An economic analysis of smallholders’ heterogeneity and the impact of Jatropha curcas cultivation on household welfare in the Mangochi district, Malawi.

Abstract

The renewed interest in biofuels among many countries globally is on account of potential increased energy security, environmental and rural development benefits. Biofuels development in Malawi has the potential to achieve these objectives. The agricultural sector is the engine of the economy. Tobacco, the current primary foreign exchange earner, faces dwindling revenues from anti-smoking campaigns. Smallholders are also affected by various shocks, including weather variation, which increase vulnerability to food insecurity. There is no doubt that Malawi needs to diversify its economy to mitigate shocks and improve rural livelihoods. The Malawi government recognises, among other strategies, increased use of renewable energy sources, increased agricultural productivity, and diversification as its key priority areas. The smallholder out-grower biofuels production schemes deliver on two key government priority areas as renewable energy sources and crop diversification with the potential to open new markets, create rural jobs, and improve livelihoods. Generally, research on energy crops in Malawi is thin. The nexus of livelihood, food security, and biofuels production has not been examined in Malawi. Thus, this study aims to: (1) identify sources of smallholder heterogeneity and farmer typologies among energy crop producers, to inform livelihood improvement interventions in Southern Malawi; (2) analyse the determinants and the impact of Jatropha curcas cultivation on resilience to food insecurity shocks among smallholders, and (3) examine the welfare impacts of Jatropha curcas cultivation on smallholders in Southern Malawi. The study used cross-section data collected in 2014 using purposive and random sampling strategies from 298 smallholders in the Mangochi District of Southern Malawi. Mangochi District was chosen following reconnaissance survey results where Bioenergy Resources Limited (BERL), a consortium of Dutch Companies engaged in biofuels promotion in Malawi, was getting the bulk of Jatropha curcas seeds. The empirical research techniques employed include Principal Component Analysis (PCA), Cluster Analysis (CA), Endogenous Switching Regression model (ESR), Propensity Score Matching (PSM), and the Endogenous Treatment Effects (ETE) model. The multivariate analysis results identified five typologies that were generally distinguished by gender, asset holdings, labour endowments, level of agricultural input use, and output sales. The typologies exhibited various constraints and opportunities for livelihood improvement. Notably, more Jatropha curcas cultivating farmers, particularly female-headed households, belonged to typologies with low to medium resource endowments as compared to non-growers. There were variations in possible interventions across many of the typologies identified. Hence,

interventions and strategies must target the identified typologies, where capacity is available to increase their impact and relevance. The portfolio of interventions identified range from human capital (extension), labour-intensive strategies such as work for inputs to social protection measures (safety-nets). The endogenous treatment effects model results showed that shocks, various capital assets, and institutional factors were significant determinants of resilience to food insecurity. Jatropha curcas cultivating farmers, particularly female-headed households, had significantly less resilience capacity to food insecurity compared to their counterparts. These results imply that policies and strategies that promote increased access to services and build people's capacity (such as institutional support to credit, quality education) should be given priority to increasing resilience to food insecurity. The findings of the propensity score matching and endogenous switching regression methods suggest that, when selection bias and endogeneity were accounted for, there were welfare benefits to smallholder Jatropha curcas feedstock producers. As such, there is a need for more empirical research on other potential biofuels to inform the Malawi biofuels policy in the future. In sum, the study has shown that biofuels are not a panacea that reduces rural poverty and improves the welfare of smallholders. Thus, future research must focus on developing and disseminating a portfolio of more profitable technology/practice packages for Jatropha curcas to contribute to rural household welfare. Furthermore, the study recommends policy efforts aimed at increasing resilience to food insecurity shocks. This could be achieved by increased access to credit, quality education, and strengthening climate forecasting capacity through research in climate models. Promotion of climate-smart agriculture practices is also recommended to reduce the impact of weather shocks. Where capacity is available, tailor-made interventions for livelihood improvement such as income or crop diversification, public works for inputs, and safety nets need to target specific groups based on smallholders' unique characteristics to account for heterogeneity.