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AgriculturalInputSubsidyProgramsinAfrica:
AReviewofRecentEvidence
T.S.Jayne,NicoleMason,WilliamBurke,JoshuaAriga
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Guestlecture,PrincetonUniversity,TimSearchingerSustainableFoodSystemsCourseNovember13,2017
Objectives:
1. Toreviewrecentevidenceontheimpactsofinputsubsidyprograms(ISPs)inAfrica
2. ToidentifygovernmentactionsthatwillincreasethebenefitsofISPs
• Directly-- throughISPprogramdesign
• Indirectly– throughactionsthatenablefarmerstousefertilizermoreefficiently
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ExpendituresofInputSubsidyPrograms
Country AnnualProgramCost(USDmillion)
%ofAg Budget
Malawi 152to 275 47to71%
Tanzania 92to135 39 to46%
Zambia 180 to239 33to59%
Senegal 36to42 26to31%
Ghana 112 to166 29to54%
Nigeria 167to800 (?) 26to78%
Kenya 61to89 9to26%
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PartI:SummaryofEvidence
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Summaryofevidence:
Conclusion#1:
• Clearshort-termcontributiontofoodproduction
Summaryofevidence:
Conclusion#2:• Highlyvariableachievementoftargetingcriteria
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Attributes of Households Acquiring FSP Subsidized Fertiliser - Zambia
0
2000
4000
6000
8000
10000
12000
1st Q(Low)
2nd Q 3rd Q 4th Q 5th Q(High)
Quintitles of HH Per Capita Land Use (Cultivated + Fallow)
Valu
e of
HH
Ass
ets
(ZM
K)
0
5000
10000
15000
20000
25000
30000
Volu
me
of F
ertli
ser A
quire
d
Value HHAssets
FertQuantityAcquired
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DiversionoffertilizerfromFISP,ZambiaFarmerclaims FSP/FISPdistribution
Plantingyear --------------------MetricTons--------------------2002 31,722 48,0002003 33,372 60,0002004 16,792 50,0002005 23,595 50,0002006 58,404 84,0002007 43,596 50,0002008 55,114 80,0002009 69,103 106,0002010 116,116 179,000
2002- 10 447,814 707,000
Source:Mason,2011
33%
63%
Summaryofevidence:
Conclusion#3: Subsidyfertilizerpartiallycrowdsoutcommercialsales:
• Forevery1000kgoffertilizerdistributedthroughISPs,nationalfertilizeruseroseonlybetween400to700kg(Zambia,Malawi,Kenya)
• Intwocases,NigeriaandareasofZambiawhereprivatefirmsdidnotoperate,evidenceof“crowdingin”
Summaryofevidence:
Conclusion#4:
• Positiveeffectsonhh incomesinyearthatsubsidyisreceived
• Nosignificantincreaseinhh incomeinyearaftersubsidyends
Summaryofevidence:
Conclusion#5:
• Littleeffectonfoodpricelevels
• Malawi
• Zambia
• Nigeria
RankingofAlternativeInvestments:Meta-StudyEvidencefromAsiaandAfrica
The Economist IFPRI study
Policies
Infrastructure investment
Agricultural R&D
Agricultural extension services
Credit subsidies
Fertilizer subsidies
Irrigation
Rankingwithrespecttoagriculturalgrowth:EvidencefromAsia
The Economist IFPRI
Policies 1
Infrastructure investment 3 1
Agricultural R&D 2 2
Agricultural extension services 5
Credit subsidies 7 3
Fertilizer subsidies 6 4
Irrigation 4 5
Rankingwithrespecttopovertyreduction:EvidencefromAsia
The Economist IFPRI
Policies 1
Infrastructure investment 2 1
Agricultural R&D 3 2
Agricultural extension services 4 3
Credit subsidies 7 4
Fertilizer subsidies 5 6
Irrigation 5 5
Summaryofevidence:
1. Significantshort-termeffectonfoodproduction
2. Highlyvariableachievementoftargetingcriteria
3. Crowdingout-- aproblem
4. Small/transitoryeffectsonhhincomes
5. Littleeffectonfoodprices
PartII:Whattodo?
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ProposalsforraisingthebenefitsofISPs
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Zambia’sflexiblee-voucherISP• Governmentpilotprogramin13of108districtsin2015/16;expandingto39districtsin2016/17
• Usespre-paidVisacard;agro-dealersmusthavepointofsalemachines
• E-vouchervalue(Ksh):
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Farmercontribution 40Governmentcontribution 170TOTAL 210
• Eligibleinputs:Variousfertilizers,seeds(anycrop),cropprotectantsandsprayers,lime,livestockfeed/drugs/dipchemicals,fishfingerlings
IntendedbenefitsofZambia’se-vouchervs.itstraditionalISP1. Givefarmersmorechoice;encourageagricultural
diversification
2. Crowd-intheprivatesector(traditionalISPexcludedagrodealers)
3. Cost-savings:shiftsomeofthecostsofthesubsidyprogramtotheprivatesector
4. Timelyavailabilityofinputstofarmers(gov’tdistributionsystemhadbeenplaguedbylatedelivery)
5. Moretransparency(gov’tdistributionopaque,massivediversionandotherrent-seekingbehavior)
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LessonslearnedfromZambia’s2015/16e-voucherpilot• Arigorousimpactevaluationisstillpendingbutpreliminaryfindingssuggestthatthee-voucher:
1. Crowdedinprivatesectorparticipationininputdistribution(e.g.,morecompetitionamongagro-dealers;someevendeliveredinputstovillagesfrommarkettownsà betteraccesstoinputsforfarmers)
2. Mayhaveencouragedagrodealerstostockawidervarietyofinputs(i.e.,beyondmaizeseedandfertilizer),potentiallyleadingtogreateragric.diversification
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DiversionoffertilizerfromFISP,ZambiaFarmerclaims FSP/FISPdistribution
Plantingyear --------------------MetricTons--------------------2002 31,722 48,0002003 33,372 60,0002004 16,792 50,0002005 23,595 50,0002006 58,404 84,0002007 43,596 50,0002008 55,114 80,0002009 69,103 106,0002010 116,116 179,000
2002- 10 447,814 707,000
Source:Mason,2011
33%
63%
OthergovernmentactionstoraisebenefitsofISPs
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I.Publicinvestmentstoraisecropresponsetofertilizer
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= Po * ΔQPfΔF
Demandandprofitabilityofusingfertilizer
Farm-gatefertiliserprice
Farm-gatecommodityprice
CropresponserateVCR
Reviewofmaize-fertilizerresponseratesonfarmer-managedfields
Study country Agronomic responserate(kgs maizeperkgN)
Morrisetal(2007) W/E/S Africa 10-14
Sheahanetal(2013) Kenya 14-21
MarenyaandBarrett(2009) Kenya 17.6
Liverpool-Tasie(2015) Nigeria 8.0
Burke(2012) Zambia 9.6
Snappetal(2013) Malawi 7.1to11.0
HoldenandLunduka (2011) Malawi 11.3
Mintenetal(2013) Ethiopia 11.7
PanandChristiaensen (2012) Tanzania 11.8
Matheretal(2015) Tanzania 5.7to 7.8
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• Soilandlanddegradationahugeconcern
ØMajorconclusionofMontpellierPanelreport
ØExtentofalreadydamagedland:Ø65%ofarablelandØ30%ofgrazinglandØ20%offorests
ØBurdendisproportionatelycarriedbysmallholders
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FactorsdepressingNUEofinorganicfertilizeruse:
1. Lowsoilorganicmatter• significantdeclineinSOMoverpast20yearsinmanycountries(MpeketulaandSnapp)
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Source:Marenya&Barrett2009
Plotcarboncontent(%)
Estimatedmarginalvalueproductofnitrogenfertilizerconditionalonplotsoilcarboncontent
Ksh/kgN
FactorsdepressingNUEofinorganicfertilizeruse:
1. Lowsoilorganicmatter• significantdeclineinSOM overpast20yearsinMalawi(Mpeketula andSnapp)
2. Acidification
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30
FromLarsonandOldham,MississippiStateUniversityExtensionService,2008.
Source:Burke,2012
FactorsdepressingNUEofinorganicfertilizeruse:
1. Lowsoilorganicmatter• significantdeclineinSOM overpast20yearsinMalawi(Mpeketula andSnapp)
2. Acidification
3. Latedelivery
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32PhotocourtesyofDingiBanda,LusakaProvince,Zambia
Elementsofaholisticstrategy:
1. R&D(nationalagresearchsystems)2. Extensionprograms/soiltesting3. Programstohelpfarmersrestoresoilquality
4. Physicalinfrastructure5. Reducingcostsininputsupplychains6. Moreappropriatefertilizeruserecommendations 33
Conclusions
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Conclusions1. ISPsareapowerfultooltoquicklyraisefood
production….
2. Butiftheyaccountfortoolargeashareofagriculturalspending,theycancrowdoutotherpublicinvestmentsrequiredforsustainabledevelopment
3. SpendingalargeshareoftheagbudgetonISPsmaynotbethemosteffectiveway topromotethewelfareofitcitizens,butitisahighlydemonstrableway todoso. 35
Conclusions4. ISPswouldbemoreeffectiveifadequate
resourceswereallocatedtocomplementarypublicinvestments
5. Morebalancedpublicexpenditurepatternscouldmoreeffectivelypromotenationalpolicyobjectives
6. ThereareconcretestepsforimprovingISPeffectiveness– relatedto
• governanceandpoliticalcommitmenttotargeteffectivelyandreducediversion
• Moreholisticapproachtosustainableintensification
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Indaba Agricultural Policy Research Institute 37Thank you
Acknowledgements• NicoleMason,BillBurke,LilianKirimi,AyalaWineman,DavidMather,MeganSheahan,JohnOlwande,JakeRicker-Gilbert,AucklandKuteya,AntonyChapoto,ChinyamaLukama,andVincentMalata
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