly from agro-dealers using their coupons and K500, which is the redemption price.
Under the arrangement, government will also drastically cut down on transport costs incurred through companies moving the inputs to various points nationwide.
The reforms are part of a broader strategy to cut the ballooning cost of Fisp on the taxpayer and ensure the programme’s sustainability in the face of a shrinking national revenue base, widening budget deficits and pragmatic calls from some stakeholders that beneficiaries must start to pay more than the K500.
Delivering the 2015/16 National Budget in Parliament on May 22, Minister of Finance, Economic Planning and Development Goodall Gondwe said government intended to limit the cost of Fisp to K40 billion (US$88.9 million).
Gondwe said government’s direct involvement in the procurement, storage and distribution of the inputs meant that it had to bear the impact of exchange rate fluctuations since contracts with suppliers are drawn in US dollar terms.
He said: “In addition, it has been difficult to control costs due to the mark-ups imposed by the various middlemen contracted by the government.”
Despite the drastic reduction, Gondwe said government will still provide 150 000 metric tonnes of fertiliser and improved seed quantities to the 1.5 million beneficiary households.
Said the minister: “However, Mr Speaker, Sir, it cannot be denied that there have been some valid criticisms regarding the implementation of the programme to date. The first criticism has been that, since its inception, the proportion of the farmers’ contribution has been declining and that of the budget has conversely escalated.
“For instance, the farmers’ contribution in 2005/06 financial year, at K950 per bag, was 45 percent of the total cost per bag, but this declined to a meagre three percent by 2014/15 financial year.”
Yesterday, Msowoya said in an interview government has taken out Fisp suppliers and allowed farmers to directly deal with all recognised fertiliser dealers nationwide.
Every year, at the onset of the agriculture season, the Ministry of Agriculture, Irrigation and Water Development, invites bids from companies to supply the farm inputs and transport them to various markets.
However, the suppliers’ list has been controversial and marred with accusations of manipulation as well as award of contracts to politically-linked individuals.
During yesterday’s interview, Msowoya said instead of government calling for suppliers and transporters to tender for the supply and transportation of Fisp fertiliser and seed, in the 2015/16 growing season there will be no suppliers and farmers will be dealing with the dealers directly.
He said government realised that it was spending a lot of money to pay suppliers and transporters, subsequently incurring huge operational costs.
Said Msowoya: “Government was sub-contracting companies to supply fertiliser and pay them for the fertiliser that has been supplied. This has been stopped.
“This time all dealers will be able to handle fertiliser subsidy coupons. What would be needed is for the beneficiaries to take their coupons to the dealers.”
In its May 30 2015 edition, our sister newspaper, Weekend Nation, reported that government owes suppliers who distributed Fisp in the current 2014/15 financial year about K15 billion (US$33.3 million) in arrears.
On May 28 this year, Minister of Agriculture, Irrigation and Water Development Allan Chiyembekeza told a Joint Sector Review Meeting that implementation of Fisp will this year take on board efficiency measures.
He said: “It is envisaged that farmers’ contribution will be increased from the current K500 and that there will be increased participation of the private sector. The allocation to Fisp, therefore, is net of farmers’ contributions.”
European Union (EU) Ambassador Marchel Gerrmann, in his opening remarks at the Joint Sector Review Meeting on behalf of the Donor Committee on Agriculture and Food Security (DCAFS), said: “Since the last Joint Sector Review, the ministry has launched a major revision of the Farm Input Subsidy Programme in consultation with the main sector stakeholders.
“This approach was welcome and I would like to congratulate the minister and his team for their willingness to work together with development partners in this way. Of course, we have to await the final outcome of the reforms and we do realise that these take time.”
In recent years, one of the key criticisms of Fisp has been a lack of an exit strategy and that K500 with which beneficiaries redeem a 50 kilogramme bag was too low.
Civil society organisations (CSOs) such as Malawi Economic Justice Network (Mejn), during the pre-budget consultations, suggested that beneficiaries put in 30 percent of the value of the bag, which is around K6 000 (US$)13 for a fertiliser bag pegged at K18 000 (US$40) at market prices.