Structural damage:
The causes and consequences of Malawi’s food crisis

KWESI OWUSU & FRANCIS NG'AMBI / World Development Movement 29oct02

Forward & Executive Summary only

Foreword

Malawi is in the grip of a severe food shortage, not only because of the floods that caused one failed harvest, but also due to serious policy blunders. In the months before the famine was officially acknowledged, the country’s grain reserves were sold off. Hundreds, perhaps thousands of people have died as a result of food shortages. This report asks why.

The reasons are not confined to events that occurred in the preceding months, but result from years of policy mismanagement in Malawi. Crucially, this has resulted not only from corrupt government in Malawi, but ideologically driven policies imposed by the donor community. In particular, the International Monetary Fund (IMF), World Bank and bilateral donors (including the UK) have mandated policies to remove subsidies that have supported livelihoods and food for the poor, while requiring privatisation and/or cost recovery of key functions within the public sector.

In doing so, they have elevated a theoretical notion of economic efficiency above other aims, and failed to understand the inherent limitations of the private sector. In the food sector, the results have included the hoarding of maize, profiteering by traders, inability to supply rural areas, unavailability of credit to the poor, particularly women, and the unaffordability of food prices for the poor. Donors also failed to understand that the market was unable to undertake the public sector’s social aims of food security and support for agricultural production.

The advice given to Malawi by the IMF and World Bank is strikingly similar to that given to more than ninety countries that have been required to follow structural adjustment policies mandated by the IMF and World Bank as a condition for aid, loans and debt cancellation. Yet research studies have repeatedly revealed that such policies are both failing economically and loading most of the cost onto the poor. The United Nations has revealed that incomes of the poorest 20 per cent of people in sub-Saharan Africa had fallen by 2 per cent per year during 1980-2000, a period in which structural adjustment programmes were the dominant policy instrument.[1]

  1. UN Conference on Trade and Development (UNCTAD) “Economic Development in Africa: Performance, Prospects and Policy Issues” 2001, Geneva.

Most of the lessons for policy-makers contained in this paper are not new – drop the debt, break the IMF and World Bank conditionality over economic policies, strengthen civil society so they can hold government to account. The tragic thing is that more people will starve, more will die needlessly from preventable disease, and more children will grow up in poverty because the richest nations of the world are unwilling to act. Our role is to persuade them to do so.

The international debt campaign has achieved much in terms of public awareness raising, but research in countries such as Malawi demonstrates how much more needs to be done. WDM is calling for:

WDM is working with campaigners in the UK, through the Jubilee Debt Campaign, and with civil society in the developing world to press governments for the achievement of these aims.

Executive summary

There is a common perception that the food crisis in Malawi has been caused by the floods that ruined the planting season in 2001, or by widespread government corruption and mismanagement. These undoubtedly have contributed to the crisis. But there is another cause, which has been even more significant – inappropriate policies of donor agencies, led by the International Monetary Fund (IMF).

Hunger and food shortage has always been a problem in Malawi, hence the poor nutrition levels of 32 per cent of the population. In the past, food shortages have been addressed through food aid from donors and government subsidies for basic food channelled through the grain board, the Agricultural Development and Marketing Corporation (ADMARC). This system has allowed the people of Malawi to survive the seasons of adverse weather, and the government corruption and mismanagement which has persisted through years of good harvest and bad.

However, over the past twenty years the agriculture sector has been restructured by the IMF and World Bank, under their structural adjustment policies. In agriculture, these policies are supposedly aimed at improving efficiency and productivity. But, as in other countries such as Zambia and Mozambique, the donors have ignored the reality of farming systems in Malawi and have assumed that markets will be able to meet social aims; to supply food at affordable prices throughout the country, and to ensure that smallholder farmers can feed their families. Instead, Malawi now faces chronic food insecurity. The IMF/World Bank policies in Malawi’s agricultural sector, supported by the bilateral aid donors, have failed.

Prior to these reform programs, the Malawi Government could ensure food availability even in the remotest areas of the country. Through subsidies and controlled prices, farmers were assured of affordable farm inputs and grain stores were maintained in remote areas. However, with the introduction of the agricultural reforms, Malawi is now faced by famine even more serious than the fabled 1949 hunger crisis.

As in other countries, agricultural reforms were imposed on Malawi without the donors having undertaken a proper analysis of their potential impact and consequences, particularly on the poor. Standard policies were applied to Malawi, following a one-size-fits-all approach. Subsidies for small farmers and the poor were reduced, price controls and regulations removed, and agencies that played a social role, such as the agricultural marketing agency, ADMARC, were re-structured and/or privatised.

The results in Malawi have included price rises and increased volatility. For instance, the removal of price controls led to a price increase for maize of 400 per cent between October 2001 and March 2002. Private grain traders have followed the market signals all too well – they have hoarded supplies and made money out of food shortages. This spirit of profiteering has fuelled corruption amongst Government officials in Malawi.

Agricultural reforms have done little to address the real problems of food production in Malawi – rural poverty, the impact of HIV/AIDS and discrimination against women. The chronic levels of poverty in Malawi’s rural areas significantly affects agricultural productivity as it directly impacts on labour availability, access to inputs, health and education and other key social indicators. Over 60 per cent of Malawians live below the poverty line, and 20 per cent of Malawi’s adult population are HIV positive.

Women constitute 70 per cent of Malawi’s full time farmers and 87 per cent of the total agricultural labour force. Yet, despite their numbers and enormous contribution to the agricultural economy, they remain marginalised from the mainstream. Gender differentiated access to resources and benefits continue to hinder their full participation, even though this is indispensable to lifting food productivity and increasing Malawi’s economic prosperity generally.

There is no doubt that Malawi needs agricultural reforms so as to enhance productivity and food security. There is no doubt either that Government parastatals, such as ADMARC, need to improve their management through reform. But, rather than ensuring that social aims are achieved through accountable government, the IMF/World Bank and other donors have pursued an agenda of austerity, deregulation and privatisation. And when, as in Malawi’s case, there have been disastrous outcomes, they have denied any responsibility. The agenda of good governance and accountability has all too often been abused by donors, using it as leverage to ensure that developing country governments comply with their policies. It must also be applied to the donors themselves.

In addition to policy influence, the donors have insisted that Malawi continue to service its foreign debt at a time when there is widespread hunger. Even after debt reduction under the Heavily Indebted Poor Countries (HIPC) initiative, debt service still amounts to around 29 per cent of Malawi’s Government spending. This heavy burden is further compounding the humanitarian crisis confronting such a poor nation.

The policies that donors have proposed for dealing with the crisis include food aid, but also an IMF loan of US$37 million to purchase maize. Since there is a shortage of grain in southern Africa, Malawi will most likely be forced to purchase grain from the US, including genetically modified grain. In its unmilled form, it will be used by desperate farmers to plant out. Malawi, as has been the case with other countries, will have GM crops introduced by the back door.

If countries in the South are to make any meaningful growth in their economies a new approach in the world economy is needed. The relations between the rich North and the poor South have to be re-defined. African Governments, supported by civil society, must be given the leading role in developing policies for their countries, instead of the IMF/WB dictating policy. Matters of food security and trade policy are fundamentally matters of justice and human rights. It is important therefore that poor countries are given enough space to articulate and implement their own policies, with the support of the international community.

Recommendations:

1. Malawi must maintain an efficient and transparent grain reserve agency to ensure adequate supply of maize throughout the year.

2. Agricultural policy should be re-oriented to address the core problems of rural poverty, the escalating HIV/AIDS pandemic, and the marginalisation of women.

3. Donors should build the capacity of the Malawi government to undertake Poverty and Social Impact Assessment (PSIA), with the participation of civil society, on all major policies.

4. There should be full cancellation of Malawi’s long term debts, on the understanding that funds are invested in the development of Malawi’s economy and its people.

5. The Malawi government must take the lead in economic policymaking, and donors should play a role in building, not supplanting, the capacity of the government to do so with full accountability to Parliament and civil society.

This is the executive summary of the report Structural damage: The causes and consequences of Malawi’s food crisis. This report is part of the World Development Movement’s (WDM) ongoing campaign, started in 1985, to end the vicious cycle of debt and poverty, and stop the damaging economic conditions imposed by donors, particularly through the International Monetary Fund and World Bank. It was written for WDM by Kwesi Owusu, Director of Southern Links, and Francis Ng’ambi, Chair of the Malawi Economic Justice Network. The full report is available from WDM or on our website www.wdm.org.uk

Contact WDM to find out about action you can take on debt and/or to become a debt activist (and receive the latest actions, up to date news on the debt campaign and information about events).

source: http://www.wdm.org.uk/cambriefs/Debt/Malawi%20ExecSum%20.pdf 30oct02

If you have come to this page from an outside location click here to get back to mindfully.org