Fertilizer Subsidies: Smart Policy or Political Trap?
The debate around using fertilizer subsidies to increase agricultural productivity in sub-Saharan Africa is ongoing. Opinions vary significantly, with strong voices on both sides of the fence. At the March Ag Sector Council seminar, we asked if fertilizer subsidies were smart policy or a political trap: 40 percent of our online audience thought subsidies were a political trap, while 50 percent sat right on the fence—unwilling to choose a side.
Michael Carter, of University of California, Davis, and Thomas Jayne, of Michigan State University, put the question about fertilizer subsidies front and center to a group of 100 development practitioners. They emphasized that:
Temporary subsidies reduce risk and encourage initial experimentation.
How do you get a smallholder farmer to invest in fertilizer if they have little experience with its application and results? Temporary subsidy programs may be a way to encourage farm-level experimentation with fertilizer by reducing the monetary risk.
As Carter pointed out, when new methods and concepts are introduced, it is human nature to “wait and see” if it benefits others before trying it. However, this “wait and see” inaction creates a logjam of adoption and makes change a slow process. He provided evidence for how a temporary subsidy in Mozambique broke through the logjam. This economic finding reflects the research of Dr. Keith Moore, of Virginia Tech, which analyzed how farmer networks catalyze change. Early adopters, or those who take risks, are the ones who change the landscape for the late adopters.
Subsidy programs alone do not solve the problem.
Jayne’s findings show that subsidy programs are more effective when paired with complementary public-sector activities, offering a more holistic approach to sustainable intensification. Research and extension efforts that combine methods of soil restoration with more efficient fertilizer application is an example of this.
Jayne argues that more funding for public-sector activities is needed. At this time, a large share of agriculture budgets is devoted to input subsidy programs with little money going towards research and development. This needs to change, Jayne said. Subsidized inputs are a very visible way to show constituents that action is being taken, which makes prioritizing government funding for these less-visible aspects particularly difficult.
In the video below, Thomas Jayne and Michael Carter discuss their takeaways: