Commercialising FRA will stunt Agric sector growth – Stakeholders

A group of civil society organisations and farmer associations says government’s decision to commercialise the Food Reserve Agency because that will severely undermine the development of Zambia’s agricultural sector.

During a consultative workshop held on December 6, 2017, government, through the Ministry of Agriculture, announced that it would review the FRA Act Chapter 225 of the laws of Zambia to allow the agency to purchase trade stock of designated commodities for local and export markets affecting both small holder farmers and consumers.

But in a statement, the group, comprising of the Zambia National Farmers Union (ZNFU), Grain Traders Association of Zambia (GTAZ), National Union of Small Scale Farmers of Zambia (NUSFAZ), Consumer Unity and Trust Society (CUTS), Centre for Trade Policy and Development (CTPD), and FoodTrade East and Southern Africa (FoodTrade ESA), the trade organisations observed that giving FRA the proposed powers would significantly weaken the private sector in Zambia.

“We welcome the government’s decision to review the operations of the FRA; this provides an opportunity to address key challenges associated with FRA, and provide learning to other countries in the region facing similar challenges. These include over dependence on government funding, high operating costs and unsustainable subsidies. We also recognise that some of the measures proposed such as defining the level of national strategic reserves, improving corporate governance and aligning the FRA’s financial year with the budget cycle could help improve food markets in Zambia. However, we, the Zambia National Farmers Union (ZNFU), Grain Traders Association of Zambia (GTAZ), National Union of Small Scale Farmers of Zambia (NUSFAZ), Consumer Unity and Trust Society (CUTS), Centre for Trade Policy and Development (CTPD), and FoodTrade East and Southern Africa (FoodTrade ESA) are deeply concerned by the proposal that the FRA should be given powers to buy and trade stock of designated commodities for local and export markets,” the statement read in part.

“Such a significant expansion of its role would severely undermine the development of Zambia’s agricultural sector, affecting both small holder farmers and consumers. It would significantly weaken the private sector in Zambia, which contravenes the government’s commitment to reduce its role in the agricultural sector. The 7NDP, the Zambia CAADP Compact, National Agricultural Policy, the Zambia Plus and the PF 2016 Agricultural Manifesto, all recommend that agriculture should be private-sector led. If the proposed amendments to the FRA Act are implemented, they would severely undermine the private sector in Zambian agriculture.”

They stated that contrary to the Ministry of Agriculture projection that the move could make FRA financially viable, the agency could not make profits from exports.

“The Ministry of Agriculture argue that the FRA can become commercially viable by raising revenue through exports. But the assumption underpinning this argument is flawed and contradictory. FRA cannot simultaneously make a profit through exports and stabilise prices. Nor can it make a profit and support farmers, which it has traditionally done by offering them an above market-price,” the statement read.

And the trade organisations stated that one major consequence of reviewing the FRA Act would be the loss of private investment in agriculture and reduced opportunities to diversify the economy.

“The proposed amendments would in effect recreate the National Agricultural Marketing Board (NAMBOARD), which had to be abolished because it proved highly ineffectual, and badly damaged agricultural-led development in Zambia. We are yet to come across a country that has successfully implemented the commercialisation of their food reserve agency and our concern is that expanding the role of the FRA could further burden the Treasury and the Zambian taxpayer. Such an outcome would be particularly harmful to the Zambian economy at a time Zambia is seeking to undertake fiscal consolidation. International evidence and the experience in Zambia demonstrate that the best way to address the concerns about financial unsustainability and high operating costs of the FRA is to scale back its role to focus on providing the country with a strategic grain reserve and servicing remote areas which are inaccessible to the private sector,” read the statement.

“These amendments are concerning and risk negating the small gains made within Zambia’s agriculture sector. One consequence of such a move would be the loss of private investment in agriculture, and reduced opportunities to diversify the economy. Further to this, such a move would have significant negative impacts on the Zambian Commodities Exchange (ZAMACE). On this basis, we recommend that the Ministry of Agriculture drops the proposed amendments aimed at commercialising FRA and engage further with stakeholders to develop a set of evidence-based reforms that help agriculture in Zambia grow.”

         

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