Prospects for smallholder commercialisation in Malawi

Written by: Blessings Chinsinga, Mirriam Matita, Masautso Chimombo, Loveness Msofi, Stevier Kayiyatsa and Jacob Mazalale

This blog is based on APRA Working Paper 75, which presents a historical and contemporary agrarian inquiry into the reality of agricultural commercialisation in Malawi. The study’s key message is that smallholder agricultural commercialisation is possible, but it cannot be attained on a sustainable basis in the context of the contemporary agrarian set-up. This blog looks beyond the study’s findings to identify a pathway forward for Malawi’s smallholder farmers.

Several factors such as land, productivity and the marketing crisis have conspired to make it almost impossible for smallholder farmers to engage with markets on a meaningful and sustainable basis. Agricultural commercialisation occurs when agricultural enterprises, and/or the agricultural sector as a whole, rely increasingly on the market for the sale of their produce and for the acquisition of production inputs, including labour.

Moreover, as a result of differential access to and control over land, off-farm employment opportunities, wage rates, markets and even social capital, female smallholder farmers are facing even more obstacles than their male counterparts. Social capital, specifically, plays a critical role in catalysing prospects for commercialisation at the smallholder level, so as a result of the disparity in this realm, women are relatively disadvantaged when compared to male smallholder farmers.

The method behind the findings

This study was designed as a tracker so as to understand the inherent complexity of agricultural commercialisation over time. Using a dataset by the School of Oriental and African Studies for the 2006/07 evaluation of the Farm Input Subsidy Programme, which provided subsidised inputs to nearly all rural farming households, we tracked 240 households in the districts of Mchinji and Ntchisi in central Malawi. The sample was extended to households that emerged from the 240 households – branching out households – which brought the total number of households in the tracker to 512.

The households were tracked as long as they were resident in Malawi. The experiences of these households vis-à-vis agricultural commercialisation were analysed through a framework that includes five different livelihood categories: stepping-in, stepping out, stepping up, hanging in and dropping out.

State of agricultural commercialisation in rural Malawi

Our results show that the majority of households in rural Malawi are simply hanging in. In other words, their efforts to commercialise are unable to take them beyond their ability to meet their subsistence needs. Although not many households are dropping out, those that are in this category are desperately poor and they barely depend on agriculture for their survival, typically depending instead on social safety nets or their extended family support system.

Households in the stepping-up and stepping-in categories demonstrate some progress toward sustainable agricultural commercialisation as measured by the household commercialisation index (HCI), which represents the level to which households are engaging with markets. HCI scores fall between a continuum of 0 and 1, with a score of 0 representing no engagement at all with markets and a score of 1 demonstrating full engagement with markets. Any HCI score of 0.5 and above represents a household’s engagement with markets that can potentially culminate in sustainable agricultural commercialisation. It is not simply the engagement with markets that matters, but also the quality of the engagement itself as well as the nature of markets that matter. The HCI scores for these stepping-up and stepping-in households have improved from 0.59 and 0.63 in 2007 to 0.77 and 0.67 in 2018, respectively.

These impressive improvements have not, however, consistently translated into sustainable agricultural commercialisation. Famers are unable to engage with markets a regular basis. Most of them engage with markets on seasonal basis, which rarely allows for a sustainable route out of poverty and household prosperity. In other words, even though these households engage with markets, they remain unable to meet and cross production thresholds that would enable them diversify their livelihood portfolios.

Men’s average HCI score is estimated at 0.58 compared to women’s at 0.50. As previously indicated, this disparity in HCI levels results from a culmination of factors including: differential ownership of, access to and control over land; unequal ownership of assets and opportunities for accumulation beyond land including wages from casual labour; disparate opportunities arising out of linkages with and benefits from bridging social capital; varying ability to recover from both generalised and individual-level shocks and differing access to lucrative markets.

Prospects for smallholder agricultural commercialisation are generally undermined by the triple crisis of land, productivity and marketing. These crises make it very challenging for smallholder farmers in rural Malawi to engage in meaningful and sustainable agricultural commercialisation.

The question of land tenure and security remains unresolved due to a protracted legislative impasse. While land per capita has progressively diminished due to rapid population growth, the uncertainties in the enabling legislative framework since the onset of the contemporary wave of land reforms in March 1996 are forcing many poor smallholder farmers to sell off their land. Regulating these sales is very difficult in the absence of definitive legislative framework.

Farmers’ ability to realise full productive potential of their land is rather limited. The cost of productivity-enhancing inputs, especially seeds and fertiliser, has progressively risen beyond the reach of most smallholder farmers since the removal of subsidies in June 1996. As a result, most smallholder farmers cannot afford these inputs without the subsidy programme. The situation is further exacerbated by the increasingly fragile climatic conditions in rural Malawi.

Farmers also have limited access to lucrative markets that would allow them to commercialise on a sustainable basis. Structured, reliable and dependable markets no longer exist, and efforts to do address this issue have been generally unsuccessful. In place of markets, farmers rely almost exclusively on vendors, which is problematic because the vendors indulge in unscrupulous business practices, such as manipulating weighing scales, and often offer farmers very low prices. In the pre-structural adjustment programme era, the state graining board – the Agricultural Development and Marketing Corporation (ADMARC) – provided a predictable, reliable and lucrative market for farmers’ produce by offering smallholder farmers a guaranteed market for their produce. An equivalent to ADMARC is yet to be established since this era.

Which way now?

At this point, there is really nothing new that can be proposed – all the requisite policies already. What remains is to implement them to their logical conclusion with dynamism, flexibility and adaptability, and embedded within a culture of continuous learning and reflection. Key points to consider in this implementation include:

  • The triple crisis calls for policy refocusing, reviews and implementation to ensure that these are no longer insurmountable barriers for smallholder farmers to engage in sustainable commercialisation.
  • Promoting investment in research and development, extension services and rural infrastructure to ensure that smallholder farmers increase their productivity and are able to seize any opportunities, including participating in lucrative produce markets.
  • Ensuring that policy interventions are systematically tailored to the needs of different categories of smallholder farmers, given that they are not a homogenous group.
  • Ensuring vertical integration of smallholder farmers into agri-food value chains, coordination and collective action, stronger market information system, and better access to institutional credit to help smallholder farmers enhance their productivity and fully take advantage of opportunities in the sector.
  • Advancing policy interventions that are gender sensitive and specifically designed to promote the empowerment of women in the agricultural sector so that they can equally be engaged in agricultural commercialisation.
  • Promoting livelihood diversification among smallholder farmers so as to increase their adaptive capacity to the adverse effects of climate change.

Photo credit: Melissa Cooperman/IFPRI