CONNECTING THE PEASANT FARMER IN ZAMBIA TO EXPORT MARKETS BY INCREASING HIS SHARE OF PRODUCTION
Learned Colleagues, Ladies and Gentlemen,
I appear before you today not as a scholar but as an entrepreneur; engaged for more than 30 years with smallholders in some of the hardest-to reach areas of the globe.
Among other activities, my business enterprises purchase maize for milling and export from peasant farmers in Zambia and supplies fertilizer to farmers in Eastern and Southern African countries. I will therefore focus my talk on these 2 commodities.
Agriculture is Africa's greatest hope in addressing the twin problems of poverty and food security. Take the example of Zambia. It has a total land size of 75 million hectares, of which at least 42 million hectares is suitable for agriculture and yet only 6 million hectares or less than 14% of this land has been developed till date.
This painful underdevelopment; despite the fact that Zambia has abundant land, water resources and manpower.
Over the last 45 years the public and private sectors have experimented with different schemes that could pull smallholder farmers out from subsistence farming to production for markets.
Farmers co-operatives, both private and government-sponsored, have failed to impact significantly on the peasant's ability to grow more for the market.
The most basic problem with agricultural produce supply in Zambia is that more than 90% of farmers are poor smallholders and cannot afford farming inputs during the planting season to produce surplus for sale. Ample land is available but not credit for buying seeds, equipment and fertilizer.
The challenge therefore is how to provide farming inputs to smallholder producers, who are in the vicious circle of not being able to provide collateral because they are not wealthy and cannot create wealth because they have no access to inputs! No inputs means little surplus production for domestic or export market!
The Zambian government and private sector has attempted to address this challenge since 1970 and is only now, in the last decade, beginning to taste success.
Private companies have sponsored out-grower schemes in which they provide seeds and fertilizers to poor peasants who cannot afford collateral for bank loans. One of my own companies, the Chipata Cotton Ginnery Ltd is providing inputs to more than 100,000 smallholders. In the current season alone the smallholders have delivered 35,000 tons of seed cotton, up from only 8,000 tons delivered in the 2011 farming season. Ginned cotton, seed oil and cake are consumed locally and exported. Though the default rate is high at 30%, it is rewarding to finally witness the smallholder improving his income and contributing significantly to the market supply chain.
There is potential for extending this scheme to other crops like sugar-cane, cassava, millet and sorghum.
The Zambian government has introduced the dramatically successful Farming Inputs Supply Program (FISP). Under this program, the government subsidizes 50% cost of one bag of seed and 4 bags of fertilizer for 900,000 smallholders. This modest assistance has ushered in a production revolution. A decade ago Zambia produced less than 800,000 tonnes of maize and had to import maize as national consumption exceeds 1.5 million tons. For the past 7 years, thanks to FISP the country produces in excess of 3 million tons and enjoys the distinction of being the only country in Africa which is self-sufficient in maize and wheat production and exports surplus grain throughout the region.
This revolution has been possible because of 2 factors. Government subsidizing a modest package of inputs and guaranteeing the purchase of all maize produced by peasant farmers at fair market prices. Purchasing all the maize by the Food Reserve Agency has been possible through an innovative scheme in which ACE GLOBAL, a collateral management company, has been able to secure bank loans for the FRA against maize stocks. In the last season alone this system of financing allowed the purchase of 1,120,000 MT of maize.
Ladies and Gentlemen! The Farmers Inputs Support Program has only scratched the surface of the vast potential. The government has limited resources and cannot finance the unlocking of the total potential in the agricultural sector. The challenge therefore is to find private sector solutions for increasing support to individual peasant farmers that and unlock the remaining 86% potential. There can be no doubt that smallholder producers are the backbone of agri-food production. Supporting individual smallholders seems to be the right direction to take in Zambia rather than grouping smallholders into collectives. Collectives and co-operatives have failed in the past and are likely to fail in the future.
Ladies and Gentlemen! The problem of financing agricultural inputs for smallholder farmers is not only a Zambian problem but faced by poor peasants all over the world. If solutions are found to this problem, poverty in rural areas will be reduced and quantum growth in food production is guaranteed in all the countries of the world!
I will now briefly discuss the second topic I wish to discuss; fertilizer supply.
Producing maize on a large scale would be impossible in Zambia without utilizing imported fertilizer.
I am director of a company called Nyiombo Investments Limited which imports fertilizer into the East and Southern African region. I only have time to make passing mention of a few major problems we confront in the importation of this commodity.
Fertilizer is needed during the short planting season in November and December. To avoid unnecessary financial costs it makes good business sense to import fertilizer near the planting season. However due to a few major bottlenecks, we are obliged to purchase stocks one year in advance, phased into small batches spread out throughout the year. This increases the landed cost.
A major problem is the poor state of port facilities at Daresalam and Beira ; two of the nearest ports used by landlocked Zambia's importers. Both these ports have limited berthing spaces, antiquated cranes and machinery, frequent electricity outages and outrageously limited indoor and outdoor storage capacity.
Overland transportation from the ports to Zambia is possible either by rail or road. Rail transport is cheaper, but the Tazara railway linking Daresalam to Zambia is in a poor state with few cars and wagons. Most of the 400,000MT of fertilizer therefore has to be transported 2,134 kilometres to Lusaka using more than 13,000 trucks. Road haulage significantly hikes the price of fertilizer and puts enormous pressure on an already congested road network.
The 2 regional ports of Daresalam and Beira are vital to the economic development of all the countries in the region. Both ports require urgent upgrading and modernization to improve supply chains for all commodities traded in the region.
Learned Colleagues, Ladies and Gentlemen! I fear I may have already taken up more than the 10 minutes allotted to me. I cannot therefore touch upon the important issues of procurement, warehouse shortages and meeting delivery deadlines to some of the most difficult to reach rural areas of the globe.
In concluding I wish to say that a revolution in rural production all over the globe is possible if innovative ways are found to provide loans to individual peasant farmers. Lastly, countries of the region cannot hope to establish competitive and viable supply chains without necessary investment in infrastructure such as ports and railway lines!