Impact Of Agricultural Market Reforms On Smallholder Farmers In ...

CHAPTER 3 – BACKGROUND AND HISTORY OF
ECONOMIC POLICY REFORMS IN MALAWI
3.1 Introduction and Background to the Economy
Malawi is a land-locked country situated in the Eastern part of Southern Africa bordering
Mozambique in the South and Southeast, Zambia in the West, and Tanzania in the North and
Northeast. The country’s total surface area is 9,427,400 ha with a population of about 11 million
people. Ranked at position 159 out of 174 countries in terms of human development, the country is
one of the poorest in the world (UNDP 1999). The country’s annual per capita GNP in 1999 was
estimated at US$ 190 (World Bank 2000). As in many other sub-Saharan African countries,
poverty is more pervasive in the rural areas. According to the 1997-1998 Malawi Integrated
Household Survey, the rate of poverty in the rural areas was 67 percent compared to a rate of 55
percent in the urban areas (National Economic Council, 2000).
The agricultural sector is the mainstay of the economy. The sector contributes more than 35 per
cent of the country’s GDP, employs about 80 per cent of the labor force, and generates around 90
per cent of total export earnings. Historically, the agriculture sector was characterized by a dual
structure composed of estate and smallholder farmers. The smallholder sub-sector comprises about
2.4 million farm families occupying around 4.55 million hectares of cultivable land under a
customary land tenure system (Ministry of Agriculture and Irrigation, 1997; World Bank, 1995).
Between 55 to 70 per cent of smallholder farmers cultivate less than 1 hectare of land (World Bank
1995, National Economic Council, 1998). The main food crops grown by smallholder farmers are
maize, cassava, sorghum, rice, beans, and groundnuts. The smallholder sub-sector produces over 80
per cent of the country’s food products. Export and cash crops cultivated by the smallholder subsector
include tobacco, cotton, chillies, coffee, soybeans, and sunflower.
The estate sector mainly produces flue-cured and burley tobacco, tea, sugar and coffee. A
considerable amount of maize is also produced by the estate sector. The estate sector has easy
access to credit and security of land tenure which motivates higher levels of investment and input
use (World Bank, 1995). The estate sector comes second to the smallholder sector in terms of
employment with tea and tobacco estates accounting for about 75 per cent of the estate sub-sectoral
employment. As of 1992, there were about 26,000 estates occupying an area of about 1.2 million
hectares (World Bank 1995).
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