Reformed ADMARC: A must for improved food security

A small scale businesswoman selling beans

By Bernard Mphepo*

The Agricultural Development and Marketing Corporation, known as ADMARC, was formed in Malawi in 1971 as a Government-owned corporation or parastatal to promote the Malawian economy by increasing the volume and quality of its agricultural exports, to develop new foreign markets for the consumption of Malawian agricultural produce and to support Malawi’s farmers.

It was the successor of a number of separate marketing boards of the colonial-era and early post-colonial times, whose functions were as much about controlling African smallholders or generating government revenues as in promoting agricultural development. At its foundation, ADMARC was given the power to finance the economic development of any public or private organization, let it be agricultural or not.

In its first decade of operation, ADMARC was considered to be more business-like and less bureaucratic than similar parastatal bodies in other African nations. However, from its outset it was involved in the diversion of resources from smallholder farming to tobacco estates, often owned by members of the ruling elite. This led to corruption, abuse of office and inefficiency in ADMARC. As a result of the declining world tobacco prices, it had become insolvent by 1985. Thus, to obtain World Bank loans, ADMARC had to be partially privatized. However, but the neo-liberal economic policies imposed on it by the World Bank forced it to cut fertilizer subsidies, which contributed to severe food shortages in Malawi in 1992.

In the aftermath of these imposed changes, ADMARC’s role was reduced to that of a buyer of last resort, trying to promote food security by maintaining strategic reserve of maize. This was to be created through domestic and foreign purchases. In 1996, the World Bank again intervened, criticizing ADMARC’s importation of maize as an unjustified subsidy, and requiring it to give up control of grain on imports. ADMARC’s record of promoting food security and maintaining strategic reserve from domestic purchases after 1996 was patchy, in the sense that its intervention prevented famine in 1998.

A potato farmer

However, between 2000 and 2001 financial pressure forced it to sell much of its maize reserves just before the poor harvest of 2002, resulting into food shortage and famine. The third round of World Bank intervention in 2002 forced ADMARC to reduce its financial losses by reducing its trading operations in order to allow private sector’s competition. This was market liberalization which had mixed results. ADMARC, therefore, survived in a changed form, and by 2009 it started growing again. In 2003, ADMARC’s legal form ceased to be that of a parastatal corporation following the repeal of the legislation that created it as such, becoming a limited liability company. In fact, and it still exists because it has not yet been possible to create a comprehensive private-sector marketing system. However, ADMARC is being criticized by donors as inefficient, wasteful and not being sufficiently independent of government control.

Studies carried out by the Centre for Social Concern (CfSC) in 2020 has revealed that ADMARC, as a grain marketer, fails to secure enough maize for the population, thereby promoting speculations of food insecurity nationwide; a situation which guarantees a continuous poverty among farmers.  ADMARC is also lacking  necessary capacity to buy crops from smallholder farmers at a fair price. Every year vendors take charge and advantage of buying crops from these farmers at a price below minimum farm gate prices. This is exacerbating increased level of poverty.

Despite government’s effort to capitalize ADMARC through loans using the same government as a guarantor,  ADMARC has failed to pay back loans. As a result, ADMARC has been using tax payers’ money to pay back some toxic loans. For example in 2018/2019 budget, the government bailed out ADMARC of its toxic loans totaling MK53 billion. ADMARC also failed to pay back loan of 1.9 billion from Malawi Energy Regulatory Authority (MERA).

Every financial year the government put in money into national budget to buy maize from farmers for resale at reasonable price. It has been noted with concern that this money does not benefit smallholder farmers; instead vendors monopolize ADMARC markets. For example, this year, 2020, farmers are selling maize between MK120 and MK150 which is far below the farm gate price of MK200 per kg. This is despite the budget of MK7 billion to buy maize and another MK10 billion which is being allocated in the procurement of maize. This year ADMARC was also planning to borrow MK89 billion to buy maize. Despite the huge investment on ADMARC, the institution has failed its social function of selling and buying the food crops at reasonable price. . This has resulted into increased food security and poverty.

The Centre for Social Concern has observed that since the government, through the Ministry of Agriculture released farm gate prices in April 2020 for various crops including maize, and the monthly survey of April/May 2020 Survey carried out by Centre for Social Concern  revealed that farmers in most parts of the country are selling below the minimum farm gate prices due to either delays in opening ADMARC depots or ADMARC depots do not have money to buy the crops. The CfSC has noted with deep concern that the government is not enforcing its own set minimum farm gate prices. Small holder farmers in most parts of the country are selling a 50 kg bag of maize at MK5,000 instead of the set minimum farm gate price of MK10,000 per 50 kg bag; while soya beans is being sold at MK10,000 per 50kg bag instead of government recommended price of MK15,000.

CfSC has noted with regret that farmers who are selling their farm produce below the minimum farm gate price will not be able to buy farm inputs next growing season. This will, surely, lead to reduced yields next growing season. As coping mechanisms farmers will be selling their assets to buy inputs; hence, increasing the number of Malawians wallowing in abject poverty.

The delay by ADMARC to open markets, forces vulnerable smallholder farmers to sell most of their maize to enable them buy basic necessities. This  and this will again result into an increased household food insecurity. The delay by ADMARC to buy maize will lead to a national food insecurity since vendors will buy most of  the maize. Thus,  government will not be able to restock grain reserves. In an effort to restock grain reserves ADMARC will spend more tax payers’ money to buy maize from vendors.

Income inequality will also be increased between small holder farmers and maize traders as vendors will be buying maize at a low prize and resell to ADMARC at a very high price.

CfSC, therefore, recommends that the government must ensure that ADMARC depots are opened on time and they should have enough money to buy crops from farmers to ensuring that vulnerable farmers are protected from unscrupulous traders who will be exploiting the farmers. The government should empower farmers to be able to bargain fair prices for their commodity which will enable them generate profit from the growing of maize. CfSC is convinced that the increase in prices for farm produce will increase disposable income that will support farmers in improving their standard of living; hence, curtail the jaws of poverty.

Cassava farmers

A random Survey conducted by Centre for Social Concern has revealed that most of the ADMARC depots are not buying crops due to unavailability of funds. CfSC suggests that a reformed ADMARC should be able to buy maize from farmers at a price that a farmer can make profit and sell  maize to farmers at a reasonable price. CfSC therefore, is recommending that the government should ensure that ADMARC depots have sufficient money to buy maize from farmers. The government should also ensure that the buying of maize is being done in a transparent manner to avoid ADMARC staff from forming cartels with the traders who try to monopolize ADMARC markets.

Moreover, CFSC recommends that the government has a task of depoliticizing ADMARC. ADMARC must be run by professionals. Politicians must stop using ADMARC as tool to siphon money from people. ADMARC must benefit all Malawians and not few political zealots. Thus, with a reformed ADMARC, all Malawians will benefit from it.

In Conclusion, failure by ADMARC to buy maize from farmers leads  to national food insecurity and increased level of poverty. Indeed, failure by government to reform ADMARC, violates people’s rights to food security and dignified life. CfSC believes that efficiency of ADMARC will help to increase food security and reduce poverty.

*Mphepo is Programme Officer— Economic Governance—at the Centre for Social Concern in Lilongwe