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Should Malawi extend the Auction System and Export Mandate to Grain Marketing?

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Part of the audience at the debate
Part of the audience at the debate

The African Institute of Corporate Citizenship (AICC) on 18th  October held a public debate at Crossroads Hotel in Lilongwe on the Future of Grain Marketing in Malawi held under the big question, ‘Should Malawi extend the Auction System and Export Mandate to Grain Marketing?’ The debate came against a background of a Position Paper adopted by stakeholders during a conference on The Future of Grain Markets in Malawi which was held on 17th August 2017 at Comesa Hall alongside the 14th National Agriculture Fair in Blantyre co hosted by Malawi Confederation of Chambers, Commerce and Industry (MCCCI).

Panelists during the debate
Panelists during the debate

The position paper, among other recommendations, suggested to further look at how Malawi can best structure its markets. It is against this background that AICC organized this public debate as a follow up. The main objective of the debate was to create a ground for stakeholders to explore models on how Malawi can best structure grain marketing.

Below are key points raised during the debate.

 

Discussion points during Grain Marketing in Malawi-

#

Thematic area

Notes/issues

1

Export ban/Export mandate

Ø  Export ban/mandates are effected in the time of plenty and even when there is no looming food issues. 

Ø  Transitioning from export ban to export mandate is not always clear and this has to be clear based on rules and predictable and on ad hoc basis.

Ø  The pros and cons of export bans/ mandates lack empirical evidence in the country. Arguments are usually based on other country studies or household level effects.  Evidence is not there to restriction bans in the country.

Ø  Aggregation mechanism is there but not very much attractive and strong to captivate interest of big buyers and even smallholder producers.

Ø  Export mandates/bans are loosely used in Malawi to mean restrictions but export mandates can still be effected while the country is still exporting as long as there is structured trade in place.

Ø  There is evidence in other countries that introduction of export bans only encourage informal export trade to flourish.

Ø  Government is justified to introduce the current market system because the other market systems have been tried and found lacking.

2

Policy/Regulatory issues

Ø  The current market system is failing to absorb excess production in a manner that remunerates value chain players especially smallholder farmers.

Ø  Focus on public agricultural investment has been on the production side without a corresponding investment in market development. Private sector is justified to support government in investing in output markets but the situation is not conducive at present with ad hoc trade restrictions- a pull factor to support  government initiatives  on production.

Ø  Farmers are still crying. This entails that something is not really working for them in terms of market breakthrough.

Ø Consideration should be made to pilot the auction system/ contract farming by drawing parallels from tobacco sector with some modifications since each system has its own challenges whether auction or contract  but all challenges currently being faced in with the two systems should be solved before introducing them in grains.

Ø The current contract farming system in other commodities does not clearly reflect the value that will accrue to and farmers do not know how much will accrue to them.

Ø  Farmers feel that there is policy inconsistency in terms of production and marketing where government has encouraged farmers to increase production and yet the same government closes borders without consulting the farmers leaving farmers destitute.  

 

3

Commercial Agriculture Development

Ø The country has predominantly focused on numbers of exporters and not on volumes. The nation still lags behind in terms of value addition for export markets.  As a nation, the country should focus on value addition and agro processing if Malawi is to benefit from export markets.

Ø Poor market information system on grain /agriculture trade. Currently, there is no reliable source of information on agriculture trade  that value chain players can access in real time regarding volumes, prices and available markets whether domestic or international markets. Due to poor access to market information, the focus is always on foreign markets even when the domestic market is available and rewarding.

Ø The Food supply system in Malawi is still archaic in the sense that it talks to the commercial systems in terms of food balance sheets, demand and supply. The methods of calculating the food supply-demand requirements has always provided the country with unreliable data to make effective decisions on grain trade.

Ø Structuring of grain markets requires prerequisites to be put in place such as farmer organisation, transport system, a good farmer registration system, insurance, collateral issues, warehouse receipt legal framework, etc.

Ø No good timing of opening of markets where the markets open when farmers have already sold at a giveaway price.

 

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Contact

African Institute of Corporate Citizenship,
Taurus House
Off Convention Drive,
Private Bag 382,
Lilongwe 3,
Malawi

Phone: +265 1 775 787

Email: aicc@aiccafrica.org

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