1. WHY THE GROUNDNUT VALUE CHAIN
IN MALAWI: Setting the Scene
Presentation at Multi-stakeholder workshop on
Groundnut Value Chains in Malawi and Zambia
At Crossroads Hotel, Lilongwe, Malawi
24-26th
April 2013
Dr Gideon E. Onumah
(Marketing/Finance Economist, Natural Resources Institute, University of Greenwich, United Kingdom)
G.E.Onumah@greenwich.ac.uk
Ms Candida Nakhumwa
(PhD Student, Natural Resources Institute, University of Greenwich, United Kingdom)
C.Nakhumwa@greenwich.ac.uk

2. Agriculture and the Malawi economy
• Contributes around 34% to the GDP
• Accounts for over 80% of Malawi’s export
revenue, 84% of labor force
• Agriculture is closely linked to economic short-
term growth (particularly tobacco, which
accounts for 60% of the country’s exports and
half the Government’s tax base)
• Risk: Heavy reliance on tobacco exports, a crop
with declining global demand prospects
• Therefore Malawi urgently requires to diversify
its export base

3. Groundnut: suited to pro-poor growth
• Groundnut is one of the strategic crops in the
National Export Strategy (NES) and also MGDSII
• Majority of farmers in Malawi, including women,
have long history and experience in the growing
of groundnuts.
• Groundnut requires less inputs compared to
other high valued crops such as tobacco
• It is grown for both food and income generation
• Groundnut provides 25% of smallholder
household income in Malawi (Diop et al., 2003).
• Builds soil fertility and therefore will help
replenish the declining soil fertility

4. Can Malawi return to old heights in
groundnut export?
• Groundnut exports ranked second only to tobacco in
terms of foreign exchange earned by Malawi
• The country lost its share of the world market for
groundnuts in the mid 1980s.
• This is due in part to high incidence of aflatoxin and at
a time when the EU imposed stringent standards on
aflatoxin.
• Other supply side factors also contributed to decline
in groundnut exports
• The evidence is: Malawi has the natural endowment
but is unable to meet domestic and regional demand
as well as regain its foothold in the global market

5. Supply-side challenges: at producer level
• Lack of/inadequate quality seed and extensive use of low-
yielding recycled seed
• Poor access to credit, limiting farmers’ ability to procure yield-
enhancing inputs
• High rural labor cost – due in part to competition for labor
from other high valued crops such as tobacco
• Emerging impact of climate change – particularly increasing
incidence of midseason drought, making farmers more
vulnerable and scaring banks
• Limited access to farm extension – under-funded public
extensions institutions
• Poor pest and disease control
• Poor management of aflatoxin contamination at both
production and post harvest levels
 Science and technology can address some of these challenges
but is it sufficient (enough investment and on its own)??

6. Marketing constraints in groundnut
chains
• Smallholder farmers who dominate groundnut production of have
difficulty accessing markets
• Producer prices are often squeezed as a result of the following:
- Poor rural road infrastructure contributes to high inflate transport costs
- Lack of efficient storage infrastructure leads to high post-harvest losses
- Traders are severely under-capitalized and, therefore, unable to absorb
surplus at harvest. This leads to glut and very low prices at harvest
- Marketing chain is often long with several intermediaries, leading to low
producer margins
• Considerable cheating on weight occurs in the trade
- Reported that nominal price at farmgate is often very close to into-
warehouse price paid by NASFAM
• Quality premium is not paid at farmgate level due to:
- Small size of quality-sensitive market: insignificant volumes export under
Fairtrade; low volumes to SA; domestic formal/regional markets do not
enforce quality standards

7. Going forward: holistic/value chain
approach needed
• Not just science and technology: breeding, inputs
subsidies, inputs credit, enhanced farm extension
and improved post-harvest management:
- Double your yield not always equal to double your farm income
• Holistic VCA can help identify opportunities to be
exploited and intervention areas to improve
competitiveness and chain-wide efficiency.
- Market-based approaches need attention

8. Going forward: market challenges
• Emerging evidence suggests that price incentives matter
in fostering adoption of improved tech and better
husbandry practices but currently:
- Fairtrade market – size too small and margins too low (farmers virtually
taxed to fund community programmes)
- Regional market quality-sensitive market (mainly South Africa) –
growing but sorting and grading occurs at exporter level denying
farmers opportunity to gain from quality premium
- Sizeable domestic formal market does not enforce quality standards,
putting consumers at risk
- Similar situation in other regional markets (predominantly informal)

9. Going forward: some options
• Expand size of quality-sensitive market and create space
for farmers to enjoy quality premium through:
- Enforcing quality standards in formal domestic market
- Fostering more formal regional exports – collaboration between
farmers organisations may be an option e.g. EAFF, SACAU
- Enforcing quality controls at exit ports to regional markets as formal
market expands
- Sensitisation of the population may be helpful
- Need to strengthen domestic quality enforcement capacity

10. Going forward: some options (2)
• Strengthen role of primary-level farmers organisations
in groundnut marketing:
- To lower aggregation cost and improve quality at farmgate level
- Case of Tanzania coffee where primary organisations have been more
effective
• Promote institutional infrastructure and regulatory
framework that encourages investment in trade and
logistics infrastructure:
- Working with the commodity exchange is one option