Local fertiliser firms are failing to service outstanding bills in excess of $120 million (K124 billion) with suppliers abroad making them unable to order the commodity due to the chronic foreign exchange shortage.

The development has restricted normal flow of fertiliser into the country for about 20 major fertiliser firms.

In a letter dated June 16 2022 addressed to Ministry of Agriculture and copied to Ministry of Finance and Economic Affairs a well as Reserve Bank of Malawi (RBM), Fertiliser Association of Malawi said the logistics window for importing fertiliser for the 2022/23 agriculture season is shrinking.

The association fears that if not addressed, the situation could lead to  shortage of fertiliser during this year’s farming season, negatively affecting the country’s overall agriculture output.

In an interview on Tuesday, the association’s executive administrator Mbawaka Phiri said given the country’s current foreign exchange shortage, particularly US dollars, government needs to focus on allocating the dollars to essentials which are medicines, fuel and fertiliser.

She said: “Unfortunately, fertiliser is often not seen as a necessity until it is too late because its effect is not seen until the harvest period months later.

“A lack of fertiliser will directly result in lower food production and therefore insufficient food for the country.”

Figures provided by the association show that in a normal season, fertiliser demand stands at about 350 000 metric tonnes (MT), which consists of about 100 000MT commercial sales and 250 000MT for the Affordable Inputs Programme (AIP).

However, this approximate demand can increase depending on the size of the subsidy programme, which has been between 300 000MT and 350 000 MT in the past two seasons.

Phiri said Malawi needs about 350 000MT of fertiliser at $350 million (about K361 billion) at the current global prices.

In Malawi, fertiliser consumption is centred mostly on two major crops, tobacco and maize.

In the last financial year, 166 companies were awarded contracts, including small and medium enterprises and two parastatals Agriculture Marketing and Development Corporation (Admarc)  and Smallholder Farmers Fertilisers Revolving Fund of Malawi.

Under the AIP, each beneficiary paid K7 500 per 50 kg bag of NPK and Urea while the government’s contribution was K19 500 per 50kg bag.

However, commercial market prices of fertiliser ranged between K35 000 and K38 000, due to forex shortages and rising global prices by between 60 and 80 percent.

When contacted on the association’s concerns, Ministry of Agriculture spokesperson Gracian Lungu said: “Once they [minister and principal secretary] get a copy of that letter in question, I am sure we will give a comment.”

But speaking on the sidelines of an engagement with commercial tobacco growers and Tobacco Commission last week, Minister of Agriculture Lobin Lowe said processes are at advanced stage in terms of evaluation and soon, the ministry should be able to come up with some contracts for AIP procurement firms, while taking into consideration the rising fertiliser prices and devaluation when determining the number of beneficiaries.

Agricultural policy analyst Tamani Nkhono Mvula observed on Tuesday that in addition to current global supply chain disruptions and government’s decision to engage Admarc more this year in AIP and forex shortage, the future of fertiliser business in the country looks gloomy.

He said: “The Malawi situation is a bit critical. Government also indicated that they are going to reduce their engagement with the private sector and work with Admarc.

“It would be interesting to know how far government has gone in preparing for the importation of fertiliser.”

Last month, the Reserve Bank of Malawi devalued the kwacha by 25 percent, a move the central bank Governor Wilson Banda justified, saying their earlier interventions to improve foreign exchange liquidity challenges and its effects on the exchange rate have had little or no impact.

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