US embassy cable - 05LILONGWE750

C O N F I D E N T I A L SECTION 01 OF 02 LILONGWE 000750 
 
SIPDIS 
 
STATE FOR AF/S KENDRA GAITHER 
 
E.O. 12958: DECL: 08/31/2015 
TAGS: EAGR, ECON, EAID, MI, Agriculture/Food Security, Economic Issues 
SUBJECT: SACHS AND FERTILIZER IN MALAWI 
 
REF: LILONGWE 693 
 
------- 
SUMMARY 
------- 
 
1. (C) The UNDP's recently issued Flash Alert on Malawi's 
food crisis contains a plan for providing free fertilizer and 
seed for 2 million farmers this growing season.  The plan has 
received practically no support among local agriculture and 
food experts in Malawi, for reasons that Embassy views as 
reasonable.  Embassy recommends USG not support the 
fertilizer/seed plan as is but push for something closer to 
the GOM's more modest plan.  End summary. 
 
 
------------------------- 
GENESIS OF THE UNDP ALERT 
------------------------- 
 
2. (U) The UNDP's "Flash Alert" on Malawi is, in part, the 
outgrowth of a recent visit by UN advisor Jeffrey Sachs, in 
which he announced a plan to offer free fertilizer and seed 
to virtually all smallholder farmers in the country.  The 
alert contains two "tracks": the first is an appeal for food 
aid to fill an identified gap of upwards of 270,000 MT; the 
second is an appeal for an additional $36 million to provide 
the free inputs (chemical fertilizer and maize seed) for 2 
million smallholder farmers. 
 
3. (U) The input scheme is meant to prevent another food 
crisis next year, following on this year's disastrous harvest 
and accordingly meager resources for the 2005/6 planting 
season.  The main argument for the plan is simple: it is 
cheaper to fund fertilizer this year than food next year. 
Sachs argues that more nitrogen in the soil will equate to 
higher disposable income and thus higher domestic savings, 
which will in turn drive economic growth. 
 
4. (C) The UN advisor's team and the Ministry of Agriculture 
arrived at the scheme practically in secret, in advance of 
Sachs's visit, with no broader discussion or comment from 
experts.  After Sachs had briefed the GOM, he then briefed 
representatives from diplomatic and development missions (at 
the insistence of those missions), ostensibly to discuss the 
plan.  The discussions were anything but substantive, though, 
as it became clear early on that Sachs was not holding the 
plan up for open discussion.  Sachs portrayed the choice as 
one between implementing his plan and letting millions of 
poor farmers starve. 
 
 
--------------------- 
REASONABLE OBJECTIONS 
--------------------- 
 
5. (C) The UNDP plan has met mostly with resistance from 
agricultural and economic experts outside the Ministry of 
Agriculture and UNDP.  The arguments against the plan stem 
from the long and mostly unproductive history of free input 
schemes in Malawi.  The principal arguments are: 
 
-- Free fertilizer will leak onto the commercial market, both 
within and outside Malawi, disrupting commercial importation 
and distribution by undercutting prices.  This can rapidly 
undo hard-won progress in building a free market in 
agricultural inputs. 
 
-- Distribution of maize seed and chemical fertilizer will 
encourage continued reliance on soil-depleting agricultural 
practices and crops.  The progress Malawi has made in crop 
diversification and other best practices may be undone as the 
plan creates incentives to grow chemically fertilized maize. 
 
-- The plan does not address the fundamental problem in 
Malawi's food supply, namely the reliance on rain-fed 
agriculture using drought-sensitive crops. 
 
-- With limited resources, fertilizer is best targeted to 
upper-end smallholders, who are more likely to have the 
resources and knowledge to apply fertilizer effectively. 
 
-- Fertilizer subsidies have an involved political history in 
Malawi and are addictive to populist politicians looking for 
votes, particularly those from the main opposition party 
(Malawi Congress Party).  Subsidizing fertilizer for one 
year--or any limited time--is thus practically impossible. 
 
 
------------------------------------ 
WIDESPREAD RESISTANCE, INCLUDING GOM 
------------------------------------ 
 
6. (C) The GOM's reaction to the UNDP plan has been measured. 
 The Ministry of Agriculture has always favored heavily 
subsidized, state-run importation of inputs, and helped to 
write the plan.  On the other hand, Finance Minister Goodall 
Gondwe has consistently opposed free input schemes on the 
grounds that they create a dependency culture and are 
fiscally irresponsible.  Under his leadership, the GOM 
deliberately structured a partial subsidy to sell fertilizer 
at MK 950 ($7.85) per 50-kg bag to smallholders.  This purely 
agricultural subsidy would be supplemented by a cash-for-work 
public infrastructure program as a safety net.  But since 
UNDP has offered a fully funded plan, his philosophical 
opposition has softened (still, he has insisted that he 
favors the plan only if GOM has no funding role). 
 
7. (C) Other diplomatic and aid missions generally oppose the 
UNDP plan.  The UK's Department for International Development 
director for Malawi, an architect of the partial subsidy, has 
vigorously criticized the Sachs plan.  Other donors' local 
food and agriculture experts, including the World Bank, EC, 
Norwegians, and the WFP, have all expressed opposition to the 
plan as well.  We have heard from a World Bank source that 
the local UK and EC envoys have made moves to block funding 
from their capitals.  In any case, it is probably impossible 
to fund and implement the plan effectively at this late date. 
 
 
--------------------------------------- 
COMMENT: OPEN THE DISCUSSION ON TRACK 2 
--------------------------------------- 
 
8. (C) The urgent need for food aid to Malawi in the current 
season is unquestionable, and indeed Embassy has declared a 
slow-onset emergency here (see reftel).  The "second track" 
of the UNDP alert is a different story: it is a controversial 
plan, hatched with an apparently deliberate failure to 
consult beyond a very small circle of interested parties.  We 
view the opposition to the plan as reasonable, as evidenced 
by its somewhat surprising breadth.  Embassy therefore 
recommends that the USG not support the UNDP alert's "track 
2," but rather open the discussion to reach a more 
sustainable course of action.  Embassy believes the GOM's 
approach, using a modest fertilizer subsidy and a safety net 
program, represents a good point of departure. 
EASTHAM