The Food Crisis in Southern Africa

The news last week that the estimate of the 2015 maize crop in South Africa has been reduced to 9,6 million tonnes came on top of a succession of estimates from other States that showed reductions up to half of previous estimates.

Only Zambia and Tanzania are likely to show a small surplus over domestic needs and the latter is likely to supply a shortage in Kenya, while the former has suspended exports to preserve stocks.

So out of all 14 States in the SADC, 12 countries will have to import grain and most of it will have to come from abroad. The average southern African citizen consumes just over 100 kilograms of maize meal per annum. It is the regional staple food and has to be supplemented with vegetables, oil and any other form of protein that is available. Aside from that maize is the principle ingredient in stock feeds for the animal products industry as well as an industrial raw material.

The total quantum of regional imports will exceed 6 million tonnes this year and new imports on this scale, requires careful management and considerable funding. For example it represents 150 cargo vessels, 5000 fully loaded trains and thousands of 30 tonne trucks. The current price of maize in the Midwest of the USA – the cheapest source of maize in this sort of volume is about $180 a tonne – slightly down this year because of lower sales to ethanol producers.

Once you have bought maize on the markets, you then have to rail it to the coast and load it into cargo vessels and carry it across the Atlantic to southern African Ports. These are universally congested and delays in discharging can be expected, then the maize has to be loaded onto railway wagons and moved inland.

As usual, Zimbabwe has the biggest problem in terms of scale. A week ago the Minister of Agriculture, Mr. Joseph Made, not known for statistical accuracy at the best of times, came out with an estimate of 700 000 tonnes from over 2 million hectares of plantings (350 kilograms a hectare). Estimates made from satellite data by the food security agencies suggest a crop as low as 300 000 tonnes. Whatever it is, it leaves us with a deficit in maize supplies until the 2016 crop starts coming in, in June/July next year, of about 1,5 million tonnes.

South African maize prices have soared and now run at about $250 a tonne and rising. A year ago the price was about $180 a tonne. This puts import parity in Zimbabwe at just over $300 a tonne. While the authorities dithered and wondered about what to do, the private sector in the form of very sharp local traders, cleaned out the Zambian stocks.

There is no transparency in these sales for many nefarious reasons, but I estimate they have taken about 500 000 tonnes of the stocks that were available there a month ago – the left over stocks from a large crop in 2014 when Zambia, Malawi and South Africa had combined surpluses of about 5 million tonnes. The average price of these transactions would have been about $200 a tonne ex depot in Zambia.

This week I wondered about in local markets and priced maize meal – I came to the conclusion that maize meal in various forms was in the market at about $700 a tonne, milled and packed for retail distribution. Grain prices in the informal sector were $5 to $7 a bucket – roughly 15 to 16 kilograms. Calculated back that is between $300 and $450 a tonne.

So whatever way you look at it someone is making a lot of money from this situation. When I was Chief Economist of the Agricultural Marketing Authority, we always worked on a rough average that the producer price for a farm product should be about half the retail price. So if milk was selling at $1.20 a litre in the stores, we worked on trying to get 60 cents back to the farmer at farm gate. If the same principle was applied to maize, we should be paying our farmers $320 to $330 a tonne at Farm gate, say $340 at the silo.

Last week the Millers Association announced they were prepared to pay farmers $150 a tonne collected. This is half what the market conditions demand. It is half current import parity from the rest of the world and well below the landed cost of Zambian maize. The announcement caused outrage but no sign of any action. Farmers who have grown maize are now stuck with their crops, unable to sell them on the local markets; if they do it will be at huge losses and will put the majority of commercial farmers out of business.

In the “bad old days” of Rhodesia, the Grain Marketing Board would have simply fixed a price in negotiations with growers and that would be paid out in cash on delivery at several hundred intake points across the country. The Board would have fixed the price to the millers and generally the Board covered its costs. Rhodesia seldom faced a food shortage and in many years was the second largest exporter of white maize, in the world. This is used in many industries in preference to yellow maize, the dominant product in the developed countries.

Today the GMB, like the rest of industry here, is a shadow of its former self, runs at a huge loss and is used as a political platform for populous activity, rather than the protector of farmer and consumer interests. Last year they announced a crazy price of nearly $400 per tonne in a market that was well below $250 a tonne (Zambian price was $220 a tonne).

They received significant inflows, could not pay for them and a large proportion was spoiled in storage while a lot was distributed, virtually free through a thing called “the Grain Loan scheme” which is just a way of giving rural populations free maize on a patronage basis.

A crude attempt to force the industry to trade at these exorbitant levels failed completely and eventually the whole exercise was abandoned this year leaving farmers at the mercy of the traders, who in any other country would be regarded as vultures, seeking to make a fast buck at the expense of the country and in a situation created by an incompetent Government.

If sanity was to prevail here, the market can clearly support a price for farmers of $340 a tonne without increasing market prices to consumers while returning to growers a reasonable return. How to achieve that is the issue.

If I were king, I would call in the maize industry to a meeting and suggest to them that they agree to a reasonable maize producer price, support and activate a local commodity exchange for transparency where the traders would pay a minimum price of $340 a tonne this year. If they refused I would suggest that we prosecute the industry for collusion under our competition rules and charge them a fine of, say 10 per cent of gross sales.

I would insist that they buy the entire crop this year, before using imports to cover their needs. Having secured a large volume of maize from Zambia at a low price, this can be fed into the system once the local crop is absorbed and the profits made used to support the market operation to take the maize crop out of the market.

Since this will not cover our total needs this year, we then have to try and persuade South Africa to import yellow maize into the coastal regions of the country and export white maize to us from the Free State and Transvaal.

While we do that we need to restore sanity to our land situation and get our agriculture back on its feet, it is crazy that we have such huge resources for agriculture here and cannot feed ourselves, let alone export.

Post published in: Africa News

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