1. 1 Why is the Development of Agricultural Input Markets Sluggish in Mozambique? Input Voucher Regional Workshop Lusaka - Zambia Emílio Tostão

2. 2 The Problem  Over 40% of children are malnourished  Over two thirds of Mozambicans live below the poverty line  Most of the poor live in rural areas rely on agriculture for work and income Ag. sector employs 80% of active population Contributes to 30% of the GDP

3. 3 The Problem Cont...  Sustained agricultural growth is needed for reducing poverty and food insecurity  farmer’s access to and use of improved seeds needs to improve. Why?  Seeds are very important: they determine the biological yield frontier and the productivity of land, labor, and capital

4. 4  drought and disease-resistant seeds can still help raise agricultural yields  But Mozambique has under-invested in its national seed system lose about $77 million annually (Rusike et al. 1997)  Lack of improved seeds means low yields, hunger and poverty across generations. The Problem Cont...

5. 5 Context & Objectives  MDGs,  Maputo Declaration of 2003  Abuja Declaration on Fertilizer of 2006  Mozambique domestic PRS (PARPA’s I and II)  suggest a twin commitment to poverty alleviation and input market development.

6. 6 Context & Objectives  The question is how to achieve the dual objective  Input vouchers have been used to market agricultural inputs in Mozambique  In the last six years, over 100,000 producers got seed worth about US950,000 via seed vouchers.  Previous work suggest that vouchers have offered little incentive to the formal seed sector

7. 7 Context & Objectives  Several possible theoretical explanations for sluggish development of the formal seed sector  Empirical evidence using actual data on seed and sound statistical analytical methods is lacking.  The objective of this study is to estimate smallholders’ probability of purchasing maize seed where there are both emergency and commercial seed.

8. 8 Data & Procedures  Used 2003 HH-level data from national agricultural survey (TIA)  Desk literature review  Used a binary logit model to model smallholders’s decision of whether or not to buy seed  Probability of buying see and marginal effects in each of 10 provinces of Mozambique

9. 9 Results Province Probabilty of buying seed Marginal effect of emergency seed Niassa 0.124- Cabo delgado 0.2090.06 Nampula 0.216-0.04 Zambezia 0.190-0.13 Tete 0.380-0.08 Manica 0.235-0.05 Sofala 0.382-0.19 Inhambane 0.568-0.21 Gaza 0.583-0.03 Maputo 0.578-0.22

10. 0.06 -0.04 -0.13 -0.08 -0.05 -0.19 -0.21 -0.03 -0.22 0.12 0.21 0.22 0.19 0.38 0.24 0.38 0.57 0.58 Probability of buying seed Marginal effect of emergency seed

11. 11 Key Conclusions  Producer probability of buying maize seed is small  Relatively bigger in south Mozambique. Space matters: size and sign of coeficients vary  Smallholders who receive emergency seed are less likely to buy marketed seed.  Emergency seed programs might be preventing development of commercial seed markets.

12. 12 Policy Options  A clear definition of “emergency,” the objective of emergency intervention, and a clear definition of the target population.  production of maize surplus and subsequent participation in maize output markets do not seem related to the use of commercial seed. Lack of enforcement lead to disappointment: when the promised quality is not attained, then demand for commercial seed is likely to remain low.

13. 13 Policy Options  Successful strategies must target younger producers, and create incentives for private investment in market development.  Long run: need to investment on roads, simplify regulation, and enforce quality standards  short run: consider incentives such as income tax breaks and/or gasoline allowances for business in rural areas where transportation costs are high.

14. 14 Policy Options  short run: consider incentives such as income tax breaks and/or gasoline allowances for agricultural companies, small business in rural areas where transportation costs are high.  Space matters: carefully consider constraints that define regions’ absolute advantages. The usual “one size fits all” policy approach might not work in Mozambique

15. THANK YOU