Country Report Zambia May 2011

Economic performance: Maize output is expected to rise by 10-25% in 2011

In April government officials announced that production of the staple food, maize, was expected to rise by 10-25% in 2011. This comes on the back of two consecutive bumper harvests that have seen maize output rise by an average of 40% per year to well above the domestic consumption requirement. The harvests have been underpinned by good rains-agriculture in Zambia remains almost entirely rain-fed-and a large scaling-up of the Farmer Input Support Programme (FISP) under which subsidised fertiliser and seed are distributed to maize producers.

Another bumper harvest in 2011 would raise farmers' incomes, help keep food prices in check and support economic growth. However, a larger maize surplus would also exacerbate the challenges that the state-owned Food Reserve Agency (FRA) has faced in recent years in collecting maize from farmers, storing it and exporting it (especially in the face of competition from cheap South African maize). This has led to large spending overruns by the FRA in 2009 and 2010. In 2009 the poor rural road network meant that many farmers were unable to take their surplus maize to selling depots. This forced the FRA to collect it from them in what turned out to be an expensive exercise. In 2010 the FRA purchased maize from farmers at above-market prices and has since been exporting it at a loss (November 2010, Economic performance). Further spending overruns by the FRA are expected in 2011.

In addition, although the FISP has allowed maize output to rise sharply, it has numerous flaws. It is marred by severe leakages, has had a small impact on productivity given its costs and is inappropriate for a country that has three distinct agro-ecological zones, each suited to the production of different crops. The scheme consumes roughly 40% of the agriculture budget, some part of which could well be better spent on water management (Zambia's vast freshwater resources mean that there is huge potential here) and extension services. However, the scheme's political appeal will deter the government from making substantial changes in 2011-12.

© 2011 The Economist lntelligence Unit Ltd. All rights reserved
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