Mozambique: Fertiliser for Malawi but Not Mozambique

Nacala port and railway have guaranteed to provide 600 wagons and associated locomotives to transport Malawi’s fertiliser imports of 80,000 tonnes over the next three months, Rádio Moçambique reported on 30 October. Malawi has 2/3 the population of Mozambique, yet it is importing through Mozambique three times as much fertiliser as Mozambique uses. In Malawi, more than half of small farmers use subsidised fertiliser; in Mozambique the figure is a tiny 4%. Therefore Malawian smallholders have double the maize productivity (2 t/ha) as Mozambicans (under 1 t/ha).

Yara: an opportunity thrown away, but only peasants lose out

Peasants do not use fertiliser in Mozambique because it is too expensive and the price at which they sell their maize does not cover the cost of the fertiliser - in contrast to Malawi and Zimbabwe. Mozambique has thrown away its opportunity to provide the fertiliser at reasonable cost and promote rural development.

Yara, the world's second largest fertiliser company, works in 60 countries supporting local distribution systems, and is 36% Norwegian state owned. Natural gas is commonly used to produce nitrogen fertilisers. Partly because of Norway's historic links with Mozambique, in 2015 Yara had a person full time in Maputo trying to negotiate a deal to use the government's share of the physical gas to make fertiliser. Mozambique also has phosphate rock which is an important component of the most common compound fertiliser NPK - nitrogen (N), phosphorus (P), and Potassium (K). Yara was prepared to set up an entire fertiliser production and distribution system, at government set prices, if government provided enough gas at a low enough price. Government simply was not interested, but in 2016 agreed a much narrower proposal for Yara to produce nitrogen fertiliser for export. But in four years of negotiations government has refused to promise enough gas at a low enough price even for that, and now Yara has given up.

It would have been possible to use the gas both to create local industries and to support agriculture, as we reported five years ago. bit.ly/MozGasEng This would have brought substantial gains, and kick-started development. But in the end, Mozambique's leaders only wanted to maximize the cash income that can be received by selling the gas directly, and had no interest in using gas for development. Yet again, $s took priority over jobs and peasant farmers.

Yara could have resolved a historic problem. Mozambique's neighbours have a system of general trading shops which sell everything from cooking oil to seeds and fertiliser, and which buy crops. The system existed in colonial times; these shops were known as "cantinas". Their Portuguese or Asian-origin owners abandoned them at independence, leaving the Mozambique or moving to run bigger businesses in the cities. But by 1980 these shops were being taken over by local Mozambicans. Then in the 1981-92 war, Renamo targeted and destroyed most rural shops.

With the end of the war came structural adjustment and donors promoted a "free market" of small ambulatory traders and market stalls, and did not allow support for the rebuilding of the shop system. Traders and stall holders pay no taxes and are not regulated, so formal shops cannot compete. But the traders sell only a few items, and do not sell heavy seasonal goods like fertiliser; some traders began to buy crops, only at very low prices. So, unlike neighbouring counties, Mozambique never rebuilt the rural general shop system.

When Malawi introduced its fertiliser subsidy, donors led by DfID objected and threated to cut off aid. But Malawi persevered, and when maize exports more than paid for fertiliser imports, donors quietly dropped their objections. But the Mozambican agriculture minister at the time told me the government was not prepared to challenge donors in that way.

Yara offered a way out that would have been donor-acceptable. But Frelimo wanted $s rather than development.

Ghana has gone the other direction

Ghana is using its oil and gas money to invest, particularly in agriculture, as a way of creating jobs. Ghana opened a new fertiliser factory in January. Increasing domestic fertilizer production will increase fertiliser use by 50% in the next five years, according to Minister of Food and Agriculture, Owusua Afriyie Akoto on 3 November. He added that Ghana is on the path to becoming the breadbasket for West Africa.

Ghana announced last year that it would use some of its gas for the increased fertiliser production. Yara is active in Ghana, where it collaborates with government and local research institutes, and promotes farmer groups.

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