Harnessing Private Sector Feedback to Grow Zambia’s Agriculture Sector
Zambia wants to be a regional “breadbasket.” It has perfect growing conditions, high productivity levels for staple commodities like maize, wheat and soy, and high potential in other crops like macadamia nuts and onions. However, growth of the sector is hindered by inconsistent trade policies and government programs that effectively crowd out private sector investment. Within its first year, President Hichilema’s United Party for National Development administration announced the development of a comprehensive agricultural strategy that would provide more than subsidized inputs and basic food security. It would lay out a pathway to private sector-led growth in the sector.
The USAID Business Enabling Project in Zambia (“the Project”) is a five-year project that aims to catalyze private sector investment in four sectors (agriculture, trade, energy and tourism). The project had just launched in 2022 when these high-level commitments were made. Taking a multi-stakeholder, market-systems approach, the Project identified champions and convened an informal group of donors under the Agriculture Cooperating Partners Group to develop and submit a set of reform principles for the Farmer Input Support Program (FISP). These principles align with the IMF and World Bank assistance to tackle Zambia’s debt issues and funnel resources into private sector development in agriculture.
In early 2023, the Project was invited by the Ministry of Agriculture (MoA) to convene private sector representatives on behalf of the government to provide feedback into the new Comprehensive Agricultural Transformation Support Programme (CATSP), and to support the process of legislative review and reform required by the programme. Through this process, the Project has contributed to a strategy that will reframe the role the private sector plays in agriculture.
Agriculture in Zambia
Agriculture offers economic opportunities to rural Zambians and provides a foundation for national and regional food security. An estimated 55% of Zambian women earn their livelihoods in agriculture and the sector accounts for over 50% of Zambia’s total employment. Agriculture also has the potential to fuel job creation in downstream industries. Despite its potential, Zambia’s agricultural sector contribution to Gross Domestic Product (GDP) has consistently declined. The sector’s contribution to GDP has been declining since 2000, from over 15% to less than 5% while its growth has on average fluctuated between -5% and 5% (calculations based on World Bank indicator data).
Existing policies were designed to encourage growth, particularly for small-scale farmers, but implementation has fallen short of these goals. The presumed social benefits of these programs have become strongly entrenched in the mindsets of farmers, public servants, and the general population, challenging reform efforts.
The major challenges to be addressed through a comprehensive strategy include:
- FISP provides a pre-defined package of subsidized inputs to small-scale farmers and currently absorbs 80% of the MoA’s budget, leaving no room for the research, development, innovation, extension and infrastructure that have been proven to lay the foundation for sector growth.
- The Food Reserve Agency (FRA) has expanded beyond its core mandate of promoting food security through strategic reserves. It is currently the largest grain trader in the country, crowding out the private sector and distorting prices, which disincentivizes commercial production.
- Trade policy is ad hoc and politicized, further distorting prices and disincentivizing high volume production by removing the factor of regional demand.
- Data and statistics on agricultural production are unreliable or non-existent, meaning that policymakers lack evidence for decision-making on issues like those beforementioned.
CATSP aims to incentivize private sector investment in production and value addition, improve market efficiency and facilitate access to finance. It is expected to shift resources away from FISP toward a more comprehensive approach that supports emerging and commercial farmers increasing productivity and facilitating trade. In April 2023, the Government of the Republic of Zambia (GRZ) issued a draft CATSP strategy, but private sector input was needed to sufficiently address the reform priorities outlined above.
Private Sector Feedback Supports an Improved Strategy
The Project held a CATSP feedback workshop in June 2023, attended by over 120 stakeholders. Participants hailed from business associations representing agribusinesses and farmers, companies in the seed, dairy, cotton, poultry and livestock business, among other value chains, finance institutions, think tanks, cooperating partners and government institutions.
During the two-day workshop, participants expressed gratitude for being consulted and outlined specific areas of the strategy for further consideration. Stakeholders called for inclusion of necessary structural changes to FISP and FRA in the document and echoed the need for a dramatic reduction in government spending on FISP. They also called for decentralizing grain trade permits, eliminating certain export taxes and eliminating export bans and carefully analyzing import restrictions to facilitate easier and more consistent trade across borders. Other concerns, like the need to incentivize input production in Zambia, enhance extension services and research and development, and improve infrastructure to support aggregation and access to markets were also highlighted.
Slow but Steady: Moving Toward a Private Sector-Friendly Strategy
This feedback was submitted to the GRZ for consideration in July 2023. In late September, the GRZ shared an updated strategy, which included language that reflects both industry feedback and the wider principles for effective reforms submitted by the Project and partners. For example, the updated strategy reflects the need for reforming FRA to reduce its interference in the market. The strategy also discusses a pathway to transition away from FISP, freeing up resources for more effective alternatives. The updates to the strategy reflect the importance of promoting multi-stakeholder participation in the policy reform process. With an improved strategy, the GRZ and stakeholders can move to finalizing and defining pathways for implementation.