Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Why the groundnut value chain in malawi


Published on

Published in: Technology, Business
  • Be the first to comment

  • Be the first to like this

Why the groundnut value chain in malawi

  1. 1. WHY THE GROUNDNUT VALUE CHAININ MALAWI: Setting the ScenePresentation at Multi-stakeholder workshop onGroundnut Value Chains in Malawi and ZambiaAt Crossroads Hotel, Lilongwe, Malawi24-26thApril 2013Dr Gideon E. Onumah(Marketing/Finance Economist, Natural Resources Institute, University of Greenwich, United Kingdom) Candida Nakhumwa(PhD Student, Natural Resources Institute, University of Greenwich, United Kingdom)
  2. 2. Agriculture and the Malawi economy• Contributes around 34% to the GDP• Accounts for over 80% of Malawi’s exportrevenue, 84% of labor force• Agriculture is closely linked to economic short-term growth (particularly tobacco, whichaccounts for 60% of the country’s exports andhalf the Government’s tax base)• Risk: Heavy reliance on tobacco exports, a cropwith declining global demand prospects• Therefore Malawi urgently requires to diversifyits export base
  3. 3. Groundnut: suited to pro-poor growth• Groundnut is one of the strategic crops in theNational Export Strategy (NES) and also MGDSII• Majority of farmers in Malawi, including women,have long history and experience in the growingof groundnuts.• Groundnut requires less inputs compared toother high valued crops such as tobacco• It is grown for both food and income generation• Groundnut provides 25% of smallholderhousehold income in Malawi (Diop et al., 2003).• Builds soil fertility and therefore will helpreplenish the declining soil fertility
  4. 4. Can Malawi return to old heights ingroundnut export?• Groundnut exports ranked second only to tobacco interms of foreign exchange earned by Malawi• The country lost its share of the world market forgroundnuts in the mid 1980s.• This is due in part to high incidence of aflatoxin and ata time when the EU imposed stringent standards onaflatoxin.• Other supply side factors also contributed to declinein groundnut exports• The evidence is: Malawi has the natural endowmentbut is unable to meet domestic and regional demandas well as regain its foothold in the global market
  5. 5. Supply-side challenges: at producer level• Lack of/inadequate quality seed and extensive use of low-yielding recycled seed• Poor access to credit, limiting farmers’ ability to procure yield-enhancing inputs• High rural labor cost – due in part to competition for laborfrom other high valued crops such as tobacco• Emerging impact of climate change – particularly increasingincidence of midseason drought, making farmers morevulnerable and scaring banks• Limited access to farm extension – under-funded publicextensions institutions• Poor pest and disease control• Poor management of aflatoxin contamination at bothproduction and post harvest levels Science and technology can address some of these challengesbut is it sufficient (enough investment and on its own)??
  6. 6. Marketing constraints in groundnutchains• Smallholder farmers who dominate groundnut production of havedifficulty accessing markets• Producer prices are often squeezed as a result of the following:- Poor rural road infrastructure contributes to high inflate transport costs- Lack of efficient storage infrastructure leads to high post-harvest losses- Traders are severely under-capitalized and, therefore, unable to absorbsurplus at harvest. This leads to glut and very low prices at harvest- Marketing chain is often long with several intermediaries, leading to lowproducer margins• Considerable cheating on weight occurs in the trade- Reported that nominal price at farmgate is often very close to into-warehouse price paid by NASFAM• Quality premium is not paid at farmgate level due to:- Small size of quality-sensitive market: insignificant volumes export underFairtrade; low volumes to SA; domestic formal/regional markets do notenforce quality standards
  7. 7. Going forward: holistic/value chainapproach needed• Not just science and technology: breeding, inputssubsidies, inputs credit, enhanced farm extensionand improved post-harvest management:- Double your yield not always equal to double your farm income• Holistic VCA can help identify opportunities to beexploited and intervention areas to improvecompetitiveness and chain-wide efficiency.- Market-based approaches need attention
  8. 8. Going forward: market challenges• Emerging evidence suggests that price incentives matterin fostering adoption of improved tech and betterhusbandry practices but currently:- Fairtrade market – size too small and margins too low (farmers virtuallytaxed to fund community programmes)- Regional market quality-sensitive market (mainly South Africa) –growing but sorting and grading occurs at exporter level denyingfarmers opportunity to gain from quality premium- Sizeable domestic formal market does not enforce quality standards,putting consumers at risk- Similar situation in other regional markets (predominantly informal)
  9. 9. Going forward: some options• Expand size of quality-sensitive market and create spacefor farmers to enjoy quality premium through:- Enforcing quality standards in formal domestic market- Fostering more formal regional exports – collaboration betweenfarmers organisations may be an option e.g. EAFF, SACAU- Enforcing quality controls at exit ports to regional markets as formalmarket expands- Sensitisation of the population may be helpful- Need to strengthen domestic quality enforcement capacity
  10. 10. Going forward: some options (2)• Strengthen role of primary-level farmers organisationsin groundnut marketing:- To lower aggregation cost and improve quality at farmgate level- Case of Tanzania coffee where primary organisations have been moreeffective• Promote institutional infrastructure and regulatoryframework that encourages investment in trade andlogistics infrastructure:- Working with the commodity exchange is one option