President of the United Nations International Fund for Agriculture Development (Ifad) Kanayo Nwanze says Malawi needs to create markets for produce, invest more in infrastructure and storage to sustain the fertiliser subsidy programme and increase agricultural production.
Nwanze said in an interview with The Nation on the side-lines of the fifth Tokyo International Conference for Africa Development (Ticad) that there is nothing wrong with smart subsidies to improve agricultural production.
“Smart subsidies are good as long as they are properly implemented. However, it doesn’t make sense to give fertilisers and seed to families to increase production and productivity when they are not able to sale it,” he said
The programme has proved that subsiding agriculture works and has a huge impact on economic growth.
Since former Malawi president Bingu wa Mutharika introduced subsidies in 2005, the country witnessed phenomenal gross domestic product (GDP) growth averaging seven percent in five consecutive years, reduced inflation rate to single digit and pushed interest rates from about 35 to 15 percent.
But Nwanze admitted that despite the success of subsidies in Malawi and other African countries, there are still many barriers to increasing agriculture production.
“Nearly a third of the rural population in Africa lives more than five hours away from a market town, and fewer than 20 percent live within an hour of a market town. This all adds up to higher costs for transporting goods,” he said.
This is the reason, he said, Malawi and other African countries need to improve access to financial services, access to improved road systems and social services systems.
“We know that investing in agriculture has a huge return in generating poverty reduction. For sub-Saharan Africa, it is estimated that GDP growth generated by agriculture is 11 times more effective in reducing poverty than GDP growth in other sectors.” he said.