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Policy errors menace Malawi's farm success - U.N. expert

Source: Thomson Reuters Foundation - Mon, 29 Jul 2013 14:18 GMT
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A woman buries organic matter in mud to make compost in Karonga, northern Malawi. TRF/Karen Sanje
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LILONGWE, Malawi (Thomson Reuters Foundation) – Misguided policies threaten to make Malawi’s much-lauded surge in maize production a fleeting rather than a lasting phenomenon, a top U.N. expert has warned.

Inadequate taxation of large businesses and ill-timed subsidies for agricultural inputs, as well as worsening weather, mean the boost in food production the country enjoyed between 2005 and 2009 could level off, according to Olivier De Schutter, the United Nations’ special rapporteur on the right to food.

“Malawi is often held up as an example of how hunger can be tackled by subsidising inputs for farmers. However, considerable challenges remain,” De Schutter told journalists in Lilongwe last week, after an 11-day assessment of the country’s realisation of the right to food.

Opportunities can be missed when too little is done to empower the poor or break cycles of dependency on chemical fertilisers, low-paying plantation work and tobacco cultivation, he added.

“Malawians need a durable agricultural resource base and living wages – and currently they are getting neither,” De Schutter said. “It is particularly important to redress the balance at a time when Malawi is about to absorb a new wave of agricultural investment under the G8’s New Alliance for Food Security and Nutrition.”

FOOD INSECURITY PERSISTS

Through the southern African country’s Farm Input Subsidy Programme (FISP), which started in 2005, more than a million Malawians have gained access to maize and legume seeds, as well as fertilisers, at discounted prices, enabling them to raise yields.

Despite this, the Malawi Vulnerability Assessment Committee (MVAC) estimates that 1.462 million people, or around 10 percent of the population, will be unable to meet their annual food requirement during the 2013/14 period.

The country ranks 170th of 186 surveyed countries in the 2013 Human Development Index. And 42 percent of households spend more than 75 percent of their income on food, according to the MVAC.

Subsidies work when they are supplemented by adequate rainfall, said an agriculturalist with the Chitedze Research Station. “For the past two seasons or so, Malawi has been hit by frequent dry spells that affected the effectiveness of the subsidies,” he said.

Another problem, he added, is that subsidies are provided to the wrong groups at the wrong times: the elderly, who lack the capacity to produce food; and the poor.

“Subsidies are provided at a time those poor farmers are food-insecure, making them willing to sell the coupons in exchange for food to meet their immediate needs. That is how perpetual poverty and food shortages come about for these poor households,” he explained.

De Schutter said that, from an agronomic point of view, inorganic fertilisers “may be masking soil nutrient depletion, rather than correcting it”. He proposed a “brown revolution” focused on expanding the use of organic fertilisers.

LOW WAGES, TAXATION

The U.N. specialist further identified wage and taxation policies as major drivers of poverty and hunger in Malawi, adding that its minimum wage of K371 ($1.12) is one of the lowest in the world.

“The policy of providing abundant, cheap and non-unionised labour to plantation owners must be consigned to the past,” De Schutter said.

Malawi offers a wide range of tax incentives to both domestic and foreign companies. De Schutter pointed out that mining companies are exempt from customs duty, excise duty and VAT (value added tax) on mining machinery, plant and equipment. They can also cut deals on the royalties they owe to the government, he added.

“Companies operating in Export Processing Zones pay no corporate tax, no withholding tax on dividends, no VAT and no duty on capital equipment, machinery and raw materials,” he added.

De Schutter cited revenue lost to the government due to the special incentives given to Australian mining company Paladin Energy, which manages the Kayelekera uranium mine. He estimated those losses at around $205 million, noting that they could shoot up to $281 million over the mine’s 13-year lifespan.

“Malawi must enforce a living wage, reserve open public tenders to companies paying it, allow workers to bargain collectively in all sectors, sign up to the Extractive Industries Transparency Initiative (EITI), and work coherently across government to negotiate fair taxation arrangements for investors,” he said.

Paladin told Australia’s ABC News the U.N.’s assertion that Malawi is missing out on tax revenue is based on incorrect assumptions, and the country is actually doing well out of the deal from royalties, job creation, goods and services the firm has purchased and social programmes it has launched.

De Schutter also called for a national food and nutrition security strategy, underpinned by a Right to Food Framework Law, to hold policies accountable when they do not yield benefits for the most food-insecure and to ensure a coherent approach across sectors.

The government, which worked with the food-security expert during his assessment mission, has not issued a response to his comments.

Karen Sanje is a Malawi-based journalist with an interest in climate issues.

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