How small-scale traders exploit farmers in Malawi
In the second of a three-part blog series on grain marketing in Malawi, APRA researchers Stevier Kaiyatsa and Mphatso Susuwele examine the methods used by some small-scale traders are taking advantage of farmers who produce a market surplus, and what the government should do to help.
Part one looked more closely at the vital role played by small-scale traders in the grain supply chains of Malawi, while part three charts the impact of COVID-19 on grain marketing.
Written by Stevier Kaiyatsa and Mphatso Susuwele
Primary level agriculture production remains the main economic activity in Malawi. Poor infrastructure undermine efforts to diversify the economy to other sectors such as industry, mining, and tourism causing many job seekers in particular the youth to end up in traditional agriculture. For instance, the Malawi Labour Force Participation Survey (2013) found that 64.1% of employed persons work in agriculture. However, agricultural production landscape faces a number of challenges that include, but not limited to, over dependence on rain-fed farming, low absorption of improved technologies due to high illiteracy levels, vulnerability to weather-related shocks, and declining natural resources. As a result, output per unit area of land (i.e. productivity) is low among smallholder farmers. Where about 80% of the population relies on agriculture for income and food consumption, producing a market surplus is the ultimate goal of each farmer. However, the amount of money that the smallholder farmer can earn in a season is subject to not only the output prices but also purchasing behaviour of the grain traders in the market, which are geared towards exploitation.
The role of the Malawi Bureau of Standards (MBS) in grain marketing
The MBS is a government owned parastatal organisation that has the mandate to inspect and verify that traders use recommended weighing and measuring instruments when procuring grain from farmers across Malawi. The organisation operates centrally with one office in each region. The MBS certify all the weighing and measuring instruments, apply an “MBS label” to them, and confiscate uncertified weighing scales from traders. However, the organisation fails to conduct a comprehensive inspection exercise every year across all the food markets due to understaffing and inadequate funding from government.
Standardised equipment
Farmers consider the use of standardised weighing scale as the most the transparent way of trading. However, small-scale traders tamper with the weighing scales to get more grains when purchasing from farmers and give less grains when selling to consumers. Further, not all small-scale traders have access to standardised equipment. It is a standard practice to store grain in bags weighing 50 or 90 kg. To demonstrate how the farmer may lose out when the trader uses unauthorised weighing scale in procuring maize grain, we use the price observations in October 2020 from Mpherembe market in Mzimba district. The purchasing price of maize grain per kg was MKW140 (US$0.18)[1], as such, it would cost the trader MKW7000 (US$9.23) to procure a bag weighing 50 kg from the farmer. Conversely, when an unauthorised weighing scale is used, the trader may get more grain from the farmer, for example, an additional 100 g for each 1 kg of grain that the scale records. Thus, the bag of grain weighing 50 kg would weigh 45 kg on traders’ scale and the farmer would get MWK6300 (US$8.31) and lose out about MWK700 (US$0.92). The losses to the farmer increases with increase in the volume of grain sold.
Unstandardised equipment
Since some of the small-scale traders do not have access to weighing scales, the use of unstandardised equipment such as plastic cups and plates, and 5 or 20-litre plastic buckets, is common across the food markets. Traders can tamper with and reduce the volume of the equipment. As such, many traders use tampered equipment to procure grain from farmers and use untampered equipment when re-selling the grain to smallholder farmers who rely on food purchases at different times of the year. To demonstrate how a farmer may lose when a trader uses unstandardised equipment, our research used prices from the same market. About 2.5 standard (i.e. untampered) 20-litre plastic buckets make up a bag of grain weighing 50 kg. At that time, we observed that the price of grain per 20-litre plastic bucket was MWK2500 (US$3.30). When the trader uses unstandardised equipment, the farmer earns MWK6250 (US$8.24) per bag of grain weighing 50 kg. Thus, the farmer loses about MWK750 (US$0.99) for each bag of grain weighing 50 kg sold. The losses may increase where the trader uses tampered unstandardised equipment.
Recorded prices on charts
Smallholder farmers that do not produce market surpluses also sell some of their produce as cash needs arise. These farmers sell grain in smaller quantities than the bag of grain weighing 50 kg, therefore small-scale traders display their purchasing prices in chart recorded per kg. If the smallholder farmer comes with the bag of grain weighing 50 kg or more to sell, the trader would buy at the price recorded on their charts. Similarly, if the smallholder farmer comes with the bag of grain weighing less than 50 kg for sell, the trader would buy at the price below the prices recorded on their charts. Thus, farmers that sell smaller quantities at a point in time get lower prices than those that sell more quantities and the higher the quantity, the higher the chance of bargaining.
Conclusions
The Government of Malawi recognises the role that agricultural commercialisation would play to achieve its development agenda of creating wealth for all. Given that agriculture is the main source of income for the majority of the people in the rural Malawi, there is need for the government to strengthen institutions that support the sector such as MBS for them to carry out their mandates effectively and efficiently. One way to strengthen MBS in order to protect smallholder farmers from unscrupulous small-scale traders is to establish its representation in district councils, where an officer would be responsible for carrying out the inspection and verification exercises of weighing and measuring instruments that traders use in grain marketing at such a lower level. Further, government may prohibit the use of spring scales in grain marketing and provide a subsidy on digital scales, which would increase their affordability. Doing this, would increase transparency in grain marketing and protect farmers from exploitation in Malawi.
[1] 1US$=MWK758.15 as of November 2020.
Feature photo: Farmers accessing inputs from private dealers in Mchinji district Malawi. Credit: Symon Duwe.
Please note: During this time of uncertainty caused by the COVID-19 pandemic, as for many at this time, some of our APRA work may well be affected but we aim to continue to post regular blogs and news updates on agricultural policy and research.