AGRICULTURAL RISK MANAGEMENT FOR GROWTH & FOOD SECUIRTY IN MALAWI
Lilongwe, October 1, 2015The World Bank
Why do we analyze data and trends?
World Bank methodology applied around the world
Provides an overview of what major risks are (production, marketing, enabling environment)
Gives an understanding of how frequent the risks are
Shows the scope of the major risks
Shows resources allocated to risk management
Sector-Wide Agricultural Risk Assessments
Why do we analyze data and trends?
- Risks differ from constraints and trends!
- To capture systemic risks to the whole sector, we look at:
– Production Risks
– Market Risk
– Enabling environment risks
- We look at biggest commodities that together account for 80% of GAO and assess risks over the past 30 years
Risk Assessment Approach
MAIN FINDINGS FROM AGRICULTURE SECTOR RISK ASSESSMENT IN MALAWI
Systemic Risks to Malawi’s Agricultural Sector
• Droughts (all major crops, in particular maize, cassava, potato, and tobacco)
• Pests and Diseases
• Price Volatilities (maize, tobacco, cotton)
• Government Interventions (maize)
Cassava Maize
Potatoes
Tobacco,
Sugar Cane
Groundnuts
Beans
Pigeon Peas
Bananas
Rice
TeaCotton
(200.00)
-
200.00
400.00
600.00
800.00
1,000.00
1,200.00
1,400.00
1,600.00
0.00 0.10 0.20 0.30 0.40 0.50 0.60
Loss
es
pe
r C
rop
(m
illio
n U
SD)
Frequency of Losses
Production losses in Malawi add up to US$150 million /year over the past 30 years*) I should be noted that the production data upon which these estimates are based (yield and area data) is debated in Malawi and that cassava losses therefore may be over estimated.
Production Losses to the Sector
Risks Have Direct Impacts On Malawi’s GDP (1968-2014)
Solutions Should be Risk Management, not Risk Response
100
1510
0
20
40
60
80
100
120
m US$
RM allocation and Losses (m US$)
Risk mitigation Losses Coping mechanisms
Ideally….
Additional positive effects are productivity increases and more stable business climate
0
20
40
60
80
100
120
140
160
Mitigation Losses Coping
Costs of Mitigation and Coping in Malawi
MITIGATIONIrrigationExtensionResearch
COPINGNFRAWFPDODMAADMARC
Solutions Areas Agreed with the Ministry
1. On-farm risk mitigating technologies and practices: What are the obstacles to uptake?
2. Mechanisms for Food Security Interventions: How can coordination and decision-making be improved?
3. MoAIWD capacity to effectively respond to agricultural risks: How can policy formulation and analysis be strengthened?
ON-FARM RISK MITIGATING TECHNOLOGIES AND PRACTICES: OBSTACLES TO UPTAKE
Root Causes Behind Poor Uptake
Government coordination of donors/NGOs and coordination between donors/NGOs & government
Project designGender Extension Seed System Limited Access to Finance Limited Access to Markets
Stronger leadership by the Ministry is needed in the sector for individual interventions to be sustained and for investments to take off
Incentives for Investments?
• Farm budgets from 2008 and 2014: maize, groundnuts, beans
• Nominal prices increased for all three crops in this period • BUT maize prices did not keep up with prices for inputs in
this period => gross income declined in this period.
Note: Incomes are based on production with improved inputs;the ranges in gross income reflect different practices and labor inputs, including for CA
STRENGTHENED COORDINATION BETWEEN THE SGR, ADMARC, MVAC, & DODMA
Main Findings
Export ban affects farm-gate prices but retail prices tend to follow regional prices later in the season when consumer demand increases – this also during good harvest years
High intra-annual and monthly price volatility in Malawi compared to other countries in the region
The coefficient of variation (CV) 2007-2014 of average monthly prices: Malawi: 62%Sub-Saharan Africa: 36%Zambia: 24%
Limited price differences between surplus areas and deficit areas
What Distort Prices?
• Interventions are not guided by rules or triggers (e.g. procurement, ADMARC’s interventions)
• Timing of procurement leads to distortions and are more costly than necessary
• No transparency in the system – costs are not clear, interventions and prices are not systematically reported
• Impacts (positive or negative) of interventions are not evaluated
What Are the Costs to the Sector?
Results of the Policy Analysis Matrix (PAM)
BETTER INFORMATION FOR BETTER POLICY MAKING AND M&E
Important Gaps
• Information systems are inadequate for effective policy making and M&E – difficult to assess exactly what is needed and what are the results of interventions
• Result in misaligned and sometimes contradictory policies (e.g. for productivity and food security)
• Communication is poor between and within of institutions
• Actors are poorly coordinated in the sector and interventions are often not aligned
Policies Are Implemented But What Are The Impacts?
RECOMMENDATIONS
Institutions, institutions, institutions…Strengthen policy capacity in ministry by Better information systems (e.g. AMIS, registers, production data, agriculture health
data, subscribe to regional data; define farm HH) Better communication back from the field Systematic M&E of policy
Food Security Agencies for non-distortive support in times of need Rule-based management and interventions, e.g. by triggers Align procurement with the agriculture year and make it predictable Move towards a combination of virtual (call options, etc.)-physical SGR Remove trade bans Revised and strengthened roles of ADMARC and DODMA
Coordination of activities Develop system for coordinating agriculture activities between actors (or build on data-base in MoF) Develop GAP Manual to standardize ag. principals for Malawi Strengthen communication between Public Agencies
All Under One Umbrella
Food Security: Availability and Access
Productivity and Resilience
Emergency Preparedness
Good risk management is often win-win => strengthened productivity and competitiveness
Thank You!