Improving Agricultural Market Performance:
Creation and Development of Market Institutions
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private sector and other role players, to help smallholder farmers and entrepreneurs
to plan their production and market activities more effectively in accordance with
market requirements, as well as to participate actively and effectively in the
mainstream markets
8. Agricultural market finance - The commercial agriculture sector usually has access
to finance through commercial banks, but finance has not been easily available to new
and smallholder farmers. The Government will design a suitable financing program
that will strive to support smallholder farmers and land reform beneficiaries in their
market needs. The program will strive to increase access to, and improve the quality
of, agricultural support services such as market infrastructure, agricultural market
information, and market skills development. The Government will also use financing
programs from various development finance institutions (DFIs) to achieve these goals.
Results of the 2010 Policy and Previous Reforms
Total support to agriculture was estimated at 0.3% of GDP in 2013-15. Direct market price
support (MPS) to farms is the largest component of this support, which is based mainly on
farm output and use of inputs. Other elements include payments to fund the national
agricultural knowledge and innovation system, and expenditure on infrastructure.491
Price distortions are low, and except for sugar and, more recently, milk and wheat, domestic
prices are “almost aligned with world price levels.” Most policy measures and direct payments
target smallholders, largely in the form of production loans to new farmers who have acquired
land through redistribution. Reduced market price support and budgetary support to
commercial farms (most of them white-owned) not only reduced the overall level of support to
agriculture, but also freed up resources to fund land reform (hitherto based on a “willing
seller-willing buyer principle to acquire white-owned farms) and support to its beneficiaries,
principally black subsistence, smallholder, and commercial farmers.492
Land redistribution policies were also changed, following earlier, unsuccessful land
redistribution programs, which failed to establish clear ownership rights and obligations and
which transferred land to inexperienced cooperative groups on unfavorable terms. Under the
New policies, all newly acquired land has been registered as state-owned on the Agricultural
Land Holding Account – administered by the Department of Rural Development and Land
Reform – and leased to selected beneficiaries, who have the right to dispose of the land after an
agreed lease period, provided the project is economically viable.
Following severe droughts in 2014 and 2015 (which cut the maize harvest by 40%),
Government repurposed some agriculture support funds to drought relief and committed new
funds, much of which went for provision of water, transport, and livestock feed. The land
reform process continues to receive funding, including support to recapitalize failing farms.
The 2016 OECD Agricultural Monitoring and Evaluation review observed that;
 “The main challenge…continues to be implementing and effectively targeting support
programs that are tailored to the needs of emerging farmers. Involving private
stakeholders (experienced commercial farmers) in [these] programs in the form of
491 OECD (2016), Agricultural Policy Monitoring and Evaluation 2016, Paris: OECD Publishing.
492 Ibid