by Wandile Sihlobo | Oct 3, 2019 | Africa Focus
Government interventions in agricultural markets seldom lead to the desired outcome. I expressed this view when the Zimbabwean government banned sales of maize by farmers to anyone other than the government’s Grain Marketing Board at a prescribed price in June 2019. This move led to farmers withholding their produce, instead of delivering it to the Grain Marketing Board. The result was ultimately a scarcity of maize in the market, which inevitably did not address the government’s concerns of consumer well-being (affordable food by setting lower maize prices). This week, this realisation kicked home. And thus, the Zimbabwean government lifted the ban on private grain sales and granted the nod to individuals and corporates to import quantities of their choice.
Domestic view
Here in South Africa, there are sufficient maize supplies for the current marketing year which ends in April 2020. Hence, the focus has somewhat shifted to 2019/20 planting season which starts later this month. In this process, the weather will be a central focus until February 2020 when the new season crop, which is about to be planted, has pollinated. As best as we can tell, the season ahead promises above-normal rainfall in the central and eastern parts of South Africa, which is supportive of maize and other summer crops. I have no concrete view about the weather forecast for the western regions of the country for the upcoming season. But it’s quite rare to see above-normal rainfall in the eastern regions and dryness in the west. Hence, I suspect that western areas could also receive good moisture, which would bode well for the 2019/20 production season.
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by Wandile Sihlobo | Aug 12, 2019 | Africa Focus
Droughts or floods always have a devastating impact on agriculture. But the second-round effects on livelihoods are manageable in countries that are economically stable, depending of course on the magnitude of the impact. However, for countries, with economic instability and low capability of mitigation, there is usually a disaster months after the extreme weather events.
The latter is precisely what we are witnessing in Zimbabwe at the moment. For context; Zimbabwe’s maize prospects — their staple crop — are not in good shape because of a drought which delayed plantings at the start of the 2018/19 production season. And when it finally rained, it became rather excessive, as was witnessed during Cyclone Idai at the start of the year.
The maize harvest is currently estimated at 800 000 tonnes, down by 53% from the previous year, according to data from the U.S. Department of Agriculture. The hardships emanating from this poor harvest, exacerbated by unstable economic conditions are being felt across the country.
The World Food Programme now estimates that more than one-third of Zimbabwe’s rural population (or some 3.6 million people) will be food insecure by October 2019. And by January 2020, the figure is set to increase sharply to 5.5 million.
Had Zimbabwe been an economically stable country (with efficient markets, policy and infrastructure), the effects of lower agricultural output would have been buffered by imports, and government assistance to a certain extent.
But this is not the case in Zimbabwe. The economy, political environment and state resources remain fragile. The maize markets cannot function efficiently, as the State’s hand is deep in the maize bag. Just last month, the Zimbabwean government designated the State-owned Grain Marketing Board as a sole buyer of maize from local farmers. Those who attempt to sell their produce outside this arrangement could face a penalty.
Now, while the government might have introduced this measure as a way of ensuring consumers’ well-being after food price inflation galloped to 126.43% y/y in May 2019 (I have discussed this here). It is unlikely to work.
Farmers are withholding their produce, instead of delivering it to the Grain Marketing Board. This leads to the scarcity of maize in the market, and will inevitably not address the government’s concerns of consumer well-being (affordable food).
Regardless of where Zimbabwe’s domestic maize policy ends, the country still needs to import about a million tonnes of maize in order to fulfil its annual needs. It is not clear if this import activity has started yet, as the local authorities have not published any data.
Also, observing from South Africa’s export data, which would be one of the key countries Zimbabwe could source supplies from, Zimbabwe has, thus far, not imported any maize from South Africa within the 2019/20 marketing year which started in May 2019.
Now that the Grain Marketing Board has been designated as a sole buyer of maize from local farmers. It is unclear if this policy will influence private businesses’ maize import activity.
One organisation that might sure make maize purchases on behalf of Zimbabweans in the near term is the World Food Programme. The organisation has recently indicated that it will boost its humanitarian aid to Zimbabwe through to April 2020.
South Africa, Zambia and Mexico could be the potential suppliers of white maize to Zimbabwe. Aside from white maize, there are a number of countries that can potentially supply yellow maize to Zimbabwe, with the most likely ones being Brazil, Argentina, Ukraine and the United States.
These are all initiatives that are yet to materialise. As things stand, there is looming food insecurity in Zimbabwe.
Written for the Daily Maverick.
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by Wandile Sihlobo | Jul 3, 2019 | Africa Focus
In economics, natural experiments are hard to come by, but once in a while, you hit a jackpot without even paying a lottery ticket. For agricultural policymakers in South Africa and the continent at large, the recent developments in Zimbabwe are one such experiment.
On Friday 28 June 2019, we learned that the Zimbabwean government has banned sales of maize by farmers to anyone other than the government’s Grain Marketing Board. This will be at a prescribed price, which we do not know at this point. This move follows a poor harvest after another season of unfavourable weather conditions, which has left Zimbabwe as a net-importer of maize. As I have consistently pointed out in our previous notes, Zimbabwe will need to import about a million tonnes of maize in order to fulfil its annual needs.
On the one hand, the latest move by the government to intervene in the maize market shows a concern for the consumers’ well-being as food price inflation quickens, having reached a rate of 126.43% y/y in May 2019.
On the other hand, these actions could disadvantage the farmers who had hoped that higher maize prices could compensate for yield losses. This will specifically be the case if the Zimbabwean government sets its “maize floor price” below the global maize prices. Historically, there have been instances where the Zimbabwean government set a floor price at levels higher than the global prices. This would have been an advantage for farmers, but delayed payments offset the benefits.
The other point to keep in mind is that the Zimbabwean government, through its Grain Marketing Board has recently issued a tender to buy 750,000 tonnes of maize in order to fulfil its domestic needs. This will be the largest import volume since 2016 when the country imported 1.4-million tonnes of maize. Under this scenario, the Zimbabwean government will have to pay the world price. Hence, I wonder if there will be price discrimination between local farmers and global maize supplies. I doubt this will be the case; my suspicion is that the government is trying to manage its currency liquidity and food price inflation. Having not applied this method, the informal market would price maize at levels above the global traded prices
Possible implications
In the short term, the government’s action to control the maize market could ease price pressures for consumers. In the long run, however, this could disadvantage maize production in Zimbabwe, as farmers would be reluctant to expand production in an environment where government policy is uncertain. Moreover, Zimbabwe will likely remain a net importer of maize, as investments are unlikely to flow in the sector. This would have other implications, such as the agricultural labour market where two-thirds of Zimbabweans are employed. All of this would potentially undermine the short-term food price inflation gains that would have accrued to the consumer due to government control.
Over the coming months, I will be closely observing this experiment to pick up lessons for policymakers in the agricultural sector. What I have observed in the recent past in other African countries was the blockage of maize exports at certain times of the year, supposedly to control domestic food price inflation, but farmers ended up worse off, and that affected expansion in the sector
*Written for and first published on Daily Maverick on 01 July 2019.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
