eBusiness Weekly
Golden Sibanda
Treasury carries the perennial burden of mobilising hundreds of millions of US dollars to fund agricultural subsidies that arguably have no desired impact on the targeted group, it has been learnt.
With a large number of poor households, free agricultural inputs support schemes continue to consume a significant portion of Government resources, which may not be sustainable in the long term.
A recent study says Zimbabwe spends huge amounts of money on farming subsidies to eradicate poverty among the poor and vulnerable, but the intervention has little or no positive impact due to it being poorly designed.
Some of the inputs are never received by the intended beneficiaries as they are diverted, resulting in the targeted people remaining in abject poverty.
In 2022 alone, the national budget earmarked $18 billion, out of anticipated revenue of $850 billion, for livestock and free inputs subsidies, nearly 5 percent of the expenditure plan.
Findings of the research study concluded that the design of subsidies or free agricultural input support schemes had some implications on the Government’s future social spending.
Since independence, agricultural input subsidies have reportedly been used as a tool to increase input usage, enhance agricultural productivity and reduce poverty and food insecurity among rural households in Zimbabwe. The study, conducted by the Zimbabwe Economic Policy Analysis and Research Unit (Zeparu), says even the new Government, which came in 2017 with strong liberal policies, has continued to pursue agricultural input subsidies.
“Budget allocation to agricultural input subsidies has been significant and extreme in some cases, contributing over US$900 million (over 50 percent) of Zimbabwe’s domestic debt in 2018,” the study says.
In the 2016/17 agricultural season, Zimbabwe spent an average of over US$554 million on agricultural input support, according to the Ministry of Finance and Economic Development.
Furthermore, in the 2018/19 season, a total of US$130 million was allocated for agricultural input support programmes, targeting over one million vulnerable households.
However, despite the subsidy the country still experienced a food production gap of over 50 percent of the required national consumption, according to data from Treasury.
In spite of consistent yearly provision of free inputs support, poverty and food insecurity remain high among rural farmers, with over 76 percent of households living below the poverty line, official statistics show.
According to research findings, this is an indication of an ineffective and inadequate input support design to drive vulnerable households out of poverty and food insecurity.
“Therefore, the question is whether these free input support schemes, achieve their stated objectives of enhancing productivity, improving food security and hence reducing poverty amongst the target populations.”
The policy concern, the study says, is to understand whether the continuation of the subsidies in their current design is beneficial to communities for poverty eradication.
It says there is need for more equitable regional distribution of subsidy resources be achieved under devolution, rather continue to carry a burdensome cost on Treasury that achieves desired impact.
Attainment of the Sustainable Development Goals (SDGs) of poverty and hunger elimination (Goals 1 and 2) will largely depend on the effectiveness of Government policies targeting these rural communities, the study says.
“The effectiveness of such a rural poverty reduction strategy largely depends on its design properties such as targeting of recipients, regional sensitiveness of input type, input support quantities and on how recipients utilise the inputs,” the study says.
The research suggested that for input support schemes to reduce rural poverty and food insecurity in a sustained manner, these support schemes should be re-designed.
“Free agricultural input support schemes must be provided as a complete package. Input quantities must be large enough to allow a five-member household to produce a surplus in absence of climatic shocks.”
