Agricultural service provision by the private sector in Malawi

Support for the activities of the GTZ Agricultural Extension Support Project to facilitate greater private sector investment in providing agricultural services to small-scale farmers.

 

 

 

 

Client

GTZ AES Programme & Limbe Leaf Tobacco Company

Consultants

Andrew Charman, Willi Ehret, Sam Matemba

Assignment

From 2002–2005, SLC, in association with Facilitators of Change Interventions (FOCI), was commissioned to annually document the experiences of the agricultural extension partnership between Limbe Leaf Tobacco Company (LLTC) and the Kasungu Tobacco Farmers’ Trust (KTFT) in Malawi. The consultancy was undertaken in support of the activities of the GTZ Agricultural Extension Support (AES) Project to facilitate greater private-sector investment in providing agricultural services to small-scale farmers.

Methodology

SLC undertook extensive field research to ascertain the achievements and failures of this partnership. The researchers interviewed farmers (individuals and focus groups), agricultural extension officers, KTFT officials and LLTC employees. The findings were documented and published by GTZ AES in three studies.

Findings

In 2001 LLTC entered a production partnership with KTFT to produce flue-cured tobacco. The partnership, which came to an end in 2005, entailed the provision of financial and technical support to small-scale farmers to enable them to grow and market flue tobacco competitively. This partnership was intended to significantly revive the tobacco estate land and infrastructure held in trust by the KTFT. It ushered in new approach to agricultural service provision, with LLTC providing a comprehensive input package that included inputs to produce maize.

At first the partnership resulted in a ‘win-win’ outcome, with farmers’ earning significantly higher incomes and LLTC meeting its goal of stabilising the level of flue tobacco production. Average tobacco leaf yields ranged between 1300-1660 kg/ha and the farmers succeeded in producing maize yields more than triple the national average.

Over time, however, the partnership soured. Political interference from chiefs and politicians resulted in good farmers being displaced from the scheme, replayed through a process of patronage and nepotism. The KTFT was also organisationally weak and did not carry out its mandate to build strong grassroots farmers clubs. It also neglected its responsibility of replanting trees as a source of fuel. But the biggest threat to the partnerships was the ‘side marketing’ of tobacco, wherein the farmers sold their crop to a third party or directly on the auction floor and thus avoided repaying their loan. In the second year of the partnership, LLTC lost $438,000 through the non-payment of loans.

SLC recommended that the Government of Malawi create an enabling environment for such partnerships to develop, through, inter-alia:

  • Investing in rural assets (including forests) and agriculture scheme infrastructure
  • Providing technical support to the organisational development of the KTFT and farmers clubs
  • Reforming tobacco marketing to enable direct buying
  • Upholding the ‘rule of law’ with respect to tobacco sales and other contractual obligations of both parties.

These recommendations were not acted upon. In 2005, after further and substantial financial loss, LLTC withdrew from the partnership. As a result of their negative experiences, LLTC no longer provides agricultural services and input loans to Malawi’s small-scale farmers.

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