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Economic efficiency and investment potential in the smallholder crop sector in Malawi

Economic efficiency and investment potential in the smallholder crop sector in Malawi The crop sector in Malawi faces a number of constraints which must be overcome before agriculture can reach its full potential. This paper uses the policy analysis matrix (PAM) to assess efficiency in the crop sector and financial analysis to explore the potential of investing in a fruit juice extraction plant in Malawi. The PAM revealed that farmers in Malawi are efficient producers but they face negative incentives in the production and marketing of their products. The nominal protection coefficients (NPCs) for both maize and beans were less than 1 while those of inputs were more than 1. Similarly, the effective protection coefficients (EPCs) were less than 1, implying that the combined effect of transfers and tradable inputs is reducing the private profitability of the systems. On the other hand, the financial analysis demonstrated that Malawi can sustain a fruit juice extraction plant. The project had a positive net present value and a benefit/cost ratio greater than 1 (1.16). Recommendations made from the study relate to the need for diversification into fruits that can sustain a fruit juice extraction plant, encouraging private sector participation and reducing disincentives to crop production. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Social Economics Emerald Publishing

Economic efficiency and investment potential in the smallholder crop sector in Malawi

International Journal of Social Economics , Volume 27 (7/8/9/10): 12 – Jul 1, 2000

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Publisher
Emerald Publishing
Copyright
Copyright © 2000 MCB UP Ltd. All rights reserved.
ISSN
0306-8293
DOI
10.1108/03068290010336973
Publisher site
See Article on Publisher Site

Abstract

The crop sector in Malawi faces a number of constraints which must be overcome before agriculture can reach its full potential. This paper uses the policy analysis matrix (PAM) to assess efficiency in the crop sector and financial analysis to explore the potential of investing in a fruit juice extraction plant in Malawi. The PAM revealed that farmers in Malawi are efficient producers but they face negative incentives in the production and marketing of their products. The nominal protection coefficients (NPCs) for both maize and beans were less than 1 while those of inputs were more than 1. Similarly, the effective protection coefficients (EPCs) were less than 1, implying that the combined effect of transfers and tradable inputs is reducing the private profitability of the systems. On the other hand, the financial analysis demonstrated that Malawi can sustain a fruit juice extraction plant. The project had a positive net present value and a benefit/cost ratio greater than 1 (1.16). Recommendations made from the study relate to the need for diversification into fruits that can sustain a fruit juice extraction plant, encouraging private sector participation and reducing disincentives to crop production.

Journal

International Journal of Social EconomicsEmerald Publishing

Published: Jul 1, 2000

Keywords: Agriculture; Efficiency; Financial analysis; Africa

References