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Partnership for Enabling Market Environments for Fertilizer in Africa (PEMEFA)


Agricultural Policy and Regulation in Sub-Saharan Africa:

Lessons for Increasing InvestmentJoshua Ariga, Katrin Kuhlmann, and Nicole Mason

on behalf of the PEMEFA team

Eye on Africa Seminar

Thursday, April 5, 2018

Room 201 International Center, Michigan State University, East Lansing, MI



About PEMEFA (Partnership for Enabling Market Environments for Fertilizer in Africa)

Consortium of five partner organizations:

1. African Fertilizer and Agribusiness Partnership (AFAP)2. International Fertilizer Development Center (IFDC)3. Michigan State University (MSU)4. New Markets Lab (NML)5. Regional Network of Agricultural Policy Research Institutes (ReNAPRI)

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GOALTo transform African agriculture and livelihoods byimproving smallholder farmers’ access to and use offertilizers by establishing comprehensive, relevant, androbust national and regional fertilizer policies andregulatory frameworks that facilitate increased privatesector investment and participation in fertilizer value chains.

About PEMEFA (cont’d)

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OBJECTIVES1. Generate evidence to mobilize support for policy and regulatory reforms

that will encourage private sector-led fertilizer markets and improvesmallholder farmers’ access to and profitable use of fertilizers.

2. Build the capacity of stakeholders along fertilizer value chains toestablish a conducive enabling environment for private sector-ledfertilizer markets.

3. Drive ongoing efforts to reform policy, legal, and regulatory regimes forfertilizer through outreach and engagement.


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PEMEFA’s initial activities (including today’s seminar) aresupported by a planning grant from the Alliance for AfricanPartnership (AAP).

The AAP is a new, innovative initiative at Michigan State Universitythat seeks to develop a collaborative and cross-disciplinary platformfor addressing today’s global challenges.


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§ International, multi-disciplinary staff and unique facilities suited for conducting a broad range of research activities.

§HQ in Muscle Shoals houses:§ Research laboratories. § Greenhouses. § Growth chambers.§ Bench-scale and pilot-plant units. § Training facilities. § Technical library.

Capabilities at Headquarters

Agricultural Policy

Fertilizer R&D Integrated Soil Fertility Management

Balanced Fertilizers Capacity Building

Market Development

Areas of Expertise



Today’s seminarAgpolicyandregulationinSSA:Lessonsforincreasinginvestment• ExamplesfromfertilizervaluechainsinSSA

Outline1. Background– fertilizeruseandfertilizervaluechainsinSSA[J.Ariga]2. Policyreforms&fertilizermarketdevelopment– Kenyaexample[J.Ariga]3. FertilizerlegalandregulatoryframeworksinSSA[K.Kuhlmann]4. Fertilizersubsidyprograms&privatesectorinvestmentinSSA[N.Mason]5. Concludingremarks[N.Mason]6. Q&A

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Fertilizer use & fertilizer value chains in SSA

Joshua Ariga (IFDC)



Importance of Agriculture in Africa• Agriculture is a key economic sector in Africa: 15% of

the GDP (5% to >50% ) and 55% of total employment (WB, 2016: FAO, 2015; ILO, 2017)

• Smallholder farmers constitute 80% of all farms in Africa (AGRA, 2014), and they are mainly women (FAO, 2015)

• Globally, fertilizer is a key ingredient for increasing agricultural production:§ Norman Borlaug: “If the high-yielding [seed]

varieties are the catalysts that have ignited the green revolution, then chemical fertilizer is the fuel that has powered its forward thrust.”

§ Evidence suggests that no region worldwide has been able to achieve food security without significantly increasing the use of fertilizer (Africa Fertilizer Summit, 2006).

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Nutrient Mining in Agricultural Lands of Africa1995–97 2002–04

Source:Henao,J.,andC.Baanante.2006.AgriculturalProductionandSoilNutrientMininginAfrica:ImplicationsforResourceConservationandPolicyDevelopment.IFDCReport.Note:Norecentupdatesofthesemaps



Farmer’s Practice

After 4 Yearsof ISFM

Cereal yield (kg/ha)

Maize 750 2,750

Sorghum 1,000 1,800

Cotton 1,150 2,000

Irrigated rice 3,000 5,500

Source: Henk Breman, IFDC Rwanda Field Office

Field With ISFM Practice

Field WithoutISFM Practice

Improvement in Crop Yield through Integrated Soil Fertility Management (ISFM) in West Africa

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Source: Henk Breman, IFDC Rwanda Field OfficeNote: No profitability analysis conducted



Africa: Other Fertilizer Facts• SSA accounts for >10% of the world’s population but < 3% of global

fertilizer consumption

§ Fertilizer demand in SSA: 3.7 million metric tons nutrients, or 2% of world demand (2017)

§ Top 4 (South Africa, Ethiopia, Kenya, and Nigeria) account for 50% of total fertilizer consumption in SSA

• SSA imports >90% of its fertilizer requirements

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Source:IFAandFAO



Fertilizer use: SSA vs. other regions - 2015(kg nutrients/ha arable land)

13

329

165

157

139

132

127

125

105

77

59

15

0 50 100 150 200 250 300 350

EastAsia&Pacific

SouthAsia

EuropeanUnion

World

NorthAmerica

LatinAmerica&Caribbean

CentralEurope&theBaltics

MiddleEast&NorthAfrica

Europe&CentralAsia

SouthAfrica

Sub-SaharanAfrica

Source:FAOSTATviatheWorldBankhttps://data.worldbank.org/indicator/ag.con.fert.zs



Cereal yields: SSA vs. other regions - 2016(kg/ha)

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7,318

5,173

5,075

4,453

4,172

3,967

3,810

3,757

3,128

2,582

1,395

0 1000 2000 3000 4000 5000 6000 7000 8000

NorthAmerica

EuropeanUnion

EastAsia&Pacific

CentralEurope&theBaltics

LatinAmerica&Caribbean

World

SouthAfrica

Europe&CentralAsia

SouthAsia

MiddleEast&NorthAfrica

Sub-SaharanAfrica

Source:FAOSTATviatheWorldBankhttps://data.worldbank.org/indicator/AG.YLD.CREL.KG


SSA has chiefly relied on area expansion to achieve gains in production

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FOB costProcurement from overseas fertilizer manufacturers

Internationalshipping

Seaport in coastal country in Africa

Warehousing in port vicinities

Physical Flow of Fertilizer Transaction Costs

Ocean freight

Port charges

Functions

Procurement (by tender or negotiation) and financing

Freight costs

Handling, bagging, inspection, customs clearance

Local transport, unloading, stacking, inventory finance

Warehousing costs

Conduct(Coordination)

Performance(Profitability)

Flow of Fertilizer from Supplier to Farm-Gate

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Transport costsInland transportation

Inland warehouse

Local transportation

Agro-dealer

Physical Flow of Fertilizer Transaction Costs

Inland storage

Transport costs

Functions

Inland transportationby road or rail

Warehousing costs

Local transportationby truck or public vehicles

Agro-dealer retails to farmer (sales, rebagging, finance, distribution, information)

Operating costsFarmer

Conduct(Coordination)

Performance(Profitability)

Flow of Fertilizer (cont’d)

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FertilizerPrice Formation

X

X + 50%

X + 80%

TransportCost

Infrastructureinvestment:ApriorityforAfricancountriesanddevelopment partners

KmofPavedRoads/Million Capita

Farm-Gate Fertilizer Price and Road Density

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Source:ChemonicsandIFDC(2007)



Policy reforms & fertilizer market development:

The Kenyan experience

Joshua Ariga (IFDC)



Summary of Kenya policies since 1960• 1960-2000:

• National Food Policy Strategy

• Mostly geared toward self-sufficiency in cereals, biased toward farmers compared to consumers

• Sessional Papers: 1981, 1994 (reactive)

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Time Reforms Comments1960-1980:Immediate post-independence

Government is Solution:• Market and price control• State agencies to implement

controls and market

• Poor management of state agencies, co-ops, KFA, AFC

• Rent-seeking

1980-1990:Incipient liberalization

Government under Pressure:• SAPs urging state divestiture• Removal of price controls and

trade restrictions• Private trade encouraged• Piecemeal liberalization: private

sector not able to fill the gap

• Pressure from donors• Famous Washington

consensus

Kenya Policy Timeline

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Time Policy Comments1990-2000:Rapid liberalization

Government Allows Private Entry:• Liberalization of maize market, fertilizer

trade, exchange rates, private sector participation

• Multiparty democracy (1992)

• State intervention in markets (buying and selling)

2000-2006:Participatory approach

Private + Reactive State Intervention:• Integrated rural development: roads,

extension, poverty, food security issues• External partners: encouraged

consultation between state, private sector, and civil society.

• Civil society network grows

• Concerted donor pressure

• Moral strength to local civil societies

Kenya Policy Timeline (cont’d)

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Private sector responses:1. Expansion in private fertilizer wholesaling and retailing.2. Reduction in fertilizer marketing costs observed between Mombasa port and farm-gate. 3. Reduction in distance from farms to point of maize sale by private trader.4. Increase over time in maize/fertilizer price ratios.

Smallholder farmer responses:1. Rise in the percentage of farmers using fertilizer and hybrid maize seed.2. Increase in maize yield and maize production.3. Increase in percentage of farmers selling maize.

Policy reforms – fertilizer marketing:1. Price de-controls.2. Full legalization of private fertilizer trade. 3. Import quotas eliminated. No subsidies (1990-2007).

Policy reforms – maize marketing:1. Price de-controls eliminated in 1993. 2. Barriers to trade eliminated by 1995.3. NCPB buying centers reduced.

Public investments:1. Rural feeder roads.2. New maize varieties: Kenya Agricultural Research Institute and private seed firms.

Synergies in Promoting Increased Fertilizer Use and Yield: Public Policy and Private Response

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Price of Diammonium Phosphate (DAP) in Mombasa and Nakuru

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400miles:8hrs@50mphPavedroad

Source:ArigaandJayne(2009)&MinistryofAgriculture,Kenya



4.1

6.9

10.6

15.0

2.9

2.3

3.0

4.3

0 5 10 15Distance to Fertilizer Seller

Low

Pot

entia

l Reg

ion

Hig

h Po

tent

ial R

egio

n

2007

2004

2000

1997

2007

2004

2000

1997

Distance from Farm to Fertilizer Seller (km)

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Source:ArigaandJayne(2009),UsingTegemeo HouseholdSurveyData

Highpotential

region

Lowpotential

region



7.8

10.7

19.0

0.1

1.5 1.9

05

1015

20

Diffe

renc

es in

Mea

ns(kg

s/acre

)

High Potential Region Low Potential Region2000 2004 2007 2000 2004 2007

Difference in Mean Household Fertilizer Application Rates from 1997 Level

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Source:ArigaandJayne(2009),UsingTegemeo HouseholdSurveyData



NCPB Officials Sacked in Kenya

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https://citizentv.co.ke/news/ncpb-interdicts-22-senior-staff-over-fertiliser-theft-127127/[CitizenNewspaper]https://www.nation.co.ke/news/Cartels-reap-big-from-State-s-fertiliser-plan/1056-4319444-kmfe79z/index.html{NationNewspaper]



Challenges and Lessons in Policy Process• Policy process can take a long time (need patience)• Political nature of the process (be very careful)• Harmonize views from interest groups• Get the right publicity• Make message simple (“help the poor”)• Include the less-advantaged in the process

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Fertilizer legal & regulatory frameworks:

Existing statuses, lessons, and ways forward

Katrin Kuhlmann (NML)

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What is an Enabling Environment?The enabling environment consists of the policies, laws, andregulations including the institutional infrastructure that guide theconduct of stakeholders (e.g., farmers, traders, etc.) in pursuit oftheir goals. An effective enabling environment is one that creates theconditions for private sector participation and investment in valuechains, thereby increasing competition, putting downward pressureon prices, improving the quality of available goods and services inthe market, and improving access.



Gaps in the Enabling Environment

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Information

• Enterpriselevel(manyenterpriseslacklegalresources)• LegalSector(marketrulesspanjurisdictionsandlegalsystems;agriculturallaw

notafocus)• PublicSector(notalwaysawareofmarketneeds)

Implementation • Significantdifferencesexistbetweenlawsonthebooksandlawsinpracticeatnationalandregionallevels

Ruleoflaw• Bestpracticesandmodelsshoulddrawfromdevelopingcountries’experiences;

customizedandincrementalapproachnotcommon

Scale • Issuesaddressedoncase-by-casebasiswithoutimpactingsystemasawhole



About the New Markets Lab• Non-profitlawanddevelopmentcenterfocusedontheintersectionbetweenlaw,economicdevelopment,entrepreneurship,andsocialimpact

• Programswithadiversesetofpartnersaroundtheworlddesignedtoleveragelegalsystemsinsectorswithgrowthpotential(agriculture–includingfertilizerandseed,services,technology)thatareheavilyregulated

• Setofinterventionsandtoolstoimproverulesonpaperandtheirimplementationinpractice

• Buildmarketcapacitythroughhands-ontrainingforlawyersfromaroundtheworld

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Examples of NML’s Work• Methodologyontheimpactofregulatoryimplementation• Highlightpriorities,tradeoffs,andregulatorysequencing• Setofprogramsfocusedonsectorscriticaltodevelopmentandheavilyregulated

• Agriculture(standards,seeds,fertilizer)• Services(ICT,financial,andtransport)• Technology(IP)• E-Commerce• EmergingIndustries

• Legalcapacitybuilding• LegalGuidesandRegulatorySystemsMapstosimplifylawandregulationonpaperandinpractice• SeedRegulationExample

• TanzaniaSAGCOTexample:AGRA/USAID

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Regulatory Objectives• Understandingandinterpretingcurrentregulatoryframeworks

• Commonchallenges,regulatorytradeoffs(e.g.:marketdevelopmentv.consumerprotection)andgapsinimplementation

• Linkingregulationwithadvocacyatnationalandregionallevels• Identifyingprioritiesfordraftingandrevisingfertilizerregulatoryframeworks(nationalandregionallevels)

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The Enabling Environment & Fertilizer• Nationalfertilizerframeworksoftenspanarangeofinstruments,including:

• Fertilizersubsidies[Nickywilltalkmoreaboutthis]• Macroeconomicpolicies(interestrates,foreignexchangecontrols,exchangeratedistortions,inflation,currencydevaluation,etc.)

• Trademeasures(tariffs,taxes,importandexport(includingbans),bordercharges,andothernon-tarifftrademeasures)

• Regulatoryrequirementsforregistrationofnewproductsandcompanies• Fertilizerdistributionpolicies• Regulationsrelatedtoqualitycontroloffertilizerproducts

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Some Definitions• FertilizerLaw:Laws(oracts)arefrequentlyestablishedthroughaparliamentaryprocessandcreateaframeworkforgoverningthemarket.

• FertilizerRegulation:Regulationsaredevelopedtoimplementlaws,usuallythroughadministrationaction.

• FertilizerPolicy:Policy createsgoalsandobjectivesthatlawsandregulationsshouldaimtoaccomplishinordertoguidestakeholdersandgovernmentofficials.(Notlegallybinding.)

The enabling environment for fertilizer refers to policies and regulations andsupporting institutions that encourage the timely availability of a wide-range ofquality affordable fertilizers that cater to farmers’ crop and soil nutrient needs.



Good Regulatory Practices• Becauseoftherangeofinstruments,fertilizerregulationsareoftenincrediblycomplex

• WellFunctioningNationalPolicy,Legal,andRegulatoryFrameworktoEncourageFertilizerMarketDevelopment

• Typicallyframeworkconsistsofseveralinterconnectedinstruments:FertilizerPolicy,Law/Act,andRegulations

• Countrieshaveamixofmeasures• Evenwhenexistmaybeoutofdatewithmarketdevelopments(forexample,fewaddressuniquenatureofbio-fertilizersandblends)

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Country CurrentInstruments Instruments UnderDevelopment

Ethiopia FertilizerManufacturingandTradeProclamationNo.137/1998; GrowthandTransformationPlan(GTPII);AgriculturalPolicyandInvestmentFramework(2010-2020);CommercialRegistrationandBusinessLicensingProclamationNo.686/2010;MoANRDirectivetoEstablishCriteriaforCompetenceCertificate

DraftFertilizerProclamation;DraftProclamationtoEstablishtheNationalFertilizerIndustryAgency(NFIA)

Malawi Fertilizers,FarmFeeds,andRemedies Act(FFRA)1973,asamended1996;NationalFertilizerStrategy(NFS),2012;MalawiGrowthandDevelopmentStrategy(MGDS);AgriculturalSectorWideApproach(ASWAp),2010

FertilizerActandRegulations(underdevelopmentsince2003;modified2007);FertilizerPolicy

Mozambique StrategicPlanofAgriculturalSectorDevelopment(PEDSA)(2010—2020);FertilizerStrategy,2012;FertilizerRegulation,2013

FertilizerAct

Tanzania Fertilizer Act,2009(amended2014);FertilizerRegulations2011(amended2017),Fertilizer(BulkProcurement)Regulations,2017;NationalAgriculturalPolicy(NAP),2013;NationalFertilizerStrategy(NFS),2013

N/A

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Good Regulatory Practices (Cont’d)• IndependentRegulatoryAuthorityestablishedthrough Regulationsunderthenecessarylegalauthority,skilledstaffandwell-equippedlaboratories

• Autonomousbodytofacilitatestableandpredictableregulatoryenvironmentandfacilitatedevelopmentofandalignmentwithregionalmeasures

• Example: TheTanzaniaFertilizerRegulatoryAuthority(TFRA)

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Good Regulatory Practices (Cont’d)• StreamlinedandSimplifiedRegistrationProcesstoRegisterFertilizer:

• Reducethenumberofseasonsoftestingandfees• Example:Tanzaniaamendedregulationsin2017(shiftfrom3seasonsto1)

• Removetheregistrationrequirementsfornewblends• Shifttoexpostsystemovertimeratherthanexante(focusesonenforcementratherthanmarketentry)

• Expostmeasuresareagoodregulatorypracticebutrequiresufficientcapacitytoimplement• Phase-outapprovedlistapproachforfertilizersandadoptatruth-in-labelingapproach

• Example:ZambiaandSouthAfricamaintainalistofnutrientsasopposedtoalistoffertilizergrades

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Prior Regulatory Process for Fertilizer Registration in Tanzania

Regulationsambiguousastodefinitionof“new”

ApplicantmustbeaTanzanianresidentorassignanagentwhoisapermanent

Tanzanianresident

Applicantcompletesapplication,whichincludes:(1)fertilizersample,(2)certificateofanalysis,(3)writtendeclarationfertilizerisnotbannedor

restrictedincountryoforigin,(4)3copiesoflabeltobeused,(5)informationonsuitability,(6)anyotherinformationordocumentrequiredbyTFRA,

and(7)applicationfeeofUSD50

ApplicantsubmitssignedapplicationtoTFRAforapproval

TestingforsuitabilityofknownandnewfertilizersandfertilizersupplementsmustundergolabtestsbyTFRA.NewfertilizersandsupplementsmustbetestedvialabandfieldbyTFRAforatleast3

consecutiveseasons

TFRAdeniesapplication

TFRAapprovesapplicationandgrantsregistration

certificatewithmaximumtermof2years

TFRAaddsnewfertilizerorfertilizersupplementtolistofapprovedfertilizersforuseinTanzania

ApplicantpaysfortestingbyTFRA,whichcostsapproximatelyUSD10,000/seasonoratleastUSD30,000total

[Renewal]

Season2Test Season3Test

Dealerregistration

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Amended Regulatory Process for Fertilizer Registration in Tanzania

Regulationsambiguousastodefinitionof“new”

ApplicantmustbeaTanzanianresidentorassignanagentwhoisapermanentTanzanianresident

ApplicantsubmitssignedapplicationtoTFRAforapproval

Testingforsuitabilityofknown&newfertilizersandfertilizersupplementsmustundergolabtestsbyTFRA.Newfertilizersandsupplementsmustbetestedvialab

andfieldbyTFRAforatleast1season

TFRAdeniesapplication

TFRAapprovesapplicationandgrantsregistration

certificatewithmaximumtermof2years

TFRAaddsnewfertilizerorfertilizersupplementtolistofapprovedfertilizersforuseinTanzania

ApplicantpaysfortestingbyTFRA,whichcostsapproximatelyUSD10,000/season

Applicantcompletesapplication,whichincludes:(1)fertilizersample,(2)certificateofanalysis,(3)writtendeclaration

fertilizerisnotbannedorrestrictedincountryoforigin,(4)3copiesoflabeltobeused,(5)informationonsuitability,(6)anyotherinformationordocumentrequiredbyTFRA,and

(7)applicationfeeofUSD50

[Renewal]

Season2Test Season3Test

Dealerregistration

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Good Regulatory Practices (Cont’d)• EnhancedImplementationofExistingLegalMechanisms

• Expandcapacityandtraining(includingfocusonlaboratories,skilledstaff,equipment,traceabilitymechanism)andenforcement(withdeterrentpenaltiesforviolations)

• StrengthenedPublic-PrivateDialoguePlatformstoImproveRegulatoryFrameworksandTheirImplementation

• Examples:MozambicanAssociationforDialogueandPromotionofFertilizerUse(AMOFERT);TanzaniaFertilizerSociety

• TheAMOFERTPlatformiswell-recognized,andparticipatedindraftinganewFertilizerActthatisunderreviewbytheMozambicangovernment

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Good Regulatory Practices (Cont’d)• AwarenessBuildingofLegalandRegulatorySystems

• Addresschallengesthrough:• Improveddisseminationofinformation(LegalGuides)• Assistanceforpreparingorinterpretinglegaldocumentslikecontracts• Providingtransactionallegalservicestoindividualsworkingwiththeagriculturalsector

• Providetailoredlegaltrainingforfarmers,includingrightsandobligations• Designtrainingprogramforlawyerstoimproveoverallregulatoryenvironmentanddeliveryofagriculturallegalservicestostakeholders

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Regional Harmonization• HarmonizedStandardsandtradeproceduresatRegionalLevelfacilitateeasymovementofblendswithintheregion;harmonizelaboratorycapacities

• AbujaDeclarationCallsforRegionalHarmonization• AUMemberStatesandRegionalEconomicCommunities(RECs)shouldtakeappropriatemeasurestoreducethecostoffertilizerprocurementatnationalandregionallevelsanddevelopcapacityforqualitycontrol

• Focusonensuringdutyandtax-freemovementacrossregions

• ContinentalFreeTradeArea(CFTA)andTripartiteFreeTradeArea(TFTA)• CFTAlaunchedthisMarch• TFTAincludesthreeRECs:theEastAfricanCommunity(EAC),theSouthernAfricanDevelopmentCommunity(SADC),andtheCommonMarketforEasternandSouthernAfrica(COMESA)

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Regional Harmonization (Cont’d)• COMESADevelopingHarmonizedFrameworks• EACHarmonizedRegulatoryInstrumentsandProceduresforFertilizerMarketUnderDevelopment

• SADCRegionalAgriculturalPolicy(RAP)• Policynotspecifictofertilizer• Noseparateframeworkforfertilizerexists

• EconomicCommunityofWestAfricanStates(ECOWAS)RegulationRelatingtoFertilizerQualityControlintheECOWASRegion

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Example: ECOWAS Fertilizer Regulations • StreamlinedProductRegistration(ECOWAS– ProductRegistrationNotRequired;Truth-in-Labeling)

• InstitutionalCooperation• FreeMovementofFertilizer(includingblends;waytomeetmarketneeds)• StandardQualityDefinitionsandLabelingRequirements

• IFDCcontributedtoworkonsamplingandtesting• HarmonizedInspectionandAnalysis• CommonLicensesforFertilizerProducersandTraders• SharedLaboratoryResources

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ECOWAS Fertilizer Regulations (Cont’d)• Requiresdomestication(differencesbetweencivillawandcommonlawcountries)

• IFDCWAFPprojectisassistingindividualECOWAScountrieswithdomesticationprocess

• Developqualitycontrolsincountrydistributionsystem(identifyandevaluatelabandhumanresources)

• EstablishagencytoenforceECOWASregulatoryframework,includingqualitycontrolandnationalcommitteestosupporttheseefforts

• Draftmodalitiesforissuanceofimportanddistributionlicenses;fixregistrationfeesforimportersanddistributors

• Setuppenaltiesforinfringementofregionalandnationalregulations

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Principles for Harmonizing Fertilizer Regulatory Frameworks

• ImplementationatNationalLevelisCritical• ApproachesMayVaryAmongMembersofRegionalBloc• ConsiderSequencingofRegulatoryInterventions• Promote“LowHangingFruit”Reforms• EstablishCommonMethodologyandIndicatorstoMeasureProgress• TailorCapacityBuildingtoNeedsofIndividualMemberCountries• ListentoPrivateSectorandCivilSocietyVoices

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Short-Term Regional Harmonization Interventions• EstablishmentofNationalEntitiesResponsibleforFertilizerRegulation

• Helpfacilitatestableandpredictableregulatoryenvironmentatthecountrylevelandsignificantlycontributetoamoreefficientregionalfertilizermarket

• ClarityonProductandBusinessRegistrationandLicensingRules• Inconsistentapplicationofregistrationandlicensingrulesimpedesharmonizationefforts

• TariffandCustomsDuties• Countriescouldagreetoexemptfertilizerfromcustomsdutiesandothertaxes,andharmonizeVATforfertilizer,includingforfertilizer-relatedservices

• ListofApprovedFertilizers• Regionalizelistofapprovedfertilizerstofacilitatetrade,withthelong-termaimoftransitioningtoanexpostapproachliketruth-in-labeling

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Short-Term Regional Harmonization Interventions (Cont’d)• PackagingandLabeling

• Establishuniformrulesforpackagingandlabeling,suchasaminimumsetofinformationtobeclearlylabeledonfertilizercontainers

• HarmonizedRegionalQualityControl(IncludingInspection)• Establisharegionalqualitycontrolsystemthatextendsallalongthefertilizervaluechain

• FertilizerStandards• Adoptuniformstandardsforfertilizer,includingblends,basedoninternationalstandards

• RaisingAwarenessofFertilizerLawsandRegulations• Atnationalandregionallevels,includingbymakingsureproposedchangesaresharedandvettedwithpublicandallrulesarepublished

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Long-Term Regional Harmonization Interventions• ShifttoaTruth-in-LabelingApproach

• ECOWASsystemisanexampleofexpostregulationandaTruth-in-Labelingapproach

• FreeMovementofFertilizerCross-Border,IncludingTransport• Removeorreducebordertaxes,roadblocks,andescortsystems;introduceone-stopborderprocesses;andimprovetradecorridors

• RegionalInspection,Analysis,Sampling,andTolerance• Inspection,analysis,andtestingprocedurescouldfollowinternationalstandardsandregionalrulesforinspectioncouldbeestablished

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Long-Term Regional Harmonization Interventions (Cont’d)• OversightandAdministration

• Establishregionalinstitutionalmechanismwithclearmandate• RighttoAppealandConfidentiality

• Harmonizegroundsforappealandensureclearrighttoconfidentialityforsensitivebusinessinformationtoavoidunfaircompetition

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Fertilizer subsidy programs and private sector investment in

fertilizer value chains: Evidence from SSA

Nicole Mason (MSU)



Fertilizer subsidy programs in SSA• Whatisafertilizersubsidyprogram(FSP)?• Popularpolicytoolfordecades• Upthrough1970s/1980s:typicallyuniversal subsidiesanddistributedatgov’tdepotsorbystate-ownedenterprises

• Abolishedin1980s/1990sduetohighcosts andinefficiencies• Resurgenceinpopularitysincetheearly2000s• *Some*attemptstomakeFSPs“smarter”/moreprivatesector-friendly

• Targeted subsidiesinsteadofuniversal• Greaterinvolvementofprivatesectorfertilizerimportersandretailers

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Still popular today. Heavy gov’t expenditure, major press coverage, mixed results.

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How have FSPs affected private investment in fertilizer value chains?• IfFSPsgenerateasustained↑indemandforfertilizeratcommercial(unsubsidized)prices,could↑incentivesforprivateinvestment

• Empiricalevidence?• Moststudies(8of10)suggestFSPs↓commercialdemand(“crowdingout”)

• EX)Zambia,Malawi,Kenya,Nigeria(maingov’tprogramin2000s)• But2casesofFSPs↑commercialdemand(“crowdingin”)

• EX)Tanzania,Nigeria(pilotprograminKanoState2009-2011)

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What explains crowding out? • SignificantshareofFSPfertilizertargetedtofarmHHsthatwouldhavepurchasedfertilizeratmarketpricesevenwithoutthesubsidy

• Thesetendtobe:• HHswithmorelandorotherassets• Male-headedHHs

• Withoneexception,allFSPswithcrowdingoutonlyminimallyinvolvedtheprivatesector

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Sources:Seecrowdingin/outreferences



What explains crowding in?• BothTanzania(NationalAgriculturalInputVoucherScheme– NAIVS)&Nigeria(KanoStateVoucherProgram– KVSP):

• Utilizedvouchersredeemableatprivatesectorretailers’shops• Tanzania/NAIVS:

• DidgoodjoboftargetingHHsthathadn’tusedfertilizeronmaizeorriceinthelast5years(75%ofbeneficiaries)

• Nigeria/KVSP:• Subsidyfor3X50-kgbags.Notenoughtomeetfulldemandà farmerspurchasetherestatmarketpriceatagrodealer?

• Inputsuppliersrequiredtobephysicallypresentinlocalgov’tareas• PilotprogramcloselymonitoredbyIFDC

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Sources:Mather&Minde(2016),Liverpool-Tasie(2014)



Implications for FSP design• Itmaybepossibletoreducecrowdingoutbytargeting:

• HHsthatcannotaffordorhavenotusedfertilizeratthemarketprice• HHswithlesslandorotherassets• Female-headedHHs

• Crowding-inappearstobemostlikelywhen:• TheFSPusesvouchersredeemableatprivateretailers’shops• Incentivesareprovidedtoretailerstolocateclosertofarmers• Subsidizedfertilizerquantitiesarelessthanfullamountneededbyfarmers

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Supply-side effects of FSPs

• Farlessrigorousempiricalevidence thandemand-sideeffects

• Mostlyanecdotal evidenceanddescriptive studies

• Exception:StudyonhowtheMalawiFarmInputSubsidyProgram(FISP)affectsprivatesectorfertilizersales(Kaiyatsaetal.2017)

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How did allowing select large-scale distributors and affiliated retailers in select districts (9 of 28) to accept FISP fertilizer vouchers in 2015/16 affect fertilizer sales? • Noeffectoncommercialsalesoflarge-scaledistributors/retailersinpilotdistricts(participants&non-participants)

• é Subsidizedfertilizersalesofparticipatingfirmsby299MT/retailer• ê Commercialfertilizersalesofindependentagro-dealersinpilotdistricts(excludedfromprogram)by28MT/agro-dealer

èOverall:1MTofsub.fert.soldà 0.14MTê incommercialfert.sales

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Source:Kaiyatsaetal.(2017)



4 insights from descriptive studies on FSPs and private sector involvement1. FSPsthathavetheprivatesector(andnotstate-ownedenterprises)

handleimportation/procurement,distribution,andretailingoffertilizerforFSPshavethepotentialtocrowd-inprivatesectorinvestmentinfertilizervaluechains

EX)Tanzania/NAIVSà sustained,predictableé infertilizerdemandàImporters/distributorsinvestinnewstorage/distributionwarehousesàAgro-dealersshiftfromrentingtopurchasingshopsàMoreagro-dealersinoperationandmoredeliveryofinputstovillages(Matheretal.2016)

EX)SimilaremergingevidenceforZambiawithswitchtoe-voucher(Kuteyaetal.2016;Machinaetal.2017)

63



4 insights from descriptive studies on FSPs and private sector involvement

2. InvolvingtheprivatesectorinthehandlingoffertilizerforFSPscanreduceprogramcosts

Profitmotiveofprivatefirmsoftenleadstogreaterefficiency,lesswaste,andreducedbureaucracyrelativetomoregovernment-centricprograms

(SOASetal.2008;Chirwa&Dorward2013;Kuteyaetal.2016;Kuteya&Chapoto2017)

64



4 insights from descriptive studies on FSPs and private sector involvement3. Trustbetweengov’tandprivatesectoractorsisparamountfor

sustainedinvolvementoftheprivatesectorinFSPs,andtothedevelopmentofprivatesectorfertilizermarketsmorebroadly.Trustiseasilyerodedanddifficulttorebuild.

EX)Delayedpayments(Ghana,Malawi,Tanzania,Zambia)andlastminutedecisionstoexcludeprivatesectorretailers(Malawiin2008)

(SOASetal.2008;Kellyetal.2010;Chirwa&Dorward2013;Mather2016;Musonda2008)

EX)OpaquetenderingprocessesforFSPfertilizer,andallegationsofcorruptionandpolitically-motivatedawardingoftenders(Zambia,Nigeria)

(Wanzala-Mlobela etal.2013;Resnick&Mason2016)

65



4 insights from descriptive studies on FSPs and private sector involvement

4. ItisimportanttoinvolverepresentativesfromallpartsofthefertilizervaluechainindiscussionstosetmarketingmarginsforFSPs.

EX)ThiswasdoneinTanzania/NAIVSbutnotinGhana,whereonlygovernmentandimporterswereinvolved.Asaresult,inGhana,severaldistributorsandretailersdecidednottoparticipateintheFSP(Mather2016).

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Concluding remarks• OurPEMEFAteamhasbeenscouringtheliteratureforempiricalevidenceonwhatworks/doesn’tre:enablingenvironmentsforprivatesectorinvestmentinfertilizervaluechains

• Mostliteratureisonsubsidyprograms(butgapsonsupply-sideeffects)• Therearesomegenerallyacceptedbroadprinciplesonbestpracticesforfertilizerpolicies,laws,andregulations,butverylittleempiricalevidencethatmovingtowardthesebestpracticesactuallyimprovessmallholderfarmers’accesstoaffordable,goodqualityfertilizers

• Nextphaseofourprojectwillaimtofillsomeoftheseknowledgegaps• Weareseekingmorecollaborators,soifthisinterestsyou,pleaseletusknow!

67



Thank you! Questions? Acknowledgements• MSUAllianceforAfricanPartnership• MSUAfricanStudiesCenter

PEMEFAteam• JoshuaAriga (IFDC,[email protected])• Katrin Kuhlmann (NML,[email protected])• NicoleMason(MSU,[email protected])• MariaWanzala-Mlobela(AFAP,[email protected])• CharlesJumbe(ReNAPRI,[email protected])• MeganGlaub (NML,[email protected])• KillianBanda(AFAP,[email protected])

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Pleasestickaroundforthereceptionaftertheseminartocontinueinteractingwithspeakersandeachother!

ThispresentationwasfundedbyagrantfromtheAllianceforAfricanPartnership,anew,innovative

initiativeatMSUthatseekstodevelopacollaborativeandcross-disciplinaryplatformfor

addressingtoday’sglobalchallenges.



References – crowding in/outKenya:

Mather,D.,&Jayne,T.S.(2018).Fertilizersubsidiesandtheroleoftargetingincrowdingout:EvidencefromKenya.FoodSecurity,DOI:https://doi.org/10.1007/s12571-018-0773-8

Jayne,T.S.,Mather,D.,Mason,N.M.,Ricker-Gilbert,J.,&Crawford,E.(2015).RejoindertothecommentbyAndrewDorwardandEphraimChirwaonT.S.Jayne,D.Mather,N.Mason,andJ.Ricker-Gilbert.2013.Howdofertilizersubsidyprogramsaffecttotalfertilizeruseinsub-SaharanAfrica?Crowdingout,diversionandbenefit/costassessments.AgriculturalEconomics, 44(6),687-703.AgriculturalEconomics,46(6),745-755.

Malawi:Ricker-Gilbert,J.,Jayne,T.S.,&Chirwa,E.(2011).Subsidiesandcrowdingout:Adouble-hurdlemodeloffertilizerdemandin Malawi.AmericanJournalofAgricultural

Economics, 93(1),26-42.Jayneetal.(2015)– seeaboveforreferenceRicker-Gilbert,J.,&Jayne,T.S.(2017).Estimatingtheenduringeffectsoffertilisersubsidiesoncommercialfertiliserdemandandmaizeproduction:Paneldataevidencefrom

Malawi.JournalofAgriculturalEconomics, 68(1),70-97.Nigeria:

Takeshima,H.,&Nkonya,E.(2014).Governmentfertilizersubsidyandcommercialsectorfertilizerdemand:EvidencefromtheFederalMarketStabilizationProgram(FMSP)inNigeria.FoodPolicy, 47(August),1-12.

Liverpool-Tasie,L.S.O.(2014).Fertilizersubsidiesandprivatemarketparticipation:ThecaseofKanoState,Nigeria.AgriculturalEconomics, 45(6),663-678.Tanzania:

Mather,D.,&Minde,I.(2016).Fertilizersubsidiesandhowtargetingconditionscrowdingin/out:AnassessmentofsmallholderfertilizerdemandinTanzania.(GISAIA/TanzaniaWorkingPaperNo.5).EastLansing,MI:MichiganStateUniversity.

Zambia:Xu,Z.,Burke,W.J.,Jayne,T.S.,&Govereh,J.(2009).Doinputsubsidyprograms‘crowdin’or‘crowdout’commercialmarketdevelopment?Modelingfertilizerusedecisions

inatwo-channelmarketingsystem.AgriculturalEconomics, 40(1),79-94.Mason,N.M.,&Jayne.T.S.(2013).Fertilisersubsidiesandsmallholdercommercialfertiliserpurchases:Crowdingout,leakage,andpolicyImplicationsforZambia.Journalof

AgriculturalEconomics, 64(3),558-582.Jayneetal.(2015)– seeaboveforreference(samedataasMason&Jayne(2013))

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References – supply-side effectsChirwa,E.W.,&Dorward,A.R.(2013).TheroleoftheprivatesectorintheFarmInputSubsidyProgrammeinMalawi (WorkingPaperNo.64).Brighton,UK:FutureAgricultures

Consortium.Kaiyatsa,S.,Jumbe,C.,&Ricker-Gilbert,J.(2017).Supply-sidecrowding-outandcrowding-ineffectsofMalawi’sFarmInputSubsidyProgramonprivate-sectorinputmarketing:A

quasi-experimentalfieldstudy.Mimeo.Kelly,V.,Boughton,D.,&Lenski,N.(2010).MalawiAgriculturalInputsSubsidy:Evaluationofthe2007/08and2008/09program– inputsupplysectoranalysis.EastLansing,MI:

MichiganStateUniversity.Kuteya,A.,&Chapoto,A.(2017).E-voucherperformanceandrecommendationsfornationwiderolloutduringthe2017/18farmingseason (PolicyBriefNo.89).Lusaka,Zambia:

IndabaAgriculturalPolicyResearchInstitute.Kuteya,A.,Lukama,C.,Chapoto,A.,&Malata,V.(2016).Lessonslearntfromtheimplementationofthee-voucherpilot (PolicyBriefNo.81).Lusaka,Zambia:IndabaAgriculturalPolicy

ResearchInstitute.Machina,H.,Sambo,J.,&Nzila,M.(2017).Hastheelectronicvouchersystemcreatedemployment?ThecaseoffivedistrictsofZambia (WorkingPaperNo.128).Lusaka,Zambia:

IndabaAgriculturalPolicyResearchInstitute.Mather,D.(2016).Lessonslearnedfromprivatesector-friendlyinputsubsidyprogramsinTanzaniaandGhana (GISAIA/TanzaniaWorkingPaperNo.6).EastLansing,MI:Michigan

StateUniversity.Mather,D.,Waized,B.,Ndyetabula,D.,Temu,A.,Minde,I.,&Nyange,D.(2016).TheeffectsofNAIVSonprivatesectorfertilizerandseedsupplychainsinTanzania.(GISAIA/Tanzania

WorkingPaperNo.3).EastLansing,MI:MichiganStateUniversity.Musonda,C.(2008,January13).Fertilizercrisisleavessmall-scalefarmersfoodless.TheTimesofZambia.Resnick,D.,&Mason,N.M.(2016).Whatdrivesinputsubsidypolicyreform?ThecaseofZambia,2002-2016 (ResearchPaperNo.28).EastLansing,MI:FeedtheFutureInnovation

LabforFoodSecurityPolicy.SchoolofOrientalandAfricanStudies(SOAS),WadondaConsult,MichiganStateUniversity,andOverseasDevelopmentInstitute.(2008).Evaluationofthe2006/07AgriculturalInput

SubsidyProgramme,Malawi– FinalReport.London,UK:SOAS.Wanzala-Mlobela,M.,Fuentes,P.,&Mkumbwa,S.(2013).Practicesandpolicyoptionsfortheimproveddesignandimplementationoffertilizersubsidyprogramsinsub-Saharan

Africa.(NEPADAgencyPolicyStudy).MuscleShoals,AL:InternationalFertilizerDevelopmentCenter.

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