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

Malawi’s economy is heavily dependent on maize as a subsistence food crop and tobacco as a
major source of earnings. Maize occupies between 60 and 70 percent of the total cultivated land
area and 80 to 90 percent of the area devoted to food crops (see Tables 3.1 and 3.2). Tobacco, on
the other hand, provides over 60 percent of the country’ export earnings. There is only one
agricultural season which usually extends from November/December to April/May. Most
agricultural production is rainfed, irrigation is still very limited. The country is particularly
vulnerable to drought; drought conditions were experienced in 1991/92, 1993/94 and 1994/95.
3.2 Historic Perspective of Agricultural Market Reforms in Malawi
The development strategies of both the colonial and post-colonial governments in Malawi tended to
favor the estate sector at the expense of the smallholder sector. Prior to economic liberalization, the
government imposed several restrictions on the production and marketing of smallholder
agricultural crops. Such restrictions included: (i) fixing smallholder export prices below export
parity levels; (ii) prohibiting smallholder farmers from producing and marketing high value crops
such as burley tobacco (through the Special Crops Act); (iii) monopolizing the marketing of
virtually all smallholder inputs and crops through the parastatal organization, the Agricultural
Development and Marketing Corporation (ADMARC) (the ADMARC distributed inputs to small
farmers at subsidized prices and purchased their output at guaranteed fixed prices); and (iv) barring
smallholder access to agricultural credit from commercial banks.
In 1981, in response to severe external shocks and macro-economic imbalances, Malawi embarked
on a series of structural adjustment and macro-economic stabilization programs supported by the
World Bank and the International Monetary Fund (IMF). Measures to meet the conditionalities of
the structural adjustment programs included the adoption of a flexible exchange rate regime,
restructuring of parastatal organizations, and liberalization of pricing and marketing policies,
especially in the agricultural sector. These economic reforms were meant to stimulate private sector
participation in various economic activities of the country. The intended reforms, however, were
rarely fully implemented and policy reversals were very common.
Following inadequate and late supply of fertilizers by ADMARC in 1983, the Smallholder
Fertilizer Revolving Fund (SFRF) was established to procure and distribute fertilizer to smallholder
farmers. In 1988, the SFRF was transformed into a trust fund called the Smallholder Farmer
Fertilizer Revolving Fund of Malawi (SFFRFM). The SFFRFM distributes fertilizer through
ADMARC’s large network of depots.
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