Competing in the open market
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CTA. 2002. Competing in the open market. Rural Radio Resource Pack 02/5. Wageningen, The Netherlands: CTA.
Permanent link to this item: http://hdl.handle.net/10568/57435
A farm business advisor for the Malawi Ministry of Agriculture explains how the opening of borders to Zimbabwean egg producers has affected Malawian farmers. He encourages farmers to form groups in order to increase their competitiveness, and to reduce their reliance on imported inputs, such as chicken feeds.
Competing in the open market Cue: Free trade; is it an opportunity or a threat for Africa?s farming communities? Well of course it can be both. For large-scale, commercial producers it may well be a great opportunity, giving the chance for them to export into new markets in neighbouring countries, or even further afield. But for small-scale farmers, who perhaps grow the bulk of their crops for their own consumption, and only sell small amounts of surplus, free markets can represent a real threat to this important source of income. Such is the case in Malawi, a country where the vast majority of farmers still do most of their farming at a subsistence level. Is there anything that such farmers can do to compete with their bigger neighbours? To get an answer, Excello Zidana spoke to Aiton Kamwela, a Farm Business advisor in the Malawi Ministry of Agriculture. Mr. Kamwela began by explaining the challenge facing smallholder farmers, using as an example, the effect of cross-border trade on Malawian egg producers. IN: ?Here we are after liberalising ? OUT: ?produce at a lower cost.? DUR?N 4?55? BACK ANNOUNCEMENT: Strong advice there from Aiton Kamwela , a Farm Business advisor for the Malawi Ministry of Agriculture. Transcript Kamwela Here we are after liberalising the marketing of eggs. But the moment we opened the market, what has happened now is that it is better for me to purchase eggs produced in Zimbabwe but sold in Malawi, than buy eggs produced in Malawi, because locally produced eggs are more expensive than the ones brought in from Zimbabwe. Production costs for the locally produced eggs are much higher than the foreign ones. Once you sit down and analyse the whole issue, you find that the problem of feeds, the feeds are very expensive; most of our producers can not actually buy them. And why are the feeds very expensive? The ingredients, most of them are imported, and are heavily taxed. So the feed manufacturers are having difficulties. If they have to make any profit at all from the feeds that they produce, they have to charge higher prices. So it?s a chain reaction. So opening up our markets through liberalisation, has had a very bad effect, in the sense that our farmers don?t have a good base upon which to compete favourably with imports. Zidana Now, while we are saying market liberalisation is really not conducive to the local farmers in these developing countries, but others are also saying that market liberalisation induces a hard-working spirit in the local farmers. What do you say on this one? Kamwela For our farmers, they have basically been producing for their own home use, they have not yet commercialised their operations. And we are talking of between 60 and 80% of our smallholder farmers. Very little actually goes through the market. So the little that goes through the market, it?s not able to compete favourably with the imports. Our smallholder farmers are not yet ready for liberalisation at this point in time. Much as I know the good parts, in that it definitely gives that spirit of hard-working, but I think our farmers have received it as a shock. If liberalisation came in slowly, gradually, giving time for these people to learn the good effects as well as some of the not-so-good effects of liberalisation, I think it would have given our farmers a good base. But now it just came almost it was a stop, an abrupt stop, and that has not been very good for our farmers. Zidana What mechanism must the government in these developing countries put in place to make sure that this scenario does not prolong? Kamwela I know that in as far as Malawi is concerned for example, it appears liberalisation has come to stay. So one thing that as a department of agricultural extension we are doing now, is to facilitate the formation of groups, farmer groups, so that those small producers, once they come together into some sort of farmer clubs, maybe in so doing they can actually compete favourably, pulling together all the little that they produce, and be able to bargain properly with the producers. So that is one way of possibly encouraging the smallholder farmers to sell at a better price, by coming together into groups. Groups maybe to produce a particular crop, groups so that maybe they can sell their products at a better price, so that at least they are better able to negotiate for prices with traders. Zidana Since market liberalisation has come to stay, how do you encourage farmers in these developing countries? Kamwela My advice to small-scale farmers in developing countries, is that they basically have to work hard, and particularly, agree to work as groups. Indeed their small sizes will never grow, because the amount of land that they have, that is what God has given them. But as far as production is concerned they need to come together, market their crops in groups. If they want to get inputs cheaper they have to come together as a group, negotiate. We have examples in Malawi, whereby farmers who have responded to our advice are reaping benefits. They have come into groups; they are now able to purchase inputs on wholesale; we are seeing some good effects in the country along those lines. So they don?t have to fear. But at the same time, while we know that the inputs are going up, they should start exploring other ways of producing farm products cheaply, like the use of manure, compost, so that their production costs can go down, and yet be able to realise good incomes out of their produce, even at the current prices. They have to fight hard to produce at a lower cost. End of track.