Following its examination of COVID-19 and the New Risks to Food Security and Nutrition, the Feed the Future Enabling Environment for Food Security (EEFS) project looked into how challenges in the enabling environment from the COVID-19 crisis have impacted food systems in developing countries. Throughout the series, EEFS presents feedback from its remote survey of private sector partners operating in Feed the Future countries.

The first installment of the series examined impacts on grain and oilseed systems in Uganda, the second installment focused on impacts to the poultry system in Ethiopia, and the third installment looked at challenges in the enabling environment for meat and dairy systems in Zimbabwe and Ethiopia. This fourth and final installment examines the impacts on agri-input systems and the potential knock-on effects on smallholder production systems.

Overview

The dynamics of agri-input systems have a clear and direct impact on the productivity, profitability, and resilience of smallholder producers. In crop production systems, smallholders rely on timely access to affordable inputs, such as seed, crop protection, nutrients, and farm equipment. Similarly, livestock producers require a range of species-specific animal health products (vaccinations and therapeutics), genetic material, and production-related equipment.

The enabling environment for agri-inputs impacts the ability of suppliers to produce and/or purchase inventory necessary to meet demand, to distribute to smallholder farmers at a competitive price, and to provide embedded services to increase customer uptake of products. While the pandemic continues to evolve, feedback from private sector agri-input suppliers in East and Southern Africa suggests at least three main challenges have emerged in the enabling environment for input systems:

• Constraints on agri-input imports, reducing availability and raising prices;
• Reduced demand from farmers due to increased uncertainty and limited purchasing power; and
• Limited outreach to customers and outgrowers, reducing embedded services available to smallholders.

Import Constraints

Where agri-inputs cannot be produced domestically at the necessary quality, scale, and price to meet farmer demand, domestic suppliers regularly rely on imports from countries with the comparative advantages to do so. Both farm equipment suppliers and diversified input suppliers report that constraints on their imports have reduced availability to farmers and increased retail prices.

Rob Jones from Empreendimentos Jones Limitada (EJL), an irrigation supplier in Mozambique, indicates that their supply of irrigation equipment from South Africa and Zimbabwe was nonexistent during the shutdown, and they could not provide these products or related services to their farmer customers. Similarly, Ashok Oza from Zambia reported severe supply chain delays for the agricultural machinery being imported from neighboring countries like South Africa.

Meru Agro Tours and Consult Co., a diversified agri-input distributor in northern Tanzania, indicates that imported shipments of crop protection products such as pesticides from China and India were severely delayed, and prices were rising. This enabling environment challenge flows down to smallholders as their production costs therefore increase, and they lack timely access to pesticides to protect their crops. 

In Ethiopia, the difficulty importing inputs has been exacerbated by an extreme shortage of foreign exchange necessary to buy products internationally. Only the largest export-oriented firms in Ethiopia have their own sources of foreign exchange — or they can obtain foreign exchange more easily from Bank of Ethiopia (BOE)-backed commercial banks, given their account receivables that generate foreign exchange. However, micro, small, and medium-sized agri-input supply firms servicing domestic farmers almost never have their own sources of foreign exchange and rely on allocation from BOE-backed banks.

Since the COVID-19 crisis emerged, foreign exchange availability plummeted, as the nation’s largest generator of foreign exchange – Ethiopian Airlines – ceased international flights, and the allocation of limited foreign exchange to small-scale domestic firms has practically dried up. Serbessa Negera from EGAA Agricultural Input Suppliers PLC and Yohannes Getinet from Ceva Sante Animale both service smallholder producers and have indicated that a lack of foreign exchange has been a debilitating condition that constrains access to animal health products, agrochemicals, and farm equipment.

Reduced Demand from Producers

Oza also indicated that Saro Agro is facing reduced demand for agri-inputs from vegetable farmers as a result of a general decline in vegetable demand. End-market demand has declined due to closures of vegetable markets in town, restaurants being limited to takeaway business, and South African supermarket chains reducing their vegetable imports. Additionally, falling oil and copper prices have led to reduced vegetable demand in neighboring Democratic Republic of the Congo and Angola, and therefore Saro Agro’s agri-input exports to these countries have also declined.

Similarly, Amilcar Lucas from Oruwera, a seed producer and distributor in Mozambique, has experienced a reduction in seed sales to smallholder farmers. The reason for this slowdown is unknown but is possibly consistent with the end-market demand issues that farmers are facing in Zambia.

Limited Outreach to Customers and Outgrowers

Agri-input suppliers also report that restrictions on mobility and social distancing requirements have resulted in fewer farmer outreach efforts, including product marketing embedded services, such as farm-level training and seed outgrower inspections.

Stephanie Angomwile from Stewards Globe in Zambia, the producer, and distributor of grain and legume seeds under the AFRISEED brand, reports that field days and seed fairs have been canceled, as farmer gatherings are discouraged. In Zambia, these events are not only a key distribution channel for agri-input companies, but they are also important platforms that enable farmers to increase their awareness and understanding of new products that can increase their productivity.

Additionally, both Lucas and Angomwile say that their agents have been unable to conduct outgrower monitoring and training visits as usual. As a result of disruptions to preharvest seed inspections, outgrowers have faced increased uncertainty and may choose to side-sell or consume the seed as grain for the household. Side-selling is a practice when farmers sell their output to different buyers despite the provision of inputs under a contract arrangement with another buyer. Where side-selling occurs at scale, domestic seed producers relying on outgrowers may face supply constraints, and farmers may be unable to access sufficient volumes of their preferred seed at planting time.

Key Takeaways

The enabling environment for agri-input systems affects both input firms and the smallholder farmers that rely on the timely and reliable availability of critical inputs for their production. Input firms operating across East and Southern Africa report that the COVID-19 crisis has hindered the enabling environment for agri-input systems in at least three distinct ways.

First, the availability of imported inputs has been constrained due to logistical barriers, global manufacturer challenges, and domestic firm access to foreign exchange. Second, farmer demand for inputs has declined due to end-market closures/restrictions and the uncertainty associated with the general economic slowdown. And third, the restrictions on mobility and social distancing requirements have limited agri-input marketing, distribution, and embedded services for rural smallholder farmers. These challenges have the potential to result in a delayed impact that will not be seen until the coming harvest season.

While these anecdotal lessons are important, USAID Missions, implementing partners, and national policymakers can benefit from comprehensive evidence-based analysis throughout the coming year as the crisis evolves to monitor if and how reduced access to and availability of agri-inputs may result in food supply shortages. 

The Feed the Future Enabling Environment for Food Security (EEFS) project is a pre-competed Blanket Purchase Agreement (BPA) for USAID Missions and Operating Units to access evidence-based analysis of how legal/regulatory and institutional factors influence agricultural market system performance, food security, and nutritional outcomes. For further information on how USAID can access EEFS expertise, please contact the Chief of Party, Adam Keatts at [email protected].