The Sunday Mail
Jackqeline Mutambara
Agriculture is central to Zimbabwe’s economy. The Comprehensive African Agriculture Development Programme emphasises the prospects for the country to register a higher path of economic growth through agriculture-led development.
This concept is further emphasised in the 10-Point Plan for Economic Growth in which revitalising agriculture and agro-processing value chains, as well as value addition, are key action plans.
There is need for an efficient agricultural marketing system to ensure a competitive agricultural sector, among other issues.
Maize production is strategic to food and national security, and Government interventions in the maize markets have been justified for attaining these social and economic objectives.
However, despite Government’s long-standing efforts to induce progress in the maize sector through market and price interventions such as input subsidies, price controls, trade restrictions and stock holding, maize production has been stagnating, with Zimbabwe slipping into being a net importer of the commodity.
Maize marketing history
Historically, a diversity of policy interventions has affected the maize sector in response to changing socio-economic circumstances. Discriminatory colonial era policies (Maize Marketing Board under Maize Control Act of 1931, Maize Control Amendment Act of 1940, Grain Marketing Board of 1950) were designed to favour market access and prices towards white farmers at the expense of black farmers and consumers.
In 1967, the government introduced the Agricultural Marketing Authority to administer the GMB and other marketing boards for cotton, meat and dairy. At Independence in 1980, control of grain marketing was continued through established institutions, but with efforts to engage and service smallholder black farmers and consumers.
The GMB buying price was determined by a committee that included the Trade and Commerce Ministry for the benefit of consumers, and representatives of smallholder farmer groups. Producer and retail selling prices were set uniformly for the marketing year.
To date, the system still uses consultative processes in setting producer prices, but a lot of questions have been raised as to the level of consultations, with inputs from other interest groups like farmers not adequately included in the final decision.
As part of the Economic Structural Adjustment Programme, grain market liberalisation came in the 1990s.
A two-tier marketing channel emerged by 1996, with GMB mandated to:
(a) set prices to operate as floor and ceiling prices (stabilisation); and
(b) procure produce at floor prices for Strategic Grain Reserve purposes, as well as being the sole importer and exporter.
n 1994, the Zimbabwe Agricultural Commodity Exchange was formed, becoming the hallmark for the liberalised maize marketing system, with private players and the GMB competing on the market.
Market liberalisation was blamed for the noted increase in the maize price and its products.
The price of maize meal rose by 21 percent in 1998, a situation that triggered food riots thus prompting Government to reintroduce price controls on maize meal that same year.
The period 2000-2009 was characterised by major structural changes in the agriculture economy. This included land reform, natural disasters, political tensions and economic decline. In an effort to ensure food security and price stabilisation under these difficult circumstances, Government applied a series of inconsistent market and price interventions.
In 2001, input subsidies and price control measures (Grain Marketing Notice Statutory Instrument 235A of 2001 and SI 387 of 2001) were reintroduced. Maize and wheat became controlled products and farmers were ordered to deliver maize to the GMB within 14 days of harvesting, marking the end of private grain trade and Zimace, and the dissolution of standard grading systems.
After 2002, due to drought and other difficult economic circumstances, Government allowed large millers to import maize to ensure food security. These import licences were issued under an MoU with the Agriculture Ministry, with special pricing conditions and quotas. Following subsequent economic difficulties and droughts, other private millers were allowed to import maize through an import permit system.
The challenges of hyperinflation in the economy culminated in the introduction of a multi-currency system in early 2009.
This policy regime saw an end to the GMB’s monopoly as a free market was allowed.
The import licence system was still operational, requiring that whoever wanted to import the commodity apply for a licence.
From 2012 to 2013, the Agriculture Ministry, through the GMB and AMA, set a non-competitive floor price of US$378/t that was higher than import parity prices.
In addition, AMA SI 147 of 2012 and SI 140 of 2013, requiring registration and payment of significant fees for buyers of grain products through a multiple stop and payment import permit system, adversely affected private sector participation in grain marketing.
On August 8, 2014, the parent ministry, through AMA, gazetted SI 122 of 2014 (Minimum Grain Producers Prices) Regulations 2014 in which the minimum procurement price for maize was US$390/t. Again, the price was non-competitive. To achieve the objective of the SI, the ministry isntituted measures to restrict or ban maize meal and maize grain imports from South Africa, Zambia and Malawi.In January 2015, the ban was lifted – temporarily.
These neighbouring countries had surplus grain which was availed for export to Zimbabwe at landed prices ranging from US$265 to US$310/t. The justification for the high minimum procurement price has been to mobilise grain stocks for the SGR and ensure farmers receive remunerative prices for their produce. This policy position was arrived at without considerations of the competitiveness of higher-value-added industry segments such as beef, dairy, and poultry, which depend on grain.
As a result, imports particularly of poultry (from Brazil) and dairy products could land in Zimbabwe at much lower prices, off-setting the demand for similar local products.
Thus the trend in grain marketing and pricing policy has been that in each agricultural marketing season, Zimbabwe’s grain industry has faced challenges on the appropriate grain prices and marketing arrangements for the crop. These policy changes have not been informed by detailed impact assessment as the country shifts from one policy position to the next.
Such inconsistent and ad hoc policy nature suggests a lack of strategic thrust to guide the sector’s marketing and pricing policy regime, resulting in an unstable and less conducive business-operating environment under which planning, and eventual medium to long-term private sector investment become constrained.
Policy and innovation
Zimbabwe needs to draw lessons from the past and adopt stable policy and institutional interventions to ensure the intended benefits of food security and economic growth through agriculture are realised.
It should embrace the concept of agriculture-led growth and development as a roadmap to developing its way forward, given its advantages of land and natural resources availability.
There is need to ensure efficiency in agricultural marketing by following best practices in market and price interventions, well-packaged with other complementary factors and appropriate to the smallholder-dominated sector.
As a way forward in terms of market interventions, Government should stem policy uncertainty by providing stable signals that stimulate production and investment in agriculture. Product price controls on maize products should not be the centre of policy intervention at the moment because:
(1) current low productivity implies limited impact of price incentives;
(2) of the lack of Government capacity to pay higher prices;
(3) high and non-competitive prices compromise industry viability; and
(4) high prices adversely affect both rural and urban consumption, contradicting food security objectives.
There is a generally observed conflict of interest in policies aimed at improving food security, but, at the same time, paired with producer price support to improve farmers’ incomes. Higher producer prices frequently lead to higher consumer prices, which reduces real incomes and is in conflict with the food security objective.
A higher price for maize – a raw material in the food processing industry – induces higher production costs and reduces competitiveness. The price hikes and import restrictions on maize have thus resulted in industry contraction and real wage declines that work collectively to suppress maize consumption by both farmer and urban workers. It is, therefore, recommended that maize price controls be suspended for now, pending successful implementation of productivity-inducing strategies as articulated above.
In the medium to long-term, in order to balance the need to protect smallholder farmers and, at the same time, promote industry viability, a two-tier marketing channel similar to the one that was in place during 1996 that provided the GMB latitude to set floor prices for its SGR only and liberalised trade for the rest of the grain market should be considered.
To improve maize production and competitiveness, the policy thrust at the moment should be directed towards addressing productivity challenges through appropriate supply side factors like human capital development, proper administration of input subsidies, improved access to private input markets and contract farming. Other factors are climate risk management, more emphasis on the gender dimension of maize production, farmer organisation into meaningful economic units, land administration and governance as well as enhancing the capacity of key institutions such as research and extension in delivering services to farmers.
Maize input subsidies have failed to deliver expected results despite continued and increasing support due to administrative failures such as late disbursements of inputs, inadequate input packages, poor targeting of farmers, and corruption in inputs distribution. This study recommends continued support for farmers through input subsidies in the short-term, with the support strategically planned on block subsidy targeting appropriate segments of farmers by location and farmer types to ensure the subsidy on maize is effective in boosting maize production and productivity for food security.
Government should commit funds to this effect and attract development partners concerned with food security to complement its funding this strategy.
In the medium to long-term, the subsidy level for all classes of farmers should be gradually reduced as farmers become independent and commercially viable.
Administration of input subsidies needs improvement to ensure timely disbursement, supply of adequate packages, and target farmers in natural regions I, II and III who have a comparative advantage in maize production. Furthermore, monitoring and evaluation systems should be strengthened and used to inform future targeting of subsidies to farmers who will deliver the best outcomes. Issues around adequate input packages will need serious consideration to guarantee effectiveness of the subsidy as inputs in production are complementary.
This applies to inputs like seed, fertilisers, chemicals, labour and machinery, which should always be combined in fixed proportion with land for optimal outputs.
Subsidy packaging should follow model approaches that have delivered good results such as maize contract farming under Northern Farming, which has a holistic approach to sustainable agricultural production.
Under the Northern Farming model, farmers would get:
(1) fertiliser, seed, chemicals, fuel, etc;
(2) loan finance for working capital at favourable interest rates;
(3) extension services; and
(4) market linkages.
Northern Farming develops best farming practices and works closely with organisations like as FAO, CIMMYT, SNV and GIZ to promote conservation agriculture and small-scale mechanisation.
Northern Farming’s unique contract-grower model focused on the commercialisation of small-scale farmers, and enhanced viability of larger farms is making a significant contribution to Zimbabwe’s agricultural production.
Other case studies are maize subsidy programmes for smallholder farmers in Zambia and Malawi that have delivered excellent results in the past.
GMOs
Whilst Zimbabwe’ s GMO-free policy is commendable, to some extent, the critical challenge is the context of the policy in line with emerging global GMO trends, the globalisation of world economies, and the country’s seemingly indifference to differentiate GMO and non-GMO finished products. The GMO inconsistency implies promoting GMO-friendly industries outside the country at the expense of local industries. Furthermore, the policy formulations on GMOS should incorporate scientific evidence as opposed to personal sentiment.
It is thus recommended that the country revisit its position on GMOs in light of increasing trade with the global economy so as to maximise its agro-technological absorption capacity, improve farm gate incomes and improve competitiveness of its agro-processing industries.
Besides productivity losses accruing to the current business environment in maize production, Zimbabwe is in serious challenges of high post-harvest losses, which are estimated to be in the range of 20-40 percent.
Comprehensive research work to verify these losses is, however, yet to be done.
The SGR policy should be maintained to ensure emergency supply in light of increasing shocks and disturbances from climate change. The current initiative of leasing excess infrastructure to private players should be promoted to reduce inefficiencies and pressure on public funds to maintain idle infrastructure. Also, there is need to diversify the commodity base of the SGR to include other basic and nutritious commodities like beans, groundnuts, small grains, cow peas, cassava and rice.
Dr Jackqeline Mutambara wrote this article for The Sunday Mail as an independent agricultural consultant for USAid’s Strategic Economic Research and Analysis—Zimbabwe. Collaborative insights and comments were obtained from Professor A Chakravarti, Dr D Ndlela and Mr R Chizema of SERA, as well as stakeholders in Zimbabwe’s maize sector.
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