New Pathways to Commercialize Agriculture in Malawi

Isn’t it puzzling that most Malawians are involved in agriculture and yet most suffer persistent food shortages? Even more puzzling when every year for a long time now we have seen investments made toward subsidizing agricultural production and, again, towards subsidizing consumption. This has become the norm.

Unravelling this requires careful examination. We need to define exactly who these agricultural households are that do not have enough food throughout the year.

The World Bank’s 2022 Poverty Assessment for Malawi shows that agriculture remains the country’s single most important sector, with 85% of the population of almost 20 million highly dependent on it, and a labor participation rate as high as 55%. Women’s participation is even higher, at 60%. But it also shows that, as a sector, agriculture requires serious re-thinking to make it a catalyst for growth, rural transformation, and job creation.

Attempts to categorize farmers into four broad categories have been made, based on research in the 5th Integrated Household Survey (IHS) report by the International Food and Policy Research Institute (IFPRI) and World Bank. I agree with IFPRI that perhaps it is good to categorize farmers for easy and better targeting.

Firstly, there are the commercially oriented smallholder farmers. This group produces considerably more crop output than they consume within their households. They comprise at least 7% of the population, with lower poverty rates than most people, at 27%, and better education levels, access to irrigation, and the ability to hire labor.

Secondly, there is the majority subsistence-oriented, rural households that engage in “some” farming, while also pursuing diverse and generally unskilled, labor-intensive, livelihood-earning activities. Also called “other productive households” in the Survey, these households comprise 64% of the population, with poverty rates at around 40%.

Thirdly, there are households that are not economically productive both in rural areas and urban centers. Such households are ultra-poor, with more than half their household members non-workers. They face extremely high poverty rates and comprise 13% of the population.

Fourthly, there are households in urban centers and rural towns that primarily specialize in economic activities outside of agricultural production. This is a residual category of urban households, which does not fall into the “not economically productive” category. It has relatively low poverty rates of 12% and comprises 16% of the population.

Using the above typology, we need to identify and redefine the farmer who can pursue agriculture as a business not just as a “cultural practice” or a norm. The current situation, with increasing food prices and high fertilizer prices (caused by the war in Ukraine), is providing an opportunity to change the prevailing discourse. Guided by such farmer typology analysis, the following options emerge for commercializing agriculture in Malawi:

1. Farmers in the “non-economically productive group” often do not have sufficient land and inputs to optimize input use and, when targeted by subsidized inputs, they mostly sell to other farmers to get the cash. Such farmers are better candidates for social protection interventions and not to be in mainstream agriculture domain.
2. Commercially oriented, smallholder farmers, who can use the inputs more efficiently, have access to land and technology, and are linked to markets are another category. An example includes farmers organized into Producer Organizations/Cooperatives under the World Bank Agricultural Commercialization (AGCOM) Project, who can contribute their own cash to the matching grants, and further complement their investments by obtaining loans from commercial banks.
3. Other productive households, who are in the majority, can be supported to shift their orientation to commercial agriculture. They are in the majority and there is need for reorienting their approach to agriculture to redefine who can be shifted towards commercial agriculture and who should be more engaged in non-farm activities, or even employed by other commercial oriented farmers.  

Fostering commercially successful smallholders and creating both on-and off-farm employment opportunities are prerequisite to agricultural transformation. But, for this to thrive, market mechanisms need to be strengthened, the business and investment climate improved, and investment made in productive infrastructure that can propel commercialization.

If this approach is undertaken, we shall see productivity of commercial smallholder farmers rise, their farm production expand, and their incomes increase, leading to increased demand for  more of the goods and services than their less agriculture-focused neighbors produce. These goods and services are those that are labor-intensive, require limited capital in their production, and typically are not marketed outside of the local community—such as construction and building repair services; transport; education, health, and other social services; furniture and handicraft-making; and food and beverage processing, among others.

This link with consumption has the potential to widen the economic gains that commercial smallholders make from more productive farming. In the process, local markets deepen, local economic activities accelerate, and access to food for economically active households, including the poor, improve.