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Agriculture and micro enterprise in Malawi’s rural south

This paper reviews and interprets changes in rural livelihoods in southern Malawi following market liberalisation. It argues that, by reducing household maize production, market liberalisation has increased the need for resource-poor smallholders to develop market strategies that provide them with income security. Whereas previous scenarios for poverty elimination in Malawi were based either on green revolution technology or burley tobacco, the emerging scenario in the rural south is one where smallholders seek market niches that do not threaten household food supply. The potential of this market-based scenario for poverty elimination requires a greater understanding of the links between agriculture and micro enterprise, two livelihood strategies that usually receive separate treatment in the development literature.

Research findings

The 1990s witnessed a growth in area planted to crops that are highly marketable but do not reduce household maize production. Evidence from national surveys suggests there was a surge in micro-enterprise activity during the 1990s, but that most enterprises were short-lived and did not develop into stable or growth businesses
Although we lack firm evidence from national income expenditure surveys, evidence from micro studies suggests that the net effect of market liberalisation on household income has been positive.
Specialisation in high-value cash crops and micro enterprise is limited by the need to secure household food supply. This reflects market failure since rural households lack confidence in the market to provide them with maize when and where they need it and at a price they can afford.
Rather than specialise and maximise income, households are optimising income by diversifying their livelihood strategies, in particular by combining minor cash crops with micro enterprise, in order to increase their income security.

Policy implications

The Green Revolution and Burley Tobacco scenarios for poverty alleviation overlook regional dimensions of poverty. We argue that a more relevant scenario for the rural south is a Market Niche scenario that links smallholders with markets for micro enterprise and minor cash crops, promotes a competitive food processing industry, and focuses on production of agricultural tradeables.
Government’s approach to the problem of market failure is to insulate households by increasing own-maize production through welfare measures such as Starter Packs. More emphasis is needed on tackling market failure directly through measures that increase entitlements to buy maize, and the availability of maize by improving the efficiency of domestic and regional markets.
- (Author’s Abstract)