IRIN Focus on agricultural reforms

The World Bank has agreed to support a government plan to reinvigorate Zambia’s shrinking agricultural industry, but the two parties look headed on a collision course over the radical reforms the government proposes. The government sees the future of the industry as lying at least partly in the reintroduction of some protection for local producers and an expansion of its own role in agricultural marketing. However, the World Bank disclosed on Monday that it would oppose the reintroduction of protectionism and a stronger government hand in the industry. “The World Bank is willing to assist in the development of the competitiveness of Zambian agriculture,” World Bank deputy representative Mehrnaz Teymourian told IRIN. “We are not aware that the government plans to reintroduce protectionism or play a greater role in marketing, but the bank would oppose both,” she added. Agriculture minister Misheck Chiindi last week launched a study on Zambia’s agricultural competitiveness with a call for “legitimate defence measures” to counter alleged unfair trade practices by some Common Market for Eastern and Southern Africa (COMESA) producers. “The World Bank has also expressed interest to participate in the study directly and contribute to the resulting analytical work that will be needed to develop required policy adjustments and institutional support mechanism that improve Zambia’s agricultural competitiveness,” the agriculture minister said. The 20-member COMESA was initially established as the Preferential Trade Area (PTA) in 1981 to boost trade among eastern and southern African countries and to stimulate economic growth on the continent. The organisation transformed into a common market in 1994. It established a free trade area, which offers duty free market access among its members, last year. COMESA member states are: Angola, Burundi, Comoros, Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Namibia, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia and Zimbabwe. Zambia ratified the protocol establishing the COMESA free trade area in October 2000 but is already having second thoughts about its position under the trade pact. Local producers believe that “dishonesty” among some COMESA member states has created an uneven playing field in intra-regional trade. They now want to see the government introducing trade barriers to curb what they allege is produce dumping on the Zambian market. “It is a fact that we all went into COMESA blindly. Already, we have started seeing the adverse effects that have been experienced,” Zambia National Farmers Union (ZNFU) president Ajay Vashee said last week at the launch of the agricultural competitiveness study. “We have seen a surge in cheaper imports of these products coming in duty-free, most of them with suspicious origins, certainly beyond COMESA”. Economic observers see neighbouring Zimbabwe as the main culprit. They point out that 85 percent of Zambia’s agricultural imports from the COMESA free trade area come from Zimbabwe, but that that country allows only limited agricultural imports from Zambia. In fact, Zambian farmers have unrestricted access to markets in only three COMESA member states - the Democratic Republic of Congo, Malawi and Mauritius. The reality is that Zambia’s agricultural sector is in a mess. For example, the number of wheat farmers has fallen by more than 70 percent over the past three years. While the national demand for wheat is estimated at 150,000 mt per year, production has remained around 60,000 mt. “Millers continue to prefer cheaper wheat from abroad. The imported grain are cheaper because inputs are considerably cheaper,” ZNFU economist Alfred Mwila explained. Similarly, the soybean crop requirement to meet the country’s edible oil needs is estimated at 150,000 mt, but annual domestic production is under 50,000 mt. At the same time, the country’s fresh milk producers are under threat from “cheap and highly subsidised” powdered milk imports from New Zealand and from “unfair competition due to trade barriers” within COMESA, Mwila said. Meanwhile, production of maize, the country’s staple cereal, remains erratic, largely as a result of inconsistent weather patterns. Most of the maize produced in the country is rain-fed. ZNFU has estimated maize production as down 30 percent in 2000/2001 at 490,000 mt. Last week, President Frederick Chiluba launched an urgent appeal for food aid for two million people facing severe shortages following floods and dry spells across the country. Heavy rains in February and March caused extensive flooding, mainly in the Central, Copperbelt, Eastern, Lusaka, Northern and Northwestern provinces along the Zambezi and Luangwa rivers, while prolonged dry weather Southern and Western provinces reduced crop yields. “There is a disaster in food security in some areas. There are up to two million people whose food security has become worse and for whom the situation is desperate,” Vice-President Enock Kavindele told a meeting with Lusaka-based diplomats. While adverse weather has pushed down maize production in recent years, industry insiders blame the country’s failure to feed itself largely on the effects of a donor-backed economic reform programme under which agricultural marketing was transferred from government to private hands. They claim that the agricultural reforms have restricted credit and input delivery to highly productive but remote and often inaccessible rural areas which profit-minded marketing agents consider risky and unprofitable. At the same time, the country’s macro-economic environment puts local producers at a disadvantage with other COMESA producers. Farmers claim that the country’s commercial interest rates, at an average 46 percent, are higher than those of most of its neighbours, as are its electricity tariffs - meaning its produce prices are inevitably higher. “Having moved quickly from a government controlled environment to a free marketing system during the last decade, Zambia needs now to reconsider its policy for the agricultural sector,” Vashee said. “The liberalised system of production and marketing has had an adverse impact on small-scale and subsistence farming, separating as it has, the previous linkage between the financial arrangements obtaining in the supply of inputs and the disposal of outputs,” he added. But while economic observers are concerned about the effects of produce dumping on Zambian agriculture, many consumers are smiling. “Zambian producers had a tendency of overcharging their customers in the past, but cheaper South African imports are forcing them to push their prices down,” a Lusaka resident told IRIN. “South African products are also often better packaged.” Liberalisation of the economy over the past decade saw a number of South African supermarket chains setting up networks in Lusaka, the capital of over one million people, and the Copperbelt province, the country’s industrial hub. Virtually all products in the shops, including fruits and vegetables, are imported from South Africa. State regulation of agriculture in the 1980s proved ruinously expensive with the government unable to afford the subsidies that kept food prices low for urban consumers. It also insisted on fixed prices for increasingly disenchanted growers. But some independent observers, including the Institute for Policy Studies (IPS), a development NGO, argue that Zambia’s agricultural industry can only be turned around if the country dropped some key aspects of the donor-backed adjustment programme. “Structural adjustment has destroyed Zambian agriculture. It can only be rescued if we return to the pre-adjustment days when farmers were protected from unfair competition, the government deliberately included smaller, rural producers in the market and credit was extended to needy farmers,” IPS director Gilbert Mudenda told IRIN. “However, even such measures would be to late for hundreds of farmers who have been forced into bankruptcy by a hostile environment,” he added.