The Zambian government recently announced the reduction and in some cases complete removal of some consumption and production subsidies. This has resulted in widespread reactions from various quarters of the Republic. Nearly everyday there is a headline or inside story in print and electronic media about subsidies from politicians, faith leaders and other interested parties. Subsidies have been removed on fuel, maize and reduced on fertilisers. Government has been subsidising fuel and fertilisers for over ten years while maize subsidies were introduced in 2012 in reaction to rising mealie meal prices. Maize is a political crop and maize mealie meal political food. Elections are won and lost based on how government handles the production and marketing of maize as well as the production and sale of mealie meal. As a result, there have been a lot of reaction both from leaders from the ruling Patriotic Front and the opposition political parties over the removal and reduction of subsidies.
The ruling party and government are justifying the removal of fuel and maize subsidies by arguing that millions of kwacha that can be used to develop infrastructure development in rural areas are spent on subsidising the rich. Further, they have argued that the funds that will be saved will be used to build schools, roads, hospitals and other capital goods and services in rural areas. They have also reduced the amount of fertiliser subsidies on the Farmer Import Support Programme (FISP) where beneficiaries will be required to pay 50% on every bag of fertiliser. According to a statement issued by the Ministry of Agriculture and Livestock, the funds that will be saved will be for agriculture diversification, irrigation development, research and extension, post-harvest management and infrastructure development (Post Newspaper, 6th June, 2013, pg 17).
Opposing views argue that subsidies should not have been removed. Attempts have been made to reverse the government policy through civil pressure but this has not yet succeeded. According to these views removal of fuels subsidies will increase the production costs in the economy and therefore result in rising prices of essential commodities in the short term. They have predicted that inflation will rise and the purchasing power of consumers will be eroded in the longer term. They have further argued that the removal of subsidies on maize will push up the price of mealie meal leaving the consumers at the mercy of private milling companies. It is further argued that increased fuel prices will push up transportation costs and further increase the cost of living. Reduction of fertiliser subsidies are also predicted to directly affect the food availability at rural household level as well as national food security.
Both opposing views are valid. However, since they have been delivered with great emotion from both ends it has really confused most common Zambians who are left wondering 'what is the truth?' Subsidies like taxes are measures that are implemented by government to address market failure or to redistribute income in the economy. There is no doubt that consumption subsidies such as the ones on fuel and maize in the long run are not sustainable. However, in the short run they assist in cushioning the negative impact of high fuel or food prices at the household level. If they are well managed and well targeted they can be used as a means of supporting very poor and vulnerable households to meet their basic needs. However, blanket provision of fuel and maize subsidies is unsustainable because even individuals that can afford the commodities at prevailing real market prices are also subsidised.
It is no secret that Zambia became a food deficit nation following the complete liberalisation of the agriculture sector in the early 1990s. The policies of liberalisation fostered very rapid change that removed government involvement in input supply and crop marketing. This policy was disastrous because the vacuum left by the collapse of the National Agricultural Marketing Board (NAMBOARD) was not immediately filled by the private sector. This prompted government to reconsider its policy and re-engage in input supply and maize marketing through the establishment of the Food Reserve Agency and the Farmer Input Support Programme in the early 2000s. Fertiliser subsidies were introduced at 50% the cost of inputs. This was raised to higher levels in subsequent years. There is no doubt that the introduction of subsidies on fertilisers resulted in some positive impact on small holder farmer productivity. Over 80% of maize production in Zambia is done by small holder farmers. Therefore, the fact that Zambia became a food sufficient and surplus country in the last 10 years points to the fact that farm productivity increased. Of course, the provision of subsidies fertilisers and other inputs could be just one of the factors. Other factors are good climate, adoption of good agricultural practices such as conservation agriculture, early planting and so on and so forth. The direct benefits at farmer level were increased food availability and income. This increased the purchasing power of rural households who were now able to afford their nutrition needs as well as invest in capital assets such as iron roofing sheets, generators e.t.c.
The down side to this is that even individuals that were not eligible to benefit from the FISP also benefited through corruption. Huge amounts of money meant to benefit the vulnerable were instead supporting the elite. Several attempts were made to prevent this abuse but they were not very successful. In addition, the provision of maize seed with the fertiliser promoted maize production at the expense of other crops. This lack of diversification was a serious threat to household food security in low rainfall areas and during times of poor rainfall distribution in other areas. Maize is highly dependent on water and can not with stand long dry spells. There was also very limited funding to other institutional support relevant for efficient production at farm level such as agricultural extension. These gaps affected adoption of innovations at farm level. In addition, the available human resource was directed towards administering FISP leaving very little time for provision of technical extension services. Further, there was little investment in irrigation despite the constant threat of drought induced by climate change making many agricultural dependent livelihoods highly vulnerable to food insecurity in poor rain seasons.
The assurance by the MAL that savings from subsidies will be used for diversification, irrigation development, research and extension, post harvest management and infrastructure development is highly welcome. It will be a pity if these funds are not retained in the agriculture sector budgetary allocation but redirected for staff emoluments and/or other sectors. It is widely agreed that agriculture has a lot of potential of reducing rural poverty by increasing food availability and utilisation as well as income accumulation. Whatever the case one hopes that this debate on subsidies will be constructive and result in a consensus that will move our nation forward and most importantly improve the well being for the rural poor for whom it is being said this sacrifice is being made.
