2012 Zambian Agriculture Sector Budget Analysis

Presented by Auckland Kuteya and Christopher Kambole ACF/IAPRI Budget Breakfast Meeting Pamodzi Hotel, Lusaka November 30, 2011

Outline of Presentation
PF Manifesto and Agriculture Overview of Zambias Ag. Sector Zambia Ag. Development Goals Ag Sector Challenges in Zambia 2012 Ag Budget Analysis Recommendations

What is in PF Manifesto for the Ag. Sector ?

Crop diversification extend government support to crops beyond maize Depoliticize FISP by involving traditional authorities Review FRA Act to rationalize its operations and promote private sector participation Introduce legislation to ensure security of land tenure in customary areas Strengthen Ag. research through decentralization Develop and rehabilitate infrastructure -livestock, irrigation facilities, feeder roads 3

Overview of Zambias Ag. Sector

Rapid population growth - Population 13 million (64% rural) in 2010 Stubbornly high rural poverty rate: 80% High food and income inequality in urban areas Rapid urbanization & increasing demand for food Stagnant agricultural productivity (yields)

Why invest in Agriculture?

Agriculture is a powerful poverty fighter No country has ever achieved mass poverty reduction without a prior substantial boost in broad based agricultural productivity (Timmer, 2005) Latin American experience shows that it is possible to achieve agricultural productivity growth on large farms without having much impact on poverty rates. Need to raise broad based productivity of smallholder farmers in order to fight poverty.
5

Agricultural growth and poverty reduction in Zambia

Agricultural growth and poverty reduction in China

450 400 30 25 20 15 200 150 100 50 0 10

Agricultural production index

350 300 250

Agricultural production

Rural poverty

5 0

19 80

19 85

19 90

19 95

Percent in poverty

Drivers of Agricultural Growth (NEPAD/CAADP)

i. ii. iii. iv. v. vi. Research, technology and extension for both crops and animals Soil fertility management Animal disease control & animal nutrition improvements Irrigation to reduce uncertainty & raise input response Reliable & competitive Markets Strategic infrastructure development
8

Zambia Ag. Development Goals: SNDP/CAADP/MDG

i. ii. iii. Reduce poverty through broad-based income growth for those in Ag sector Attain 90% household food security and cut hunger by 50% by 2015 Increase Ag Sector Growth from 1% to 7-10% per annum Increase Ag contribution to GDP from 18-20% to 25% Increase Ag. contribution to foreign currency earning from 3-5% to 10-20%

iv.
v.

Ag Sector Challenges in Zambia

10

Agricultural Sector Challenges

Stubbornly high rural poverty rate: 80% Many smallholder households are land constrained (a paradox in a land abundant country) Nearly 50% of rural farm HHs are net buyers of maize Highly concentrated patterns of maize surplus generation
11

Agricultural Sector Challenges

Stagnant agricultural productivity (yields)
Zambian smallholders highly vulnerable to weather shocks

Under investment in key agricultural drivers

Unpredictable government intervention in maize market stifling private sector participation
12

2012 Ag Budget Analysis

Ag Show 0.4% Arrears 0.3%

Ag Dev Programs 22%

Personal Emoluments 12.6%

RDC 8.5%

Grants 0.7%

Poverty Reduction Programmes 50.4%

Capital Expenditure 5.6%

13

Real Size of Overall Agricultural Budget 2000 2012

2700 2400 2100 1800
A decline of 41.9% if we consider supplemental funding of K1,449 Billion mostly to FRA and FISP

ZK' Billion

1500
1200 900 600 300
An Increase of 31% if we ignore supplemental funding to FRA and FISP

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Year
MAL - Allocation MAL - Actual (2011-interim )
14

Agricultures Share of Zambian National Budget 2000- 2012

14 12 10
Includes supplemental funding of K1,449 Billion mostly to FRA and FISP

CAADP Target

% Share o Agriculture

8
6 4 2 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
0.2% drop if we ignore supplemental funding to FRA and FISP in 2011

Year

Allocation

Actual (2011 - only up to Oct)

15

Overall Agriculture Sector Budget Key Spending Components

Key Component
Personnel Emoluments (PEs)
Recurrent Departmental Charges (RDCs) Grants and other payments Poverty Reduction Programs (PRPs) Capital Expenditure Agricultural Development Programs (mostly funded by donors)

%
12.60
8.51 0.72 50.36 5.63 21.56

16

Overall Ag Budget Comparison Allocated funding in 2011 and 2012

2011 Allocation 2012 Allocation

ZK Billion
Personel Emoluments (PE) Recurrent Departmental Charges Grants and Other Payments

ZK` Billion
205.89 139.01 11.81

%
12.60 8.51 0.72

183.31 132.13 8.03 664.45 485.00 150.00 29.45

13.36 9.63 0.59 48.45 73.00 22.59 4.41

Poverty Reduction Programs o/w FISP FRA Other PRP Allocations Capital Expenditure
Agricultural show Agricultural Development Programs Allocation to other ministries Arrears (Mostly PE related) TOTAL

822.94 500.00 300.00 22.94 91.98

5.87 352.24 4.37 1,634.11

50.36 60.76 36.45 2.79 5.63

0.36 21.56 0.27 100.00 17

59.64
5.16 186.03 124.54 8.21 1371.5

4.35
0.38 13.56 9.14 0.6 100

Overall Ag Budget Comparison Allocated/Released funding in 2010 and 2012

2010 Allocation 2010 Released 2012 Allocation ZK` Billion 205.89 139.01 % 12.60 8.51

ZK Billion
Personnel Emoluments (PE) Recurrent Departmental Charges

ZK` Billion

154.59 131.50

12.70 10.80

173.10 84.36

8.22 4.01

Grants and Other Payments

Poverty Reduction Programs o/w FISP FRA Other PRP Allocations Capital Expenditure Agricultural show Agricultural Development Programs Allocation to other ministries Arrears (Mostly PE related) TOTAL

5.55
551.47 430.00 100.00 21.47 40.92 2.50 247.00 84.07 1217.60

0.46
45.29 79.97 18.13 1.90 3.36 0.21 20.29 6.90 100

6.63 1808.75 1204.09 589.01 15.65

27.70 2.86 2.30 0.00 0.00 2105.70

0.31 85.90 66.57 32.56 0.87

1.32 0.14 0.11 0.00 0.00 100.00

11.81
822.94 500.00 300.00 22.94 91.98 5.87 352.24 4.37 1,634.11

0.72
50.36 60.76 36.45 2.79 5.63 0.36 21.56 0.27 100.00 18

% Composition of MAL Poverty Reduction Programmes in 2010

Allocated
Other 4% FRA 18% FISP 78%

Released

Other 1%

FRA 33% FISP 66%

19

What does data say?

Nation Wide Random Surveys CFS/PHS/SS 99/00 = 364 SEAs CFS 2006/07 onward = 660 SEAs

20

FISP Expenditure & Maize Yields

21

FISP fertilizer received per farm household in 2010/11

Source: CSO Crop Forecast Survey, 2011

22

Nearly 50% of rural HHs are net buyers of maize

Smallholder Farmers Maize Market Position Buyers only, 45% Sellers only, 18.6%

Buy and sell (net buyers), 4.1%

Source: CSO/FSRP- Supplemental Survey, 2008

Buy and Sell (net sellers), 8.9%

Neither Buy nor sell, 22.9%

23

Ratio of RDCs to Personnel Emoluments

1.6
1.4

Increase in Operational Funds from 2010

RDCs/PEs

1.2 1.0 0.8 0.6

0.4
0.2 0.0

2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012*

Year
*Not actual (Allocation)
24

Highly concentrated patterns of maize surplus production

N= Farm size (ha) Ha farmed (ha) Gross rev., maize sales (million kw) Gross rev., crop sales (million kw)

Top 50% of maize sales

78,384 (5.2%)

4.3

3.0

8.1

8.6

Rest of maize sellers

499,530 (33.2%)

3.4

2.0

1.3

1.7

Households not selling maize

927,971 (61.6%)

2.2

1.2

0.2

Source: CSO Crop Forecast Survey, 2011

25

FRA Expenditure vs. Poverty

Since smallholder maize sales are so concentrated, Food Reserve Agency (FRA) price-raising policies have highly regressive effects on income distribution Higher maize prices hurt the majority of the population who are net maize buyers and relatively poor farmers

26

Recommendations
Enactment of the Agricultural Marketing Act Effectively reform FISP and FRA Streamline the FRA activities Flexible FISP programme covering other farm inputs (crops and livestock) Use of E-voucher with private sector procuring and distributing the inputs Leverage private sector resources
27

28

% of small and medium-scale farm sector, by acres cultivated, 2010/11

45 40 35 39.6 33.1

% of farms

30 25 20 15 10 5 0 0-0.99 ha

23.5

3.3 1-1.99 ha 2-4.99 ha 5-9.99 ha

0.5 > 10 ha

Source: CSO Crop Forecast Survey, 2011

FISP fertilizer received per farm household in 2010/11

% Farmers Receiving FISP Fertilizer

70 60 50 40 30 20
30.6 45.1
58.5

52.6

10
0

14.3

0-0.99

1-1.99

2-4.99

5-9.99

10-20
30

Total Area Cultivated in Ha (maize + other crops)

FISP fertilizer received per farm household, by acres cultivated, 2010/11

400

Kgs received per hh

350
300 346

310

250
200 150 100 50 0 24 0-0.99 ha 1-1.99 ha 2-4.99 ha 5-9.99 ha > 10 ha FISP fertilizer received per hh 69 140

Average yields of key commodities compared to global average

5 4.5 4

2001/02

2003/04

2005/06
3.5 3 2.5 2 1.5 1 0.5 0

2007/08

2009/10

Global

MT/HA

Source: CFS datasets, various years with Global figures obtained from COMESA

32