Fair Trade Hopes Take Root

Can Malawi's newly empowered farmers transform one of the world's poorest countries?

• Nick Mathiason
• The Observer,
• Sunday January 27 2008

This article appeared in the Observer on Sunday January 27 2008 on p6 of the Business news & features section. It was last updated at 23:17 on January 26 2008.

The district hospital at Mchinji in Malawi was built nearly 20 years ago to serve a population of 275,000. It is a modern complex that, from the outside, would not look out of place in any British city. The trouble is that it's drowning under a sea of patients.

Mchinji lies in the far west of Malawi where the Zambian and Mozambican borders meet. The sick swarm over the borders and swell the hospital's catchment area to more than 600,000. With a population of 13 million, Malawi has the lowest number of doctors per person in the world; a 17-bed children's ward will typically treat at any one time 185 kids suffering, and often dying, from malaria, pneumonia or anaemia.

The sick children are accompanied by a parent - or, just as likely, a guardian, because Aids has sunk its claws into the people who farm this fertile land. Consequently, life expectancy has reduced from 45 in 1990 to 37 in 2005. Virtually every adult you meet looks after at least one Aids orphan, more likely several.

But Mchinji District Hospital has no beds for those accompanying the sick, let alone cooking or washing facilities. So opposite the hospital, gathered on scrubby grass, are hundreds of women and children at the mercy of the elements. Some are pregnant, waiting to go into labour.

Yet here at Mchinji, contrary to perception, all is not lost. Three weeks ago, work started on a brick shelter to protect parents, guardians and expectant mothers from the sheeting rain and scorching sun. Progress has been rapid: the foundations have been laid and the structure is rising out of the ground. Work should finish soon. What's remarkable is that the shelter has been paid for by nuts - fair-trade groundnuts, grown in Malawi and sold to British shoppers.

The story is repeated across this southern African nation: infrastructure improvements and better life chances are being paid for by fair trade: new homes, water pumps and pipes, electricity, repaired bridges and bursaries to secondary school for orphans. Fair trade is, in a sense, the purest form of aid and the British public knows it. Government surveys show that people believe it is more effective than giving to charity. Growers are paid a guaranteed payment above world market price for their goods and smallholders form democratic associations that receive a premium to invest in improving communities.

This does not mean fair trade is a soft touch. 'Abuse the windfall and lose the Fairtrade mark' is no idle threat - accreditors constantly monitor projects. Smallholders in Cameroon have been thrown out of the scheme in the recent past; there is no stronger incentive to keep on the straight and narrow. Contrast this with traditional donor aid, up to 40 per cent of which is frittered away by consultants, while much of the rest is tied to murky procurement conditions that stipulate developing countries must import goods from the donor country.

Although it is a fledgling concept in Malawi, a growing number of smallholders have formed themselves into associations to sell tea, sugar, cotton and nuts to processors who can't get enough of Fairtrade products as the sector booms.

Next month the Fairtrade Foundation, which is the accreditation wing of the movement, will reveal that UK consumers annually spend more than £450m on fair-trade goods. In 16 years, fair trade has become one of the fastest-growing retail sectors. Brands such as CafeDirect and Divine chocolate have become household names. The latest launch is Liberation Nuts.

The leaders of the movement are now intent on a rapid acceleration, taking the sector beyond the billion-pound mark in short order - and they are going to concentrate on the least-developed countries, such as Malawi. In fact, the signs are that the Fairtrade Foundation movement will use Malawi as a pilot.

But to do this requires small and strategic investments in capacity-building, quality management systems and accreditation monitors. Processors and retailers complain that it takes a long time to be approved to supply Fairtrade products. The Fairtrade Foundation and retailers are lobbying the Department for International Development to come up with small amounts of extra cash to help kick-start change in poor countries. Since 2003, Dfid has granted just £2.1m to the Fairtrade Foundation and its international parent body.

What can be achieved is clear: when the foundation was given £250,000 from the department five years ago, it was able to increase its range of products from 100 or so to several thousand.

What started as a fringe movement championed by unions, church groups and the Co-op chain has been adopted by some of Britain's major retailers - Sainsbury's, Marks & Spencer and Waitrose. Sainsbury's and M&S have made giant strides in the past two years: Sainsbury's own-label tea is Fairtrade and the supermarket has committed to ensuring its price will stay in line with rivals' own-brand tea. All its bananas are Fairtrade and it is moving all its sugar the same way.

Last year, M&S purchased around a third of the world's Fairtrade cotton and sold more than 3.2 million garments made from it; all its jams and conserves use Fairtrade sugar. Waitrose has a similarly impressive story to tell.

The question that worries fair-trade leaders as the economy enters increasingly choppy waters is: will the supermarkets be able to invest in supply chains to ensure ambitious expansion plans can be achieved? It is a concern quickly allayed by the bosses of Sainsbury's, M&S and Waitrose, who insist there is no going back on their commitment.

For the people of Lujeri, in the shadow of Mount Mulanje, Malawi's highest peak, such talk is music to their ears. Here 6,000 smallholder farmers are poised to receive $800,000 (£404,000) once they get Fairtrade accreditation, which should come within months. The money is desperately needed: the women farmers say they go without food to ensure their children go to school, and that poverty creates the conditions for prostitution and Aids to spread. Money will go towards new medical facilities and bursaries for secondary schools.

If Malawi can scale up and take advantage of the fair-trade boom, it will be a remarkable turnaround. Until 2004, commodities were sold to the government, but liberalisation brought a catastrophic drop in prices. Smallholders were left exposed to duplicitous middlemen who conned growers by fixing weighing scales and altering the size of bags so they did not have to pay farmers what they were entitled to.

But by banding together - the motto of the National Smallholder Farmers' Association of Malawi is 'The future belongs to the organised' - farmers can achieve better prices, and benefit from training and quality management systems to ensure products meet standards.

It is a route out of poverty built on equity and entrepreneurialism. It is also a route that, now more than ever, needs to be backed by the British government.

The nation

Under President Bingu wa Mutharika, Malawi has stabilised its economy, although it is one of the world's poorest nations. Most people live on less than 50p a day. Rampant inflation, now 7.4 per cent, has been tamed and interest rates are roughly 25 per cent. The economy is dominated by agriculture, although uranium finds, now being exploited, will add significantly to GDP. Severe drought in 2004 led to hunger.

Malawi is split between three main tribes. Fears are growing that elections in 2009 could see a repeat of the chaos in Kenya. Despite opposition claims of corruption, most believe Mutharika's record of economic competence should see him win