ANNEX F: SAFETY NETS IN MALAWI


 The term, safety net, is commonly used in two different ways. The first, and original use
 of the term refers to a program or set of programs introduced in countries which are in the process
 of eliminating certain social or economic programs which have universal coverage, but where
 there is a desire to assure continued public assistance to the poorest. There is implicit in the term
 a process of moving from programs which are open to all, regardless of income level, to programs
 where eligibility is related to poverty, and the level of benefits may be related to the level of
 poverty. The safety net can be a permanent element of government policy, or it can be linked to
 a process of transition, to provide a short-term cushion for the most vulnerable. In developing
 countries, this has often been linked to the process of structural adjustment.

 The concept of the safety net has also been used to refer to specific government programs
 which target either the chronic poor and food insecure, and/or the transitory food insecure. This
 can encompass nutrition, poverty alleviation, food security and emergency programs, among
 others.

 There have been a number of major policy changes in the last decade in Malawi, as
 discussed earlier. Most importantly there has been a move from a largely command economy
 towards a more market-oriented one. In particular, there have been adjustments in the foreign
Exchange rate, subsidies have been removed from agriculltral inputs and commodity prices, with
the partial exception of maize, are determined by market forces. This has changed the relative
 prices faced by smallholders, and to some extent the rural-urban terms of trade. As with all
 changes of this nature there have been winners and losers. As indicated in section 2 of the main
 report, some of the poorer sections of the rural population have not, as yet, benefited from market
 liberalisation and may have lost as a result of changing relative prices.

 There has been particular concern about the impact of the changing role of ADMARC on
 the poorest sections of the population, particularly in rural areas. Historically ADMARC was the
 main source of supply of maize on the market in both rural and urban areas. It bought and sold
 at administered prices throughout the country, regardless of transport and storage costs and
 whether an area was maize surplus or maize deficit. ADMARC's selling price of maize was both
 politically and economically important and it was factored into the level of the minimum rural and s
 urban wage. ADMARC was seen as having an important social function, in maintaining both
 availability of maize, and, by keeping the price of maize at acceptablee" levels regardless of
 underlying market conditions, protecting the purchasing pnwer of nt maizse purchasers. To a
 large extent this was financed through cross-subsidisation within ADMARC between maize
 transactions and dealings in other commodities. it

 Since 1986 there have been steps taken to liberalism agricultural input and output markets
 and reduce the dominance of ADMARC. In the maize market this process has been slow and
 rather uneven in pace, due in art to the nature f ADMAR' continued presence which reduces
 the incentives for private trade to enter the market. It is clear that, with ADMARC's current price