1.     CONTEXT OF MEGA FARMS IN MALAWI

1.1     Government Commitment to Mega Farms Development

The Government of Malawi has committed to transforming agricultural production through large-scale farming in the form of “mega-farms”. The Mega Farms will be centres of large-scale production and anchor other farmers in surrounding communities by attracting private markets for inputs and outputs. Mega Farm development is anticipated to revolutionize the agricultural sector. The Malawi 2063 (Mw2063) Agenda, which describes what the government aspires to accomplish before the nation’s centennial, specifies a need to develop mega-farms to increase agricultural production, productivity and commercialization as well as to contribute to urbanization and industrialization. Mega Farms development has the potential to increase savings and investment, widen the tax base and develop manufacturing industries and tradable services. Mega Farms development in other countries like Tanzania and Zambia accounts for roughly 40% of the country’s marketed agricultural produce, hence a viable approach in commercial farming. In Malawi, it is envisaged that anchor farms could account for between 25 and 50 percent of Malawi’s growth targets by the year 2030.

On 31 August 2023, the president of the Republic of Malawi launched the Mega Farm concept in Kanengo, Lilongwe. The project will focus on the development of anchor medium and large-scale farms and youth incubator farms to accelerate agriculture commercialization. Malawi will adopt a platform approach in which the government will predominantly play the role of convener, match-maker and coordinator for privately owned farms, suppliers and buyers. Additionally, the launched Mega Farm project will establish 9 facilities to enable suppliers and buyers to hear the needs of registered investors in such farms and develop products and offtake agreements that respond to the needs. The 9 facilities will be as follows: Off-taker Linkages Facility; Financing Facility; Farm Mechanization Facility; Supplementary Irrigation Facility; Affordable Input Facility; Farm Management Facility; Input Production Facility; Youth Incubation Farm Facility and Policy Facility. This project will focus on the development of anchor medium and large-scale farms and youth incubator farms to accelerate the commercialization of Malawi’s agriculture and thereby accelerate Malawi’s agro-industrialization.

Mega Farms' development has recently drawn the attention of different stakeholders with mixed views on the approach. Stakeholders expect land for mega-farms to come primarily from idle or underutilized estates. However, a consensus is that the Malawian mega-farms should be managed and owned by the private sector, while the Government should provide a conducive environment (e.g., provision of tailor-made extension services and investment incentives) and make available land for use by the investors. The Presidential Delivery Unit (PDU) recently indicated that the 100% private sector-led mega farm model which studies have shown is feasible. PDU acknowledges that there is a need for a huge mechanization investment to develop Mega farms in Malawi hence the need to lobby large private sector companies such as Illovo Sugar to invest in Mega Farms.

1.2     Impact of Mega Farms Development

According to the research paper published by MwAPATA Institute, the key attributes of a mega-farm highlighted are: land, mechanization, value addition, irrigation and supporting infrastructure. However, the paper cites some reasons for the poor performance of large farms in Malawi and these are:

1. Unpredictable government interventions in output markets
2. Insufficient incentives by the government to support large production
3. Unfavorable business policy environment
4. The yields of most food crops are generally higher on small farms than on large-scale farms in Malawi

According to studies conducted in different countries, megafarms have been associated with high profitability and productivity. The papers also mention that Mega Farms can potentially increase small farms’ access to and use of improved seeds, fertilizers and other inputs.

2.     ACTION POINTS TAKEN BY DEVELOPMENT PARTNERS AND GOVERNMENT

2.1     Development Partners

Development Partners are strategic to play catalytic support to increase agriculture productivity by the private sector without market distortions. The DPs’ support includes technical assistance, grants, guarantees, equity and quasi-equity and loans in line with the specific Development Partner portfolio of the program. The following are some of the key actions taken by the Development Partners.

1. Development Partners agreed to have commercial farming and megafarm as one of the thematic priorities for 2023/2024 year, where issues of megafarm could be discussed and exploring areas for the possibilities of support. USAID is the lead agency for this thematic group.
2. Development Partners continue to engage with the Government to understand the Government’s approach to Mega Farms development. For example, the Mega Farms Head of Unit, Dr Alfred Mwenifumbo was invited to make a presentation on the megafarm concept at the DCAFS meeting in May 2023; and in planning is to invite him again at the thematic meeting to share progress.
3. Funding by some DP is well aligned to the megafarm concept such that support to specific mega farms development interventions are in the pipeline. Currently, out of the total support DP funding to the agriculture sector (about US$2.005 Billion), 12% is allocated to mega farm development.

2.2     Government Actions

1. In August 2023, the government launched an expression of interest for the implementation of the Mega Farm and anchor farm framework. The call was made for the horticulture crops with three categories are land holding size (5-20; 21-50 and above 51 hectares).
2. The government has come up with a priority list of value chains for Mega Farms development and these are oil seeds (soybean, groundnut, maize, sunflower, other legumes); legumes (pigeon peas, beans, sesame); horticulture (mango, pineapple, avocado, chillies) and macadamia. In addition, livestock development (dairy, goat, sheep and piggery as well as fish) is the primary focus. These were identified as game changers for Malawi’s agro-industrialization, value addition, net exports, and regional value chain integration as per the AfCFTA. In addition, job creation, climate resilience, gender empowerment food and nutrition security are also other parameters considered in the selection of the value chains.
3. The Ministry of Agriculture has identified a total of 864 medium & large-scale farmers from across the country who will be supported through various processes to go into commercial farming of the selected priority value chains starting from the 2023/24 farming season. It is estimated that about K20 billion is needed to roll out mega farms this year.
4. On 28 August 2023 the Ministry released an advertisement for various openings positions; farm business development consultants, farm managers and tractor & tractor-drawn implements operators, to support the farmers to access important commercial production facilities as well as to ensure adequate availability of key production factors.
5. As of November 2023, the government announced that it has identified 279 large-scale farmers who are ready to go this year with an aggregated hectarage of 18,500. However, the anticipated hectarage is subject to the availability of funds to support the farmers. The mega farms will target three value chains of groundnuts, soya and maize this year (2023/24) and then expand in the coming years.

2.3     Mega Farm One-Stop Shop Initiative

The launched Mega Farm Unit is to operate as a One Stop Shop initiative. The Lilongwe University of Agriculture and Natural Resources (LUANAR) has been entrusted to play the pivotal role in this initiative and its five key roles are:

1. Farm Business Plan Development & Bank Engagement: LUANAR will assist farmers in crafting bankable and winning business plans, crucial for securing funding from financial institutions.
2. Farm Management Support: LUANAR will ensure proper and efficient farm management practices, aiding farmers in optimizing their operations for maximum productivity and profitability.
3. Technical Expertise: LUANAR will draw upon its pool of agricultural experts to provide farmers with technical guidance, helping them address challenges and adopt innovative agricultural techniques.
4. Managerial Skills Development: With an emphasis on capacity building, LUANAR will offer training and support to develop farmers’ managerial skills, enabling them to make informed decisions and effectively run their enterprises.
5. Coordination with Service Providers: LUANAR will act as a hub for coordinating with other service providers, ensuring that farmers have access to a comprehensive network of support services.

3.     ROLLING TALKING POINTS

1. APPLAUD The Government introduced a power special agriculture tariff and committed to transforming agricultural production through large-scale farming. It is also pleasing to note that the GoM recognizes the critical role of the private sector in revamping Malawi's agricultural sector.
2. CONCERN
   1. Policy and Regulatory Business Environment: Creating an enabling policy environment remains critical to incentivizing the private sector investment into the mega-farms development. Among others, the Government should ensure honest and effective consultations in coming up with the legislation, a case in point is the Crops Bill. The stakeholders are looking to see the revised Crops Bill and then have an opportunity for re-validation.
   2. Minimum Farmgate Price: The Government Minimum farmgate price has negative effects on export marketing because Malawian crop prices become higher than the global market offers. For example, Pyxus Limited failed to export groundnuts in 2023/2024 because Malawi groundnuts were expensive. As a result, groundnuts were sold at factory prices.
   3. Market Intervention: Unpredictable government interventions in output markets remain a concern to most large-scale farmers. In addition, the government is concentrating much on local off-takers with unstable markets such as ADMARC. Such an approach would not provide an appetite to investors given the history of business failure by ADMARC.
   4. Access to Inputs: The high cost of farm inputs and the availability of fake seeds on the market due to the lack of regulations or enforcement mechanisms is a deterrent to the mega farm program.
   5. Incentives: The issue of insufficient incentives by the government to support large production remains a concern. Megafarm requires mechanization which in most cases is to be imported. However, the taxes associated with the importation of farm machinery remain relatively high.
3. ENCOURAGE
   1. The Government should rethink a Minimum Farm-Gate Price (MFGP). Strategically, the Government should not issue mandated Minimum Farm Gate Prices but rather issue a ‘Guideline Price,’ based on the same metrics used to set a MFGP. The issuing of a ‘Guideline Price’ would allow the GoM to influence market prices with less risk of causing negative market distortions and allow for flexibility within different market segments such as contract farming.
   2. Timing of publishing the Minimum Farm-Gate Price: The prices should be set before the season starts for the following three main benefits:
      1. Farmers will have price information to help them make decisions on what crops to plant
      2. Better price visibility allowing buyers to properly plan their operations
      3. Prices can be incorporated into contract farming agreements providing stability for farmers.
   3. The Government should consider megafarm to be 100% private sector-led. The Government should foster an enabling environment by addressing gaps in policy, legal, and regulatory frameworks for agri-business in the country to attract the appetite from the private sector into the megafarm program.
   4. The government should facilitate access to financing, and access to large domestic and export markets as well as come up with strategic incentives for investments in irrigation, electricity and other supporting infrastructure.
   5. The government should consider developing commercialization strategies that strengthen and support existing large farms and address factors that limit productivity.