Effect of value addition on income among deepening enterprise development groups in Ntchisi district, Malawi

Abstract

Agribusiness in Malawi is still in the early stages of development and is associated with insufficient value addition. Farmers‟ ability to produce outputs in quantities and quality forms that are marketable and commercially viable is limited by a number of factors. Lack of sufficient storage and processing facilities as well as inadequate skills are some of the notable constraints. As a way of enhancing the competitiveness of the rural agribusiness actors and ultimately raising their incomes, the government of Malawi with support from the African Development Bank (AfDB) implemented an initiative called Deepening Enterprise Development (DED) under the Local Economic Development (LED) project. The study was therefore carried out to better understand the impact of the project in solving the problem of low household income through value added agriculture. The aim was to assess the effect of value addition on income among DED farmer groups in Ntchisi District, Malawi. The study used a multi-stage sampling procedure to select 100 farmer groups comprising of 62 beneficiaries and 38 non-beneficiaries of the project. Data analysis was done using descriptive statistics, probit model and propensity score matching (PSM) model. Cleaning, grading, processing, packaging and labelling were the forms of value addition found to be practiced by the farmer groups. Beneficiaries of DED (23%) were more involved in packaging as compared to non-beneficiaries (3%). About 21% of the beneficiaries processed and labelled their products while none of the non-beneficiaries were involved in either of the two practices. Location and project participation were found to have significant positive influence on groups‟ decision to add value. On the contrary, type of farming, number of enterprises and belonging to a single gender group had a negative influence on the groups‟ decision to engage in value addition. Lastly, the difference in gross margins (ATT) between the two groups that came about due to value addition was MK251.08. The study therefore recommends that strategies be put in place to enhance the farmers‟ ability to engage in higher forms of value addition techniques. These may include creation of an enabling environment for credit access that can be used for investment in value addition equipment and facilities. Efforts should also be made by all stakeholders to advance the provision of agricultural extension services, which may lead to an increase in the adoption rate of value addition activities among the farmers. Value added agriculture should be promoted as one of the strategies for improving the socio-economic wellbeing of smallholder farmers through increased income.