US embassy cable - 04LILONGWE1164

UNCLAS SECTION 01 OF 02 LILONGWE 001164 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR AF/S ADRIENNE GALANEK 
STATE FOR EB/IFD/OMA FRANCES CHISHOLM 
STATE FOR EB/IFD/ODF LINDA SPECHT 
TREASURY FOR INTERNATIONAL AFFAIR LUKAS KOHLER 
 
E.O. 12958: N/A 
TAGS: ECON, EAGR, KMCA, EFIN, EAID, MI, Agriculture, Economic 
SUBJECT: MALAWI'S FERTILIZER SHORTAGE THREATENS 2005 HARVEST 
 
REF: LILONGWE 1089 
 
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SUMMARY 
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1. (U) Malawi's farmers are unable to find enough fertilizer 
as they near the end of their yearly planting season.  The 
shortage results largely from Government delays in ordering 
stocks for its subsidy programs and confused signalling to 
private sector suppliers.  While the shortages are expected 
to clear by early January, they may have an impact on the 
harvest and thus on food supplies for 2005.  Opposition 
politicians are questioning the competence of the current 
Government.  End summary. 
 
 
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NOT ENOUGH, AND SLOW GETTING HERE 
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2. (U) With the onset of yearly rains, Malawi's 2005 maize 
crop is in the ground and beginning to grow.  As the rains 
spread from south to north, November through late January is 
the time for farmers to apply fertilizer, which is a 
necessity in Malawi's nutrient-depleted soil.  Virtually all 
fertilizer is imported into the country through South Africa 
and the Mozambican ports of Beira and Nacala.  Malawi was 
estimated at the beginning of the season to require 228,000 
metric tons of fertilizer. By mid-December, only 121,000 tons 
had been landed--a shortfall of 107,000 tons, or 47 percent 
of the total. 
 
3. (U) The arrival of product already on its way here should 
alleviate the situation by early January.  Some 88,000 metric 
tons of fertilizer was in transit or on order by 
mid-December.  But the delivery of product in the supply 
pipeline is being delayed by a number of regional 
transportation problems.  These include weight restrictions 
on trucks passing through the South African/Zimbabwean border 
crossing at Beitbridge, a shortage in return loads to the 
port of Beira, and a number of problems with the rail 
connections and port at Nacala. 
 
 
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GOVERNMENT THE MAIN CULPRIT 
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4. (SBU) Though the region's troubled transportation system 
is part of the problem, most of the blame for the shortage 
lies squarely with the GOM.  Political contention over the 
Targeted Input Program (TIP) and the fertilizer voucher 
scheme (see reftel) delayed Government's decision to place 
orders with importers in time.  TIP stocks were not ordered 
until near the end of October, and private suppliers could 
not obtain commercial financing without a government contract 
in hand. 
 
5. (SBU) Beyond the direct result of shortages for Government 
programs, the GOM's actions have also led to indirect market 
disruptions.  For example, dealers saw very low early-season 
sales following June pronouncements that the GOM would be 
able to lower prices with across-the-board subsidies.  In the 
absence of early sales (August to October), dealers have been 
not had the working capital to ramp up stocks to normal 
planting-season levels.  Private importers also delayed 
ordering stocks because, in the absence of a clearly defined 
subsidy, they could not project requirements or prices.  When 
the GOM finally announced the TIP program in October, most 
wholesalers sold their entire stocks to the Government.  This 
has left private buyers (about one-third of Malawi's farmers, 
including its highly efficient commercial farmers) with 
nothing to buy. 
 
 
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COMMENT: A QUESTION OF COMPETENCE 
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6. (U) With its poor soil and strong preference for maize, 
Malawi's farmers need fertilizer to bring in a normal 
harvest, even when the region's notoriously unreliable 
weather cooperates.  If the shortage of fertilizer affects 
the 2005 harvest--as seems increasingly likely--the country 
will once again experience a food shortage late next year. 
The Malawian public is keenly aware of this possibility. 
Accordingly, the opposition parties have been raising an 
outcry over the situation in recent days. 
 
7. (SBU) Following hard on a controversy over bungled wage 
reforms, the fertilizer debacle has provided opposition 
figures, and President Mutharika's political enemies within 
the ruling party, the opportunity to portray the Government 
as disorganized and incompetent.  They are taking that 
opportunity with gusto.  The worst consequence of this 
political controversy may be that it makes the Mutharika 
government fear the marketplace all the more where critical 
commodities are concerned.  The reflex is still to seek 
statist solutions where there is no room for mistakes; 
unfortunately, state intervention itself seems usually to be 
the first mistake. 
GILMOUR