Since the late 1980s, agricultural markets in Malawi had undergone several reforms. Prices for agricultural produce and inputs had been liberalized, as had agricultural marketing services, to allow for private-sector participation. The state's Agricultural Development and Marketing Corporation (ADMARC) was restructured and it sold of many of its assets and began closing some of its unprofitable markets. The reformers expected the private sector to step in once the state had withdrawn. It did not always do so, however, and the performance of ADMARC has continued to deteriorate despite the reforms. This has encouraged some to hasten the privatization of ADMARC itself, a process that would entail more market closures. The PSIA examined the likely impact of such market closures on poor and vulnerable groups in Malawi.

 

The PSIA used parallel mixed methods and was based on three background reports. Two were quantitative and used econometric techniques to assess the importance of ADMARC on household welfare and one was qualitative based on research in 20 purposively sampled rural communities on the combined effect of closing markets and a decline of ADMARC's marketing activities. A synthesis report drew the findings of the three individual studies together. As the different studies did not inform each other, focus will be on the social study of the ADMARC reform.

 

The study was conducted within the catchment areas of 10 ADMARC unit markets (with 2 communities in each). The location of the ADMARC markets was selected through purposive sampling on the basis of their remoteness and their dominant livelihood characteristics to cover the existing diversity in terms of regional and geographical criteria, farming and livelihood systems as well as other social and cultural criteria. The rationale for choosing remote markets underlied the assumption that ADMARC's marketing services would make the biggest difference in areas where infrastructure was poor, because private traders would be less likely to operate in those areas. All ten sites presented a fairly diversified agricultural sector, in terms of both crops and livestock types. There were also a significant number of nonfarm activities. Staple food production did not differ dramatically across the ten sites, as they all produced maize as well as other food crops such as groundnuts, cassava and sweet potatoes. However, there were considerable differences in cash crops, with three sites producing cotton and the rest being more involved in tobacco, but with some households also producing other cash crops such as soybeans and paprika.

 

The qualitative study was designed as an ex-post assessment of the impact of closing selected ADMARC markets on various social groups. A range of qualitative research methods were used to solicit households' and other stakeholders' reactions. Focus group discussions using variants of participatory learning methods were the main method for collecting data. Interviews with key informants in the selected sites were also conducted. Finally, semi-structured interviews with policy and decision-makers in stakeholder institutions were also carried out. In each of the 10 ADMARC unit markets, participatory rural appraisal methodologies, focus group discussions and key informant interviews were conducted in two villages. This implied that a total of 20 villages were included in this study, resulting in a total of 40 focus group discussions (half with women groups), 54 semi-structured interviews and 44 key informant interviews (9 interviews with ADMARC officials, 3 interviews with private traders and 32 interviews with other key informants). The selection of interviewees and discussion partners was done in consultation with local leaders and local extension staff to account for differences with respect to social and economic stratification, ethnic and livelihood diversity and gender.ÿ The 10 ADMARC unit markets included 6 unit markets that had been proposed for closure and 4 unit markets that should continue to operate. In the 6 unit markets earmarked for closure, interviews were conducted in villages in the catchment area of closed seasonal markets, as it turned out that there were no unit markets that had been closed in the past five years.

 

Given the qualitative nature of the study, caution had to be exercised in generalizing the results of the study. Firstly, it was noted that the perceptions on closure of markets could not be filtered out from the effects of other factors that were affecting ADMARC's performance. Moreover, the study was conducted against the background of the famine that engulfed Malawi and southern Africa in the 2001/2002 season, and some of the views from the smallholder farmers could have been influenced by the famine situation. Further, the study focused on ten sites of the many markets ADMARC has throughout the country, and therefore, the results only allowed some general insights in the operations of agricultural marketing systems in Malawi. In addition, very few interviews were conducted with private traders due to the high mobility of private traders and the fact that most of the private traders were not resident in the villages where the interviews were conducted.

 

The results of the interviews and focus group discussions indicated that private traders, both large-scale and small vendors, were progressively replacing ADMARC as buyers/sellers of crops, especially in markets with well-developed infrastructure. Large-scale traders were not many, and specialized mainly in the purchase of crops, particularly cash crops. Small-scale unlicensed traders (or small vendors), on the other hand, were very common and provided an accessible marketing channel for buying and selling of maize in the rural areas. It is these small vendors that to some extent had bridged the gap left by ADMARC's inability to provide reliable and efficient marketing services.

 

The withdrawal of ADMARC did not appear to be compensated by an equivalent increase in private sector activity, resulting in overall lower competition (and efficiency) in marketing institutions. On the contrary, the immediate effect of closure was a more concentrated market structure. This implies that the immediate effect of the closure of markets was to reduce the profitability of smallholder agriculture, as reflected both in the increase in transaction costs for farmers and higher margins for the traders.

 

In sum, ADMARC markets in rural areas appeared to play an important role as distribution networks for affordable maize in the lean season and in times of famine, in providing benchmark prices, in providing a reliable source of inputs, and in the purchase of crop produce from farmers. Even in markets where private traders were particularly active, notably border markets, the withdrawal of ADMARC markets might have had negative consequences for food security and regular access to input.