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Macroeconomic policy choices for growth and poverty reduction:
Access to land, growth and poverty reduction in Malawi1
Policy brief
Ephraim W. Chirwa2
Contact:
University of Malawi & The North-South Institute (NSI)
2005
SARPN acknowledges The North-South Institute (NSI) as the source of this document.
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Background
The economy in Malawi is dominated by the agricultural sector, accounting for more than 38 per cent of gross domestic product, more than 90 per cent of foreign exchange earning and an important source of livelihood for 71 per cent of the rural population. It is also estimated that 84 per cent of the agriculture value-added comes from about 2 million smallholder farmers that cultivate on average one hectare of land. It is not surprising, therefore, that Malawi has pursued an agricultural-led development strategy since independence in 1964. The agricultural strategy was dual: based on the promotion of estate agriculture for export earnings and the creation of agricultural employment and smallholder agriculture for subsistence and food security.
Various policies in the 1960s and 1970s were implemented to support smallholder agricultural development, including guaranteed produce prices through the state marketing agency, government administered agricultural input credit, promotion of technologies and subsidies on key agricultural inputs. Although the policy emphasis has been on the agricultural sector over the past four decades, the economic situation has not changed substantially and recent studies show that poverty is increasing. In 1998 the integrated household survey revealed that 65.3 per cent of the population were poor with consumption of basic needs below the minimum level of MK10.47 (US$0.34) per day. Qualitative poverty studies also show that the poverty situation was worsening due to several factors some of which were a result of economic liberalization.
Agriculture has the potential to increase welfare or reduce poverty in low-income countries because a large proportion of the population engages in farming for subsistence needs and generation of cash income. Agricultural development can reduce poverty through paid employment for the landless or near landless and through higher productivity brought about by technological change for those who have land. In any case, the extent to which agricultural development can have greater impact on poverty depends on the availability of land. In low-income countries like Malawi farming systems are organized around family units on small farms the tenure of which is not well defined. With excess supply of family labour in most households, productivity and returns to agriculture tends to be low on small farms. Landholding sizes are becoming smaller and fragmented with the growing population,
making some of the productivity-enhancing technologies impossible.
This policy brief presents results of a study of the link between access to land and changes in poverty status in Malawi using household panel data in 1998 and 2002, and assess the feasibility of land redistribution and implications for pro-poor agricultural development.
Footnotes:
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This paper is based on a research project titled ‘ Macroeconomic Policy Choices for Growth and Poverty
Reduction’, funded by The North-South Institute (NSI), Canada. The financial assistance provided by NSI is gratefully acknowledged. I am also grateful to Tom Crowards, Rodney Schmidt and participants at the Wilton Park Conference for their comments and suggestions on an earlier draft of the paper. The usual disclaimer applies.
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Associate Professor of Economics, Department of Economics, University of Malawi, Chancellor College, PO Box 280, Zomba. Email: .
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