Namibia shouldn’t restrict maize imports during a pandemic

Namibia shouldn’t restrict maize imports during a pandemic

Since the pandemic started several countries have adopted restrictive trade policy approaches such as export bans and export quotas. The justification for such policies was consumer-focused, as the countries needed to ensure domestic food security during this pandemic. Fortunately, when International Grains Council data showed ample global grain supplies in the 2019/20 and prospects for a larger crop in the 2020/21 production season; countries such as Russia, Cambodia and Vietnam, amongst others, reversed these protectionist policies. These countries had intended to restrict their wheat and rice trade.

Unfortunately, on the African continent, we continue to witness restrictive trade policy, although the policies are producer focused instead of consumer-focused as has been the case in other continents. Consider Namibia, where the country’s Agronomic Board recently announced that there will be a suspension of imports of maize and millet from 01 June 2020 until the domestic harvest has been absorbed by domestic millers. The Namibian authorities expect this ban to be in place at least until November 2020, which is a period they expect the domestic supplies to last. The rationale provided is that the policy will ensure that domestic farmers have a market for their produce, which will support them during this pandemic.

But I can’t stop to wonder if this policy is practical if one seriously considers Namibia’s maize market as an example. Maize is one of the major staple crops in the country, although largely dependent on imports. Over the past five seasons, Namibia’s maize production averaged 59 000 tonnes, according to data from the United States Department of Agriculture. This is a small fraction against their average annual maize consumption needs of 216 000 tonnes. The difference is usually imported, which is the volume the Namibian Agronomic Board wants to put a temporary stop on. The policy appears to be heavily producer focused at the expense of the consumers that could benefit from competitively priced imports.

With maize import needs of about 72% of Namibia’s annual maize consumption, placing a temporary ban on imports is not an informed policy option, especially during the pandemic where the objective of the governments should be to get the most affordable food to the citizens. Such affordable food, in the absence of trade barriers, could be a reality this year.

South Africa, which is a major maize supplier to Namibia is expecting its second-biggest maize harvest on record, about 15.2 million tonnes, according to data from the Crop Estimates Committee. This means as soon as the harvest process gains momentum around mid-June 2020, South Africa’s maize prices will likely fall to levels below R2 600 per tonne for both white and yellow maize, where they are currently hovering around. Such potential price declines would be beneficial to the Namibian consumers. The Agricultural Business Chamber of South Africa (Agbiz) currently estimates that South Africa could have about 2.7 million tonnes of maize for the export market, up by 90% y/y.

From a Namibian farmers’ perspective, the government is attempting to provide support through trade policy, but that will most likely yield very limited success. There is no certainty that the domestic maize harvest will be of acceptable quality to attract millers. Also, as best as one can tell from Namibia’s aforementioned maize production data, the country has not been self-sufficient in maize production for over the past two decades. Therefore, to boost local maize production and global competitiveness, the interventions would have to be through increased investment in higher-yielding seeds, irrigation, expansion of planting, and various more efficient farming techniques, rather than a temporary ban on imports, which the Namibian Agronomic Board is currently pursuing. These interventions are long-term and could be part of the post-COVID recovery strategy for Namibia’s agricultural sector. In the near-term, the focus should be to ensure that the citizens receive the most affordable and high-quality staple food possible. If this means imported, as is usually the case, that should be permitted.

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How long can the status quo in the global food system hold?

How long can the status quo in the global food system hold?

Essay by Wandile Sihlobo and Tinashe Kapuya[i]

As countries continue to implement “risk-adjusted” responses to COVID-19 and global leaders and analysts alike continue to assess the evolving implications of the pandemic on global markets. What makes COVID-19 unique is that it is a health shock that has fundamentally affected both the supply and demand side of the global economy.

In the food industry, government policy responses have mainly hinged on three major interventions since the pandemic started. These include (1) an initial intent to implement protectionist trade policies in major agricultural producing countries, followed by a pullback of direct trade restrictions (2) supply-side support for the agricultural industries in the form of historic budgetary support for small and large companies, and (3) demand-side support through a boost in household incomes through wage support.

First, in the early days of the pandemic, countries such as Russia, Kazakhstan, Cambodia and Vietnam, amongst others, introduced export quotas and bans on rice and wheat exports. These were attempts to ensure stable domestic staple food supplies amid the uncertainty about how long will the pandemic last. But these policies were soon abandoned after a month, as aforementioned countries signalled a return to the open market trading terms within the next two months.

One of the reasons that contributed to this change includes the exemption of agriculture and food supply chains from COVID-19 restrictions that had affected trading in other sectors of the economy. The International Grains Council has lifted its 2020/21 global grains harvest by 2% year-on-year to 2.2 billion tonnes. This is a welcome development for grain importing countries who feared food insecurity risk when the protectionist policies were announced. This includes South Africa and the African continent at large, which relies on rice and wheat imports from the global market.

Second, as initial worries about production abated, it became clear that the biggest challenge was not a lack of food in the market, but logistical disruptions. However, closures of meat processing plants in the US, Ireland, Canada and Brazil, amongst others due to the outbreaks of the virus in production facilities is now bringing renewed fears that the longer the pandemic continues, the more likely that parts of the food system will cease to function. The risks of meat shortages in the global market, as well as the negative ripple effects in other parts of the food system linked to the meat sector, implying that the food system remains extremely vulnerable. The emerging concerns of potential meat shortages – and spillovers into potentially other parts of the food system – are putting intense pressure on political leaders to respond more aggressively, as seen in the US, where President Trump ordered meat plants to re-open to avert an inevitable spin-off crisis.

This specific aggressive intervention is just part of a much broader set of unprecedented policy responses from global leaders, which have been underpinned by large unprecedented fiscal spending which surpasses those of the 2008 financial crises and the Great Depression. Richer countries have implemented financial relief programmes to support small and large businesses, including farmers – to cope with the deep negative impacts of the pandemic. In South Africa, the Department of Agriculture, Land Reform and Rural Development ring-fenced R1.2 billion for financially distressed small-scale farmers. This prioritizes the poultry sector, livestock and vegetables, amongst other agricultural commodities which will be selected on a case-by-case basis. The farmers within the Proactive Land Acquisition Strategy programme are also included in this package.

Third, governments tried to preserve incomes and livelihoods, and in turn, supported the demand side of the food sector. Rapid increases in already high levels of unemployment in most parts of the world translate to weak demand for food, particularly high-value products in the near-to-medium term. Income protection and support in countries such as the UK and the US is expected to mitigate the weakening demand, and somewhat keep demand at levels that ensure that the economy can bounce back quickly once the economies are fully opened up post-COVID-19.

Meanwhile, in the emerging markets, South Africa has been amongst countries that provided support through an increase in social grants, food parcels and food vouchers. While these are short term assistance measures, they somewhat help improve household demand for food products. These measures are short term and are being implemented with the hope that the pandemic will keep the economy closed for a maximum of three months.

But if the global economy does not bounce back sooner, under the pressure of a new wave of infection which leads to a much slower opening of the economy, then household income and purchasing patterns might be altered over the short to medium-term. In this case, the implications for the agricultural and food sector could be dire. We suspect that the demand for higher-value products will inevitably decline somewhat post-COVID-19, but the longevity of this decline could lead to a shift in the supply chains. Depending on the extent and duration of the impact, the shift could be permanent, due to irreparable damage to the supply chains – if critical businesses shut down permanently.

This is crucial for countries like South Africa whose agricultural sector is export-orientated, with rough 49% of the produce in value terms exported. South Africa’s high-value export products are mainly fruit, wine and beef. These are mainly destined to the EU and Asia market which accounted for nearly US$10 billion in 2019, according to data from Trade Map.

In a nutshell, the resilience of global agriculture will continue to be tested as the pandemic impacts both the supply-side and demand-side of the global economy. There is no telling how long the global food system – as currently configured – will continue to sustain the pressure from COVID-19. What is becoming increasingly clear is that, the longer the pandemic continues to impact on the supply and demand sides of the global food system, the more likely we are going to see structural shifts that will fundamentally reconfigure it as it adapts to the changing effects of the pandemic.

What is particularly worrying is the lack of support measures for businesses and households in developing countries. In resource-poor nations – especially those in the African continent, who are already under the weight of worsening debt levels – governments do not have the means to support private businesses and farming communities to the same degree as the US, the United Kingdom, China, and others. This means that the developing world is a part of the global food system and economy that remains extremely vulnerable to the pandemic.

There have been relatively lower numbers of COVID-19 cases in sub-Saharan Africa so far, perhaps due to a lack of testing capacity. But if what is happening in the global north is a harbinger of what is to occur in sub-Saharan Africa over the next couple months, then the largely informal food systems in the continent will likely come under extreme pressure, a scenario which will evoke a food insecurity catastrophe.

[i] Wandile Sihlobo is chief economist at the Agricultural Business Chamber of South Africa (Agbiz). Tinashe Kapuya (PhD) heads supply chain research at the Bureau for Food and Agricultural Policy (BFAP).

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New data out of Stats SA on Business impact survey of the COVID-19 pandemic in South Africa

The actual impact of the COVID-19 pandemic on South African businesses remains unknown until critical variables to measure it can be identified, including the duration of the pandemic and its intensity in terms of infection rates. So far, the pandemic has highlighted the need to obtain accurate information as close as possible to real time.

Hence, the good folks at Statistics South Africa have set out to determine the impact on businesses and the economy at large by conducting an experimental study. They have just released their first report and you can download it here.

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