AIMS Program Develops Horticulture and Dairy Sector in Malawi

The USDA-funded Agribusiness Investment for Market Stimulation (AIMS) program, implemented by Global Communities (GC) since September 2014 in Kenya, Tanzania and Malawi, facilitates agribusinesses to access markets and finance as a way of bolstering domestic, regional and international trade of agricultural products. In Malawi, the program targets grains, livestock and horticulture value chains.

The agriculture sector plays a significant role in the economy of Malawi. It employs about 80 percent of the workforce and accounts for almost 40 percent of the country’s gross domestic product. For many years agriculture has revolved mainly around two crops, maize and tobacco. Maize is the focus of food security policy in Malawi and it accounts for over half of the caloric intake of households in the country (Minot, 2010). However, its production and availability is threatened by prolonged drought and erratic rains linked to El Niño. Tobacco has been a main cash crop for many farmers; however, Malawi’s tobacco industry is facing challenges of a recession, oversaturated markets, and ever-growing antismoking campaigns.

In order to improve food security and minimize risks associated with heavy dependence on maize as a staple food and tobacco as the main cash crop, the government of Malawi has been promoting crop diversification. The horticulture and dairy industries are among the sectors that has the potential to improve food security, income, foreign exchange earnings, and generate employment (Khonje, 2013).

Horticulture                          

Despite the promise of horticulture a desk study by the AIMS program found that there exists gaps in the horticulture sector including:

• Lack of a clear policy and strategy on horticulture – the horticulture section falls under the crops department in the Ministry of Agriculture and Irrigation. The section is regarded as an “appendage” of the crops department, as a result, less attention is given to the section as compared to others, such that, Malawi does not have a coherent and focused horticulture policy and strategy. Various horticulture crops are grown in almost every part of the country despite the varied [1] climatic conditions because of lack of a clear policy and strategy on horticulture. It is clear therefore that Malawi is missing an opportunity to optimise horticulture development.
• Low production levels – horticulture production is done by smallholders, mostly under subsistence conditions;
• Lack of specialised personnel and private sector support – the study further found that limited specialist personnel in the horticultural sector and limited government and private sector support on production, marketing, and processing have contributed to the poor performance of the horticulture sector in Malawi.

In order to revamp the horticulture industry, AIMS mobilized key private horticulture players to instruct them on the need for them to champion horticulture development in Malawi. Through this facilitation, the private (commercial) horticulture farmers organized themselves into a Horticulture Farmers’ Cooperative of Lilongwe (HOFACOL), a cooperative of horticulture SMEs. The AIMS Malawi program has been providing technical assistance to HOFACOL to develop a business model and putting together a proposal to manage a horticulture market facility built by the Ministry of Agriculture, Irrigation and Water Development with funding from African Development Bank. This facility will help horticulture sector players access both local and export markets. The ministry issued a request for proposals as it does not intend to manage the facility. HOFACOL will use capital on the market facility to grow linkages with smaller horticulture cooperatives while at the same time link off-takers locally and internationally. In addition, AIMS collaborates with the department of Horticulture in the Ministry of Agriculture, Irrigation & Water Development to revive the process of reviewing the agriculture policy and strategy through involvement of other stakeholders like private sector, academia (Lilongwe of Agriculture & Natural Resources – LUANAR), NGO (Civil Society Agriculture Network – CISANET).

The AIMS program has also facilitated horticulture market linkages through organizing a horticulture business to business event for SMEs and buyers. The event resulted in deals involving 15 metric tons of tomatoes, onions, green beans, green peppers, cabbages, pawpaw’s, mushrooms, and bananas worth USD $7,480 being actualized. In addition, the program has linked horticulture SMEs to supermarkets, hotels, and catering service providers. The program is also building the capacity of SMEs in the chillies and tubers horticulture sub-sectors and linking them to processors and larger aggregators/exporters.

The AIMS Malawi’s contribution to facilitating a process of an enabling policy environment coupled with markets and capacity building for horticulture SMEs will go a long way in increasing volumes and values of domestic, regional, and international trade of horticulture products.

Dairy and Livestock

In terms of dairy, the team has also played a significant role of supporting development of the sector. According to Government Policy Document on livestock in Malawi, this is a growing sector with a potential to significantly contribute to the economy of the country.  The sector contributes about 11% to the total GDP and about 40% of the total value of the agriculture products. Approximately 1.4 million families are engaged in livestock of which about 15% of the livestock owners are commercial.

Dairy farmers in Malawi are organized into milk bulking groups (MBGS). Most of the MBGS supply their milk product to processors which have structured business trading relationships with distributors. Despite these formal trading structures, major challenges hinder growth of dairy sector including lack of a legal and regulatory framework to guide operations of the sector, that is, there is no dairy board and policy/strategy for the sector; low production levels; and lack of capacity to manage the enterprises as businesses among others.

Due to already existing formal trading systems and processes that makes dairy sector players access market easily, the approach of business to business linkages might not add much value in this sector. The team however has focused on addressing these bottlenecks hindering the business growth of dairy sector SMEs through implementing capacity building initiatives in order to ensure they have the necessary knowledge and skills to manage their businesses, access finance and market information.

In addition, AIMS program has partnered with other stakeholders such as African Institute for Corporate Citizenship (AICC), Malawi Milk Producers Association (MMPA) and Civil Society Agriculture Network (CISANET) with a purpose of supporting the development of a dairy sector in Malawi. Towards this noble task, AIMS program in partnership with AICC and CISANET has facilitated the establishment of National Dairy Sector Steering Committee, comprising key stakeholders in the sector key among them being producers; processors; apex organisations supporting the dairy sector; Malawi Bureau of Standards (MBS); Consumer Association of Malawi (CAMA); Lilongwe University of Agriculture and Natural Resources (LUANAR); Malawi Government Officials; and Civil Society Organisations. In this steering committee, Global Communities is playing a coordination role as an ex-officio. This committee is chaired by a private sector player and discussions are ongoing regarding developing a legal framework of a dairy sector.

AIMS Malawi team has also facilitated a review of a five year Strategy and Policy Document (2018 to 2022) and it has been agreed that CISANET will champion the endorsement of the document at national level. The endorsement and implementation of dairy sector strategy will play a big role in tackling most of the issues affecting agribusiness SMEs in the dairy sector.

Despite having an established trading systems in the dairy sector, the market dynamics remains a biggest challenge with agribusiness SMEs due to fluctuations of milk prices. In 2016 the government imposed a VAT on dairy products which led to increase of prices by 16.5%. This adversely affected business operations within dairy sector where processors reduced their buying price of milk by 9% in order to reduce their margin of risk and losses.  This demotivated producers in the dairy sector and later National Dairy Steering Committee requested parliamentary committee on agriculture to lobby for a removal of the VAT on dairy products. The debate was presented in parliament during the season of reviewing the national budget and this is work on progress.

The following next steps are foreseen moving forward with the dairy sector engagements:

• Pricing Study on Dairy Sector – AIMS Malawi program in collaboration with AICC and CISANET are facilitating a pricing study on dairy sector in Malawi. CISANET is funding the consultant fees for the assignment whereas GC and AICC will support dissemination of the report findings through organized forums. The study will clearly define pricing structure, challenges and propose solutions that will regulate pricing in the dairy sector. This is expected to be a major milestone in bolstering trade in Malawi.
• National Dairy Sector Stakeholders Forum – This forum will be used to disseminate the study findings and institutionalise the steering committee while giving them a mandate to officially execute the recommendations of the report. The meeting will bring together all key stakeholders in the industry including the government and civil society organisation to discuss, among other things, the planned activities in the new pricing strategy for the dairy sector.
• Dairy Sector Legal Framework – This milestone will clearly define, develop and execute a legal framework and structure that will strengthen the existing systems such as the Malawi Dairy Board, Shire Highlands Milk Producers Association (SHIMPA), Central Region Milk Producers Association (CREMPA) and Mpoto Dairy Farmers Association (MDFA).

AIMS Malawi is leveraging on the resources and capacities of other institutions working in the sector to add value and bring synergies that will revitalise and grow the dairy sector in Malawi. In addition, working with partners and key players in the dairy sector who are drivers of this change will also enhance a buy in from stakeholders and create sustainability.