Impact of local RUTF manufacture on farmers’ incomes in Malawi

By Marta Ortiz Nunez

Marta Ortiz Nunez is a recent Masters graduate in International Development. In 2006 she co-founded a Spanish non-governmental organization focusing on development of rural and urban areas of Nicaragua and has worked for a number of other development NGOs.

This work was undertaken as an MSc research project for the International Development Department, University of Birmingham, UK.

The author expresses her gratitude to the people who supported her field study in Malawi. In particular she thanks Valid Nutrition for accommodation and access to their factory, the National Smallholders' Association of Malawi (NASFAM) that enabled access to the farmers' clubs in rural areas, and Dr. John Watson, for his help, support and always encouraging words. Finally, her thanks to the respondents of Mchinji Area Smallholder Farmers Association (MASFA), Malawi.

This article describes the experience of local production of Ready to Use Therapeutic Food (RUTF) in Malawi by Valid Nutrition with regard to economic impact on local farmers.

Food aid is essential in certain contexts. However, it is widely acknowledged that food aid programmes can have a negative impact on the economies of developing countries. Food aid can create disincentives for local agricultural production¹, depress prices² and act as a disincentive for labour supply. It is therefore vital that food aid programmes take into account the potential damage that they may cause to the local economy³ while exploring mechanisms for benefitting the local population. For example, food aid can be positive if it is locally procured⁴ since local raw materials are easier to procure, store and transport and are less likely to be stolen (less corruption). Also, local farmers are paid for the local ingredients, which has a positive effect upon farmers' income source.

Potential benefits of local RUTF production in Malawi

With the expansion of community based management of acute malnutrition (CMAM), one form of food aid - Ready to Use Therapeutic Food (RUTF) - has increasingly been used. The most common RUTF recipe is made from milk powder, vegetable oil, sugar, peanut paste and powdered vitamins and minerals. It is energy-dense (about 5.5 kcal/g) and provides minerals and vitamins in precise quantities specific to the treatment of severe acute malnutrition.

Experiences to date have found that RUTFs can be safely and easily prepared with a simple industrial infrastructure that allows its local production at small or large scale. It has been argued that encouraging local procurement among suppliers of RUTF can decrease the cost⁵ while creating jobs through local production and benefits to local agricultural economies. Local production shortens supply chains allowing beneficiaries to access RUTF more quickly and cheaply. Furthermore, if local production can reduce costs, then agencies, clinics and non-governmental organisations (NGOs) can purchase and distribute more RUTFs so that a greater number of severely malnourished children can be treated (See Box 1).

Valid Nutrition⁶, which has recently received UNICEF accreditation as a supplier of RUTF in Malawi, believes that local production of RUTF provides a "unique opportunity to develop local food manufacturing industry, providing viable markets for a range of locally grown crops"⁷. To further this, they have developed and tested new RUTF recipes, designed to stimulate demand for a variety of crops, such as chickpeas or sesame, which will improve agricultural diversity and reduce vulnerability to changing rainfall patterns. Others involved in RUTF production in Malawi feel one of the reasons that local production of RUTF is attractive is that "locally grown peanuts, oil and sugar can be purchased in the country where they are being used, and this will support the local economy" ⁸. Agencies involved in CMAM programming, such as Concern Worldwide, consider increased local production of RUTF to be essential for increasing the availability of the product globally, regionally and nationally⁹. Overall, manufacturing RUTF in developing countries from appropriate locally grown crops effectively harnesses market mechanisms, linking the treatment of malnutrition to the promotion of agricultural diversity, whilst lowering the cost of RUTF and providing local employment.

Research Aim

The overall purpose of the study was to determine whether and how local procurement of raw materials for Valid Nutrition's RUTF production in Malawi benefited local farmers.

The objectives of the study were to:

• Study the economic impact upon local farmers when ingredients needed for development of RUTF are produced locally.
• Assess the necessity of the presence of intermediaries in the relationship between Valid Nutrition and local farmers.
• Examine the mechanisms Valid Nutrition employs to benefit local farmers through the purchase of raw materials.

Study method

The fieldwork for the study involved observations and interviews using questionnaires and focus group discussions (FGDs) with members of the Mchinji Area Smallholder Farmers Association (MASFA). MASFA belongs to the National Smallholder Farmers' Association of Malawi (NASFAM)¹⁰, which is the largest independent, smallholder-owned membership organisation in Malawi. It is organised as a corporation and works through farmers' clubs and endeavours to promote local capacity building and empower local farmers to achieve development through agriculture. NASFAM plays an important role in the local procurement chain since they connect local small farmers with manufactures such as Valid Nutrition (see Box 2).

Interviews were arranged with 21 farmers from MASFA. The sample of farmers belonged to eight different clubs of 10 to 20 members each. Thirteen of those interviewed were women and eight were men, all aged in their forties. Interviews were also carried out with Valid Nutrition, NASFAM staff and external actors, such as the Ministry of Agriculture and Food Security, UNICEF and WFP.

Findings

Views of NASFAM and Valid Nutrition

NASFAM was officially formed in 1995 and emerged from a USAID funded project aimed at enabling famers to access the tobacco market. Since then, NASFAM has focused on helping famers diversify crop production including maize, groundnuts, rice and soya beans. NASFAM is present in 19 out of 29 Malawian districts and chooses work locations based on an assessment of where market failure is most pronounced. They therefore work mainly in southern and central regions of Malawi.

Valid Nutrition is highly aware of the potentially damaging impact of long-term importation of a product like RUTF and that local farmers could benefit significantly from a steady demand for crops like groundnut, which is a major component of RUTF. This is why Valid Nutrition has chosen to work with NASFAM, which aims to support local farmers and local production.

Valid Nutrition hopes to become a stable supplier of RUTF for UNICEF, as well as to export on a larger scale to other African countries. To that end in 2009, they substantially increased the production capacity of their Malawi factory up to 2000MT /year, installed a sachet packaging machine and are currently waiting for UNICEF to visit and re-inspect for certification as an international supplier. Valid Nutrition is also trying to develop new formulae for RUTF with crops such as chickpeas, sesame and soya which are all rich in proteins. This will reduce the quantity of expensive imported milk powder required and stimulate diversity of crop production locally. Controlled trials into several of these recipes are ongoing.

NASFAM recognise the efforts to provide a stable market for local farmers, however Valid Nutrition cannot always ensure this as they are dependent on demand from UNICEF, local clinics or NGOs. For example, at the time of the study, Valid Nutrition could not confirm how much groundnuts they would need in 2010.

Valid Nutrition is constantly grappling with issues of cost. A major factor behind their research is to shift away from milk powder use, which constitutes 30% of the total cost of the product. Valid Nutrition is also working to lobby government to waive value added tax (VAT) that is applied to RUTF products.

The quantity of RUTF sold by Valid Nutrition has increased substantially over the past two years, from approximately 70 MT between June and December 2007 to 273 MT between January and June 2009.

Valid Nutrition believes that cooperation with NASFAM and their capacity building of local farmers has been crucial for the success of the project. This has involved NASFAM's guarantee of groundnut quality^11x involving promotion of professional grading and handling, as well as ensuring a robust procurement system to secure a good supply of raw materials for RUTF production.

Views of Mchinji Smallholder Farmers Association (MASFA)

The Mchinji association was established in 2000. Respondents stated that they are very satisfied with NASFAM as they believe the organisation helps them identify markets. However, they also feel that in some instances they would like to see NASFAM offer them higher prices. Board members of MASFA stated that they have received incremental benefits since they began working with NASFAM in terms of income and training. Before working with NASFAM, they were earning 2000-5000 MKW (Malawi Kwacha) per season but now the amount has effectively quadrupled. This has enabled the farmers to pay for school fees, school uniforms and medical treatment and to invest in the purchase of assets, such as bicycles, radios, iron sheets, kitchen utensils, house construction, goats, chickens, pigs or/and rabbits. The average duration of membership of those interviewed was 6.2 years. Average farm size was 2.5 Ha, which is significantly larger than the Malawian average of 1.5 Ha. Farmers in the sample grew other crops apart from groundnuts, including maize, cassava and sweet potatoes. Annual production was about 355 kg of groundnuts per season with the average farmer selling about 235 kg per year and keeping the remainder for consumption and seeds. Many of the farmers stated that local procurement offered them a means of income generation they did not have before and that they were pleased that NASFAM would buy unsold crops at the end of the season.

External agency views

Concern Worldwide and UNICEF stated that local procurement was positive in terms of preventing negative impact of food aid on the market and fostering development. However there were some concerns expressed over inflated prices being paid for local ingredients by some international NGOs and agencies and that this was not sustainable. At the same time, local procurement was certainly leading to lower RUTF prices than those charged by Nutriset France who have higher transport costs. Purchase from local producers and local production of RUTF also meant less delay.

Study limitations

There are a number of limitations to the study, such as the small size sample of farmers and the research being based on the experiences of one local manufacturer, Valid Nutrition (another significant manufacturer in Malawi, Project Peanut Butter, was unable to participate due to time constraints). Validity and reliability of the findings may have been compromised by using an expatriate interviewer which could have meant exaggerated negative reports from association members in order to secure more help. The interviewer had to rely on the translator to interpret responses. Use of a NASFAM translator could have led to a positive bias towards how the association was represented. Unrepresentative participation is a risk with the methodology, where the interests of dominant groups or individuals can dominate interviews/FGDs. For example, during the FGD with farmers, men tried to take control over the discussion.

Conclusions

The study found that Valid Nutrition is successfully producing and marketing RUTFs in Malawi and small farmers have benefited from it through increase in the demand and production of RUTF, accompanied by significant increases in the income and living standards of an increasing number of farmers. The overall impact of local procurement remains limited, since only around 6,000 farmers who are MASFA members, have benefited from this activity.

The study reinforced the value of local manufacturers like Valid Nutrition working with intermediaries like NASFAM in order to access local farmers, and to enable farmers to link to new 'markets'. Without the help of this local intermediary and their role in building local capacities, it would have been difficult for Valid Nutrition to set up the local procurement and production process that now exits in Malawi.

Lack of stability in the market for RUTF is a constraint. In order to increase levels of local procurement and its positive impact on farmers, Valid Nutrition needs to have a stable level of 'customer demand'. Without this, NASAFM is uncertain about the quantity of groundnuts required by Valid Nutrition and without a 'demand guarantee' it is difficult to scale up and develop crop production. To an extent, this dynamic is problematic and reflects partly the nature of the market, wherein demand for RUTF depends on prevalence of malnutrition which is not stable and varies from year to year.

For further information, contact Marta Ortiz Nunez, email: martaortiznunez@gmail.com

¹Oxfam, (2005). Food Aid or Hidden Dumping?, Oxfam briefing paper, Oxfam. Available at http://www.oxfam.org/sites/www.oxfam.org/files/bp71_food_aid.pdf

²FAO, (2006). The State of Food and Agriculture: Food aid for food security? Food and Agriculture Organization of the United Nations: Rome.

³Clay, E.J., Dhiri, S. and Benson, C., (1996), Joint Evaluation of European Union Programme Food Aid, London: Overseas Development Institute

⁴Awokuse, T.O, (2006). Assessing the Impact of Food Aid on Recipient Countries: A Survey, Working Papers 06-11, Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA).

⁵Henry, C. J. K. and Seyoum, T. A. (2004), An Alternative Formulation of Ready-To-Use Therapeutic Food (RUTF) for Use in Supplementary Feeding, Oxford, UK: Valid International. Collins, S. (2004), Community-based therapeutic care: A new paradigm for selective feeding in nutritional crises, 48. London: Humanitarian Practice Network. Overseas Development Institute, Network Paper. Available at http://www.odihpn.org/documents/networkpaper048.pdf

⁶Valid Nutrition is an Irish registered charity that produces RUTF products exclusively in developing countries.

⁷Valid Nutrition (2007), Valid Nutrition Brochure; Available at http://www.validnutrition.org/

⁸Manary, M.J. (2006), "Local production and provision of ready-to-use therapeutic food (RUTF) spread for the treatment of severe childhood malnutrition". Food and Nutrition Bulletin, 27(3), pp: 83-89

⁹Gatchell, V., Forsythe, V. and Thomas, P-R (2006), "The sustainability of community-based therapeutic care (CTC) in non emergency contexts", Food Nutrition Bulletin, Volume 27, number 3, September 2006 (Supplement - SCN Nutrition and Policy Paper No. 21), pp: 90-98

¹⁰www.nasfam.org

¹¹NASFAM has a laboratory geared up for quality control of Products. For groundnuts, the laboratory assesses aflatoxin contamination as well as presence of debris like stones or wood.