19 December 2012

Zambia: Mealie Meal Price Hike Baffling

On September 12, 2012, I looked at one issue which, sadly, seems newsworthy even today and this is the increment of prices of mealie meal amid plenty of maize from subsidised production.

Like I said then, the increment of mealie meal prices by what level now after Zambia has just posted a maize bumper harvest defies any rationality.

From basic economics, we are told the higher the supply of a product on the market, the lower the prices, of course all things being equal, that is.

Zambia's yearly maize consumption is about one million tonnes and in the year when Zambia has recorded total production of about 2.9 million tonnes, the surplus is so huge that shortage of the commodity is absurd.

Why then should the Zambian consumers witness the increase in the prices of the country's staple food now?

Every year, the dawn of the maize harvest season marks the beginning of good things, starting with low prices of commodities, availability of the goods and generally the value of the Kwacha peaks as a result of the low demand for foreign exchange.

There is low demand for foreign exchange in that the importation of food products is reduced as opposed to the time of food shortage when huge imports have to be made to meet the food requirement.

The prices of mealie meal have been the driver of almost the entire local economy, hence its export is somewhat regulated by the Government through the issuance of export permits.

Then we saw the emergency of economic pundits of all shades and sizes propounding the issue of increased prices of mealie meal but the more they did so, the harder it became to understand the price increases.

Some said the situation was caused by the effects of the global economic trends, adding that Zambia is not an island and, therefore, it is not insulated from the external economic shocks from the international community.

The crop whose sale is controlled and inputs highly subsidised by the Government is not so susceptible to the effects of the international trends.

Therefore, the Civil Society for Poverty Reduction rubbished the assertion saying it was unfair for the Government to continue subsidising maize to millers when the cost of mealie meal remained high.

The Zambia Consumer Association joined in the condemnation.

I noted that the scenario was not new because a few years ago, amid plenty of maize, the prices of mealie meal went skyrocketting, much to the regret of Government which has been subsidising the maize  production.

Then the Government responded by directing the Food Reserve Agency (FRA) to offload huge amounts of maize to the millers.

This, unfortunately, did not yield much because in the end the benefits of the cheaper maize released by the FRA did not reach the consumers and the prices remained high.

I feared the situation looked like it would repeat itself and I suppose it has.

This is at the expense of Government's efforts to maintain prices of mealie meal by subsidising production through the Farmer Input Support Programme (FISP).

On August 29, I looked at the FRA saying it was established in 1996 under the Food Reserve Act 1995 as the buyer of the last resort for maize and other strategic crops.

Following the amendment of the Act in 2005, the FRA was bestowed with further responsibility - that is of marketing and market facilitation for maize and other strategic crops.

With the Government's FISP towards small-scale farmers, the bulk of the Zambian maize productions have been achieved by farmers in this category.

Every year during the marketing season, however, the small-scale farmers are seemingly at the mercy of the FRA on who they rely for the market.

I agreed with the current Parliamentary Committee on Agriculture which recommended in its report this year that there is need for a comprehensive legal framework to be called the Agriculture Marketing Act which should create a body to be called the Agriculture Marketing Council (AMC).

Then on September 5, I noted that Zesco had applied to the Energy Regulation Board (ERB) for the increment of electricity tariffs with effect from November 1, 2012.

The previous Friday, I had joined other media practitioners who were invited to Zesco managing director, Cyprian Chitundu's presentation on the status of power supply where the issue of the proposed tariffs came up.

It suffices to state that the ERB's consideration of the proposal is still on cards.

Four days before September 23, 2012, on which the ruling Patriotic Front clocked one year in power, I looked at some of its economic successes.

In 12 months, a lot had gone on and economic successes had been scored on various fronts.

I, however, noted the need for more articulation of the Government's economic policies.

By September 26, the tone had been set for the 2013 Budget, which was the first fully Patriotic Front-formulated one.

This was after President Michael Sata gave the indication of what the Budget would be like in his speech during the official opening of the Second Session of the 11th National Assembly of Zambia.

I noted that the single-most challenging factor for the Government would remain the need to translate the economic successes scored into reduced poverty levels among all.

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