Browsing by Author "Ratii, Motselisi Ledecia"
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- ItemThe welfare impact of the removal of input subsidies for crop production in Lesotho(Stellenbosch : Stellenbosch University, 2016-03) Ratii, Motselisi Ledecia; Punt, Cecilia; Stellenbosch University. Faculty of Agrisciences. Dept. of Agricultural Economics.ENGLISH ABSTRACT: The dwindling agricultural production and extreme poverty in Lesotho and most of sub-Saharan Africa has let governments to resort to fertiliser subsidies as a strategy to combat poverty and attain household food security. However, the efficiency analysis of input subsidies in these countries showed that the costs of the programs outweigh the benefits. For this reason, fertiliser subsidies are discouraged. In Lesotho fertiliser subsidy seem to not be a good tool to ensure food security as a country is prone to natural disasters like droughts and floods. Agricultural production remained low despite the presence of fertiliser subsidy program. This had let one to question the extent to which fertiliser subsidy improves agricultural production. Household food security is achieved when there is availability of food in households. Also household food availability enhances welfare. The objective of this study was therefore to determine the impact of removing fertiliser subsidy on production, prices, income and consumption as well as fertiliser demand. The objective was achieved through the use of the multi-market model developed by Lundberg and Rich (2002) for Africa. Products used in the model are differentiated into internationally tradable products (maize, wheat, cash crops, non-foods and fertiliser) and internationally non-tradable products (sorghum, other foods and livestock). Households were classified into urban poor and urban rich, rural poor and rural rich. The results indicate that the withdrawal of fertiliser subsidy reduces crop production while production of livestock increases. Non-food production is not affected. Subsequently, income in urban households increases and income of rural households decreases. This is because livestock (broiler) production is an urban activity while crop production is mostly rural based. Prices of internationally tradable products are not affected while prices for products not traded internationally increased. As a result, consumption of tradable products increased and consumption of non-tradable products decreased. Fertiliser consumption declines by more than half. Conclusion based on these results are that the fertiliser subsidy contributes to about 15% of maize production, 8% of wheat and 7% of sorghum and cash crops (beans) production as well as a modest 3% contribution to production of other food (leafy green vegetables). Though the opportunity cost of the fertiliser subsidy is not measured in this study, the M10.11m which is the cost of the fertiliser subsidy program could be used to fund programs that generate non-agricultural income for poor households. This will enable them to afford imported food hence, their welfare will be improved.