The World Bank recently published a Country Economic Memorandum on Malawi, providing a comprehensive analysis of the country’s economic developments, prospects, and policy agenda, and identifying policy for reforms for key economic sectors.
The report argues for a shift in policy to enable continued inclusive economic growth and points to tangible success stories, several of which involve Palladium projects Feed the Future Malawi Ag Diversification (AgDiv) and Feed the Future Malawi Growth Poles as key players.
Both projects worked and continue to work across Malawi to support and foster a more sustainable and inclusive agriculture sector by working closely with USAID Innovation Labs and private companies. These partnerships are called ‘Growth Poles’ for their ability to reach hundreds of thousands of smallholder farmers, increasing incomes, jobs, and exports. They’re engines of economic growth that create resilient prosperity.
“We’re shifting the paradigm in Malawi,” explains Tate Munro, Chief of Party of the Feed the Future Growth Poles Project. “We’re supporting applied, commercially-driven agriculture research, and bringing it together with industry-pioneering companies that are looking for new value chains to diversify not only their businesses, but the livelihoods of the thousands of outgrowers, suppliers, and workforce they train and support. It’s proven uniquely effective, efficient, and scalable as a model.”
For Eduardo Tugendhat, Palladium Acting Managing Partner for Inclusive Growth and Nature, the World Bank’s report is a validation of inclusive growth strategies overall. “Across Malawi, much like many other countries in which we’re working, we’re partnering with large farms and private sector firms within the commercial agriculture sector in a way that’s helping to modernise the sector, provide a pathway out of poverty, and drive more inclusive growth across the country.”
Addressing Poverty Starts with Policy
The report, which found that though Malawi’s GDP has increased over the past 30 years, it’s not been sufficient enough to raise standards of living for everyday people. In addition, the report points to policy choices that worsened an already struggling economy. But the World Bank points to macroeconomic policy reforms, including those already underway, that hold the key to moving Malawi forward.
A key part of those policy reforms has been shifting the rural and farming economy to a more market -driven approach. The goal of the shift is to increase local demands and scale up agriculture commercialisation and much-needed exports and foreign currency reserves. It sounds more complicated than it is.
“The successes we’ve seen across our projects point to a way forward and go hand in hand with the World Banks’ recommendations to make it easier for modern commercial farming to take place,” explains Tugendhat. “Part of the report’s point, which relates to our typical inclusive growth approach, is that even if you did increase smallholders’ productivity, they wouldn’t necessarily move out of poverty because they’re too small. You need more structural change across the sector.”
In the case of Malawi, this has meant supporting the more successful farmers to diversify into and expand production of higher value crops so that they can make a true living, while at the same time creating other on-farm, off-farm and non-farm jobs in the ecosystem – including other farms, processors, and service companies related to the broader agribusiness industry.
Partnerships in Unlikely Places
Controversially, tobacco companies have played and continue to play a role in Malawi’s agriculture success stories. “Much of the country depends on tobacco exports for its foreign exchanges and that’s been shrinking exponentially,” says Tugendhat. “So, we partnered with multiple large tobacco companies to help them support the tens of thousands of farmers that provide them with tobacco to diversify into other crops. This helps to achieve the companies’ corporate social goals including living incomes for farmers and net zero business emissions.”
“These companies have incredibly robust agricultural research and development expertise, and have been catalytic in introducing new varieties and adding value to crops like groundnuts, macadamia, and soybean – value chains cited specifically in the World Bank report,” Tugendhat add. Specifically, since the partnership, three improved varieties of groundnuts were released and are now produced at scale. Two large companies have contracted nearly 7,000 farmers to produce locally processed groundnuts, representing the first steps on a journey for Malawi to produce one million metric tons of quality groundnuts annually by 2030.
The report points to ‘government facilitation rather than control’ as the key to enabling groundnuts along with macadamia and soyabeans to become the primary cash crops for farmers across Malawi, while both upstream and downstream industries successfully emerge.
“This ecosystem approach to thinking, though it’s been fairly pioneering, is proving to be very successful especially in the context of Malawi,” Tugendhat says. “It shows that by partnering with larger firms and farms to invest in the ecosystem and facilitate the connections, we ensure sustainability in the long term.”
Ultimately, the report recommends that future economic growth across Malawi will require the alignment of political incentives with development goals, as well as continued focus on non-traditional agricultural value chains.
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