Agricultural Commercialization to regulate food market
Most of the country’s smallholder and medium scale food crop produce, livestock and fisheries farmers do not benefit from their toil because they are exploited by buyers since the market is not regulated by the government just as is the system in the tobacco industry.
Thus, through interventions from various government Ministries and agencies, Agricultural Commercialization (AGCOM) is working towards promoting the use of structured markets in which food crop buyers should be signing an off-take agreement to regulate the market for mutual benefits.
This was said by Minister of Trade Sosten Gwengwe at a business breakfast at Marriott Ryalls Hotel in Blantyre on Friday that his Ministry and AGCOM organised to interface with the off takers to forge a fruitful partnership named Productive Alliance.
AGCOM is a US$95 million project targeting smallholder and medium scale farmers on the supply-side and all other value chain players for the selected commodities.
It is supported through a loan from the World Bank and the various ministries involved are of Agriculture, Trade, Industry, Lands as well as Competitions and Fair Trading Commission, Malawi Bureau of Standards (MBS) amongst others.
The Productive Alliance is an agreement between a registered offtaker and the producer to supply livestock products, crop produce, fisheries and horticulture.
The offtaker must demonstrate capacity to absorb the producers production meeting agreed specifications and that the farmer must demonstrate capability to produce the volume and quality agreed given the resources the project may provide.
The breakfast meeting was the second one following another held in Lilongwe last week to sensitize potential the off-takers on the opportunities that exist through being associated with AGCOM.
Gwengwe emphasized that AGCOM is promoting the use of structured markets and signing of an off-take agreement is crucial to the project as it spells out a positive trade-deal between the producer and the buyer (off-taker).
“This deal has to be clear on expected volumes, quality and standards and also price — where possible,” Gwengwe said. “AGCOM is providing extensive training and technical assistance to ensure that producer organisations learn the importance of honouring contracts and valuing long-term business relationships with credible off-takers.
“This understanding is equally important to the off-takers. As part of strengthening use of structured markets in the country, Government is also working on improving the commodity exchange markets, specifically to improve accessibility and increase usage by stakeholders.
“Whether it be commodity exchange or off-taker arrangement, the emphasis is to encourage a more formalized, predictable and orderly business undertakings, which currently are lacking for commodities mostly traded by smallholder farmers.”
The AGCOM project empowers smallholder and medium scale farmers to form cooperatives and they are trained on how to do business. They are then given grants in which the farmers contribute of 30% of the total cost of the assets they require to operate with.
Their contribution a minimum of 10% in cash contribution and up to 20% in kind, depending on the choice of capital assets and the other 70% is from AGCOM.
Thus the government’s plans to regulate the supply chain in order to protect the interests of the farmers on one hand and to promote and expand Malawi’s trade at both local and international levels.
Gwengwe disclosed that the Ministry of Trade has also developed Export Mandate regulations to support the structured markets which will be gazetted soon.
“The learning curve might be bumpy for a start, but its worthy pursuing because evidence from elsewhere suggest that the benefits are more in the long-term,” he said, adding that considering the strong emphasis AGCOM has placed on the markets, there was the need to interact with the off takers “as one of the strategic partners that can make AGCOM a success story”.
“I am quite excited to learn that this meeting has not only brought together potential off-takers for the various agricultural commodities, but also the commercial banks. As such, we have a rare opportunity to interact and share experiences.”
Gwengwe said time has come that farmers as well as buyers benefitted from agriculture rather than unregulated vendors who exploit the industry by ripping off farmers while the country does not benefit economically since the vendors smuggle the produce outside the country.
“At the conceptualization of AGCOM project, Government had in mind the fact that it will contribute towards diversifying both the export and food base; increase export revenue and also incomes to the farmers and value chain players.
“We cannot talk about organised markets for farmers and yet ignore the off takers of these commodities. As such, availability and active participation of credible off-takers is critical to the success of this project,” he said.
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