Temporary Subsidies Prove a Smart Investment for Struggling Farmers in Mozambique

Mozambique farmer

At 46-years-old, Luis Fazenda Manhangaze, known to all as “Mambucha,” managed to transform himself from a struggling farmer to a leading agro-input dealer and respected community leader in the Munhinga community of Manica Province, Mozambique.

“My family is in this house because of the vouchers,” says Mambucha. “I’m almost done building it, just missing some windows and shelves. I have left a small house for a big house.”

The vouchers were part of a two-year farming inputs subsidy program the Mozambique Ministry of Agriculture rolled out beginning in 2009. A rigorous impact evaluation by the Feed the Future Innovation Lab for Assets and Market Access (AMA Innovation Lab) at UC Davis showed just how common stories like Mambucha’s are.

Subsidies to Close the Yield Gap

In 1960, cereal yields for most developing countries were low, hovering around one ton per hectare. In the intervening 50 years, the average yields in these countries nearly tripled while yields in sub-Saharan African countries remained stagnant.

Farmers in sub-Saharan Africa today use approximately 85 percent less fertilizer on their crops compared to farmers in other developing countries, leading to a vast yield gap between what is possible and what farmers actually harvest. This directly affects how much food ends up on the family table.

With entrenched poverty throughout the region and climate shocks increasing, the persistent failure to adopt fertilizer is thought to be a major roadblock standing in the way of farmers trying to increase productivity, secure more sustainable livelihoods and eventually pave their own way out of poverty.

In response, many sub-Saharan African countries have embarked on large-scale input subsidy programs aimed at intensifying the use of fertilizer and other modern agricultural inputs. In some countries, these subsidies have become permanent, draining scarce resources from national agricultural budgets.

Long-Term Benefits From a Short-Term Subsidy

The Mozambique subsidy consisted of a lottery for farmers across five provinces for 25,000 one-off vouchers to partially subsidize the cost of a technology package designed for half a hectare of improved maize production. This included 12.5 kg of improved seeds and 100 kg of fertilizer. Farmers were required to pay 27 percent of the package’s total value.

The AMA Innovation Lab’s five-year evaluation of the subsidy experiment included over 1,500 of the program’s participants in Manica in central Mozambique. Most importantly, the assessment continued for three years after the government subsidies ended.

The research team found that maize yields were 613 kg per hectare higher than for farmers in the control group. Total maize production was 828 kg higher. Across all agricultural production, fertilizer use spilled over to other crops and saw an overall 48 percent increase in fertilizer use relative to a control group. The value of farmer production rose 41 percent (US$357) and sales of agricultural products increased by approximately US$100. These impacts of fertilizer use persisted for the two years after the subsidy.

“Farmers are often invited to try out new and unproven technologies, on their own dime,” says Michael Carter, co-principal investigator on the study and director of the AMA Innovation Lab. “Temporary subsidies share the risk of experimentation and become smart if they indeed induce learning and continued use of the new technology after the subsidy expires.”

Aniceto Matias, who was at the time of the study a local representative of a non-profit group handling the fertilizer inputs, frequently tromped through the fields talking with farmers about their experiences. Matias saw firsthand that farmers who received the vouchers used more fertilizer even after the subsidies had stopped.

“Some farmers were even looking to buy fertilizer at full market prices,” Matias says.

Seeing the positive impacts on his own land and finances, Mambucha invested in even more agricultural inputs in the following years to sell to others so that they too may benefit. He used part of the revenues to open a bank account and used the rest to start buying and selling agricultural surpluses. When the next sowing season arrived, he also used part of the money to purchase seeds and inputs and resell them to other farmers.

“Now when I buy one ton of fertilizer it’s sold in two weeks,” he says. “Before I wasn’t able to sell a whole ton, and it would rot.”

Learning Leads to Changes in Farming Practices

The study also definitively showed that not only did the learning and use of improved technologies persist, it resulted in an almost 10 percent increase in living standards for voucher recipients compared to a randomly selected control group. This was partly because it encouraged farmers to change their behaviors in the longer term.

“Before, I didn't make a line or know about spacing,” says Mambucha. “But when I bought the seeds and the fertilizer, I also learned how to make a mound and how to space seeds in a line. Production went much better afterwards.”

Mambucha says his neighbors also changed the way they farm. One, he says, had a small farm and also sowed carelessly. When he began to receive the vouchers, he started buying better inputs.

“Anyone who comes to visit him likes what he is doing,” says Mambucha. “He now has a big farm and this year we had a big drought but he still has a lot of corn.”

But perhaps even more importantly, neighbors who did not receive the vouchers also learned of the fertilizer’s benefits. According to Matias, many farmers asked to join the voucher program or wanted to learn more about fertilizer use in general after they saw how much more their neighbors were growing using improved inputs.

Room for Improvement

Rachid Laajaj, a co-principal investigator on the study and assistant professor at Universidad de los Andes, agreed that this program was promising as an effective tool for promoting fertilizer use. The higher yields harvested “allowed farmers to build assets and maintain higher levels of consumption,” he says.

Also promising, Laajaj observed that by increasing maize yields, the farmers were more likely to engage in intercropping, which means diversifying their food crops to minimize not just hunger but malnutrition. Farmers were able to provide a more varied diet for their families, but the voucher users were also able to shift themselves from being near-subsistence farmers to becoming active participants in local agricultural markets.

Laajaj points to the voucher take-up rate of only 50 percent in this study as a major stumbling block. “For the program to be effective,” he says, “it has to be inclusive as possible. The greater the participation in the program, the greater the socio-economic impacts will be.”

The evaluation showed that the primary reason many farmers did not use the vouchers was lack of cash to make the necessary co-payment to purchase the seed-fertilizer package. This finding suggests that a more generous initial subsidy could be even smarter, bringing in more people and spurring greater learning across a broader range of less well-off farmers, including women.

“I am very interested in this kind of program continuing,” says Mambucha. “It can help many farmers and even allow them to have the money needed to support their children in school, as well as other purposes, for each farmer.”

Sophie Javers is an outreach specialist for the AMA Innovation Lab. This post originally appeared on Agrilinks.org.