Malawian farmers have to bear the risks of price volatility for their produce. The absence of an effective price support system, lack of information about production and the underdevelopment of postharvest infrastructure has lead to low productivity, high costs of inputs and low revenue from sales.
In the face of these problems, contract farming - agreements in which the farmer commits to producing a given product in a given manner and the buyer commits to purchasing it - can be immensely helpful.
In principal, contract farming can address a lot of fundamental challenges faced by smallholder farmers in Africa such as low productivity, stagnant yields, weak market linkages, post-harvest losses, high transaction costs, access to credit and market information. Contract farming by nature promotes the commercialisation of small holder farming.
Malawi has scored successes with contract farming particularly in the Tea sector. Other value chains however have suffered from noted risks associated with contract farming. Furthermore, it was noted in Malawi that the contracts themselves were confusing, not well explained to farmers and poorly translated. The off-takers who have a better business acumen than smallholder farmers have also been accused of using these contracts to exploit producers as they pursue their profit agendas. In Malawi, though contracts were signed between farmers and buyers, a regulatory framework did not exist and therefore these contracts were largely not enforceable.
Grow Africa working through the New Alliance for Food Security and Nutrition and the Government of Malawi had identified Contract Farming as priority policy area in Malawi necessary to foster private sector investment and have recently launched the Contract Farming Strategy for Malawi with the Ministry of Agriculture, Irrigation and Water Development (MoAIWD), to ensure that all contract meet stipulated minimum standards and provide support for dispute resolution.
The strategy will be enforced by the Malawian Competition and Fair Trading Commission (CFTC) which shall be the market regulator between buyers and producers. Mr Alex Namaona, Director of Planning at MoAIWD, noted recently in a meeting with Grow Africa, that the purpose of the strategic is to bring sanity to contract farming in Malawi. He further commended the Government of Malawi for taking key steps in developing contract farming.
Although it is still early days and much still has to be learnt from the practical implementation of the Contract Farming Strategy in Malawi. What is clear is that this strategy is needed if agriculture is to be commercialized in Malawi and if well implemented and respected by all value chains actors it will lead to increased value chain integration, increased financial access and inclusion, crop diversification, increased productivity and increased adoption of technologies and knowledge.