Thursday, December 9, 2010

Agro-processing: Missing link in economic revival

The goal posts are shifting for Malawi’s agriculture industry, with agricultural experts and government officials acknowledging that there cannot be sustainable social-economic development without embracing the concept of value-addition.

This signals a paradigm shift in policy and perceptions since independence, especially because the Malawian farmer is long used to selling unfinished agricultural products such as cotton, tobacco, tea, sugarcane, soya and beans, while the country’s top produce buyers have grown accustomed to exporting raw materials.

According to Principal Secretary for Agriculture and Food Security Andrew Daudi, this is analogous to “throwing away the baby with the bath water”.

But what does he mean?

“When we export unfinished agricultural products, we are doing harm to our nation because we are exporting both jobs and business. Take, for instance, cotton: exporting raw cotton, which is bought at extremely low prices, means that we are also exporting the (cotton) seed for free,” he says (where).

The target countries for the exports simply employ their own people as cotton ginnery workers and then export the finished product back to Malawi at exorbitant prices. Hence, the country’s losses are thus two-fold: lost employment opportunities for people on the unemployment queue as well as lost national wealth — hence the adage throwing away the baby with the bath water.

It is an observation President Prof. Bingu wa Mutharika already made when he opened this year’s National Agriculture Fair. As a cost-saving and job creation measure, Mutharika banned the exportation of raw products, describing this practice by some cotton buyers as ‘immoral and irresponsible’.

“These people manufacture a lot of goods from our raw materials. The most unfortunate part is that it is the rural farmer who suffers. There are no good returns for their labour and toil,” argues Mutharika.

But because Agriculture and Food Security Minister Prof. Peter Mwanza and Malawi Confederation of Chambers of Commerce and Industry (MCCCI) President, Mathews Chikankheni, unanimously agree, the nation can lest be assured that there will be no dissenters from this voice of reason.

For one, Chikankheni says increased economic growth depends on increased efforts in the area of agro-processing. He notes that value-addition has rejuvenated the once napping economies of Europe, East Asia and India, among others.

His only appeal is that government and public service providers should stop subsidising consumers, especially those in urban areas, as doing so discourages market liberalisation and hurts food and industry processors.

“What this means is that private sector players in the agro-processing sector will be assured of positive investment returns. Farmers will also benefit a lot because buying prices for cotton, maize, groundnuts, soya, cassava and beans, among other crops, will improve,” says Chikankheni.

Malawi has been producing eye-popping results in food production since the 2005/06 fiscal year. The food index price pushers have largely been cassava, sweat potatoes, sorghum, millet, rice, beans and maize.

The country produced a maize surplus of 500,000 metric tonnes in 2005/06 agriculture season; 1.1 million metric tonnes in 2006/07; 500,000 metric tonnes in 2007/08; and 3.77 million metric tonnes during the 2008/09 season, representing a 36 percent increase.

The granaries were filled to the brim with the 2009/10 season production output of 2.78 million metric tonnes, all this against the national maize requirement of 2.45 million metric tonnes annually.

The good thing is that it is not only maize that has made people sit up and notice; the graph curves have climbed steadily for the other traditional crops during the period in question. During the 2008/09 growing season alone, the country produced 135,000 metric tonnes of rice; 293,000 metric tonnes of groundnuts and 499,900 metric tonnes of pulses.

Though cassava is largely described as a slow-mover (because it takes longer than maize to mature), it nearly caught up with maize during the same period (2008/09) with 3.7 million metric tonnes to boot; followed by sweat potatoes at 2.69 million metric tonnes; 775,000 metric tonnes of Irish potatoes; 60,000 metric tonnes of sorghum; and 26,000 metric tonnes of millet (source).

In all this, the missing factor has been value-addition, which has cost the country dearly in terms of foreign exchange, employment creation and market competition.

“This is the right time to shift our focus from exporting raw materials. We can create wealth for our people through agro-processing,” Mwanza says.

In the end, agro-processing — served a meal along with the soup of a massive ‘Best Buy Malawi’ campaign — remains the sure way of opening the economic gates for the country. The experts and policymakers’ take is that it is time to walk the talk and switch on the machines.

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