Point-of-output subsidy will boost farming

For as long as I can remember, the Zimbabwean government has been giving inputs to farmers. These inputs have been provided in various ways, in some cases as loans to both commercial and communal farmers, while in some instances as hand-outs for political expediency.

 

Either way, they are subsidies to farmers. In most of those cases, especially where they have been provided as loans, many of the farmers have never paid back. This has created a dependence disease in our farmers which is a threat to the country’s economic well-being and food security. They say that insanity is doing things the same way and expecting a different result!

If we don’t change the way agriculture is subsidised in Zimbabwe, we will continue to have an underperforming agricultural sector. My submission here is not that we should stop agricultural subsidies. Many countries including Japan, China and the United States subsidise farmers. Rather, the present subsidy model needs to be changed.

Before going into detail, there is a need to address two critical myths peddled in Zimbabwe for a long time. Correcting those myths is important in locating the role and importance of agriculture in the greater economic sphere.

The first myth that has been peddled for a long time locally and internationally is that Zimbabwe, until the land reform which started in 2000, was the breadbasket of Africa. This myth can be traced back to the role that Zimbabwe was assigned at the formation of the Southern African Development Coordination Conference (Sadcc), now known as Sadc, way back in April 1980 in Lusaka, Zambia.

At that time, countries were assigned specific responsibilities which related to their natural endowments and assumed future strengths. For example, Malawi was assigned responsibilities over fisheries and wildlife, and Zambia was assigned a role over mining. While it is true Zimbabwe had agricultural surpluses for certain crops at the time, it is a fact apartheid South Africa, which was not a part of Sadcc, produced by far more food, including maize and wheat among other agricultural products, than Zimbabwe.

The second myth holds that land is the economy and the economy is the land. Promoting that myth has political benefits in our country where the majority of our folks are either poor or subsistence farmers or both. However, making our people hold such beliefs is neither visionary nor useful. Our people certainly need development, and we can only transform from a Third World country to a developed one if we industrialise, and doing so means we should transform our ability to produce goods and services through building key skills and technologies.

No economy in this world had developed on the basis of agriculture. This is not to say agriculture is not important. But the importance we have given it in Zimbabwe is only good enough if our vision is to remain a Third World country.

Coming back to the agricultural subsidy issue, subsidies to farmers are provided in many countries, including the two richest countries, the US and Japan. The only country that has eliminated all subsidies to farmers is New Zealand. So indeed to promote agriculture, it may be necessary for governments to continue subsidies. However, what should change is the model in use.

The current model in Zimbabwe has not been very helpful to the economy. It has created the farmer-subsidy-dependence syndrome. This disease has become so pervasive as to become chronic and destructive to our ability as a country to run farms as enterprises. Our government has given farmers everything over the years mostly for free — diesel, scotch-carts, tractors, trailers, ploughs, wheelbarrows, irrigation pipes, combine harvesters, seed, and fertiliser, among a host of other inputs. Yet every year, there are reports of abuse of those inputs.

The media has even reported of some recipients of tractors using them to transport commuters. In spite of this investment over several years, it has become normal to hear farmers whining that the government has not given them inputs at the beginning of every rainy season.

For Zimbabwe to develop, full and efficient utilisation of the land is important, and we can only get to that stage if the current crop of farmers starts looking at farming as an enterprise. This should be applicable to both commercial and rural farmers. To achieve that, the subsidy model needs to change. The solution to that needs to look at the farming value chain or the farming process. The present model subsidises farmers at the input level. This is populist and works well for politicians, but encourages laziness and abuse of the inputs.

So how else can we subsidise our farmers in a way that reduces abuse, encourages production and transforms agriculture? We must incentivise output rather than give inputs. Subsidies should be moved from the point of inputs to the point of outputs. That way, farmers get rewarded for what they have produced and not for what they are yet to produce.

Government needs to channel the subsidies to the point of sale. When a farmer, for example produces wheat, the government can top up a certain amount on the price per tonne delivered. That would incentivise production. It will enable the government to channel those subsidies to specific crops whose output it plans to stimulate.

This concept is not entirely new. The Reserve Bank used to do it for tobacco in the past. But that’s not adequate because it left out the non-tobacco producing farmers.

The biggest advantage of going this route is that it weans the system from carrying and supporting unproductive farmers and inputs abusers. It also stimulates production as there is a monetary incentive for increased output. More importantly, our farmers need to understand farming should be run as an enterprise at whatever scale.

Some might argue this model will leave out start-up farmers who do not have resources. That is mitigated by the role of contract farming. If a farmer has land but no capital for inputs, then he should go the contract farming route.

If we keep on doing the same thing and expecting different results, then we are insane.

 

Chinyamakobvu is a Japan-based scholar and analyst. Email: tchinyamakobvu@gmail.com.

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