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Friday, 19 April 2013

Failing Maize Prices Controls

JCTR summarises well how GRZ price control has failed to reduce the price of mealie-meal in April 2013 press release :

From August 2012, instability in the price of mealie-meal across the country was a cause for concern. To mitigate the instability, government intervened directly by engaging millers, to reduce the price of mealie-meal by an average of K 2, 000 (KR2). Notwithstanding government intervention, the price continued to be high across the country.

According to the evidence obtained by the JCTR through the basic needs basket surveys, the price of the commodity continued to not only be high but was increasing. Apart from Lusaka where the cost of mealie-meal only reduced marginally by K400 from K47, 400 to K47, 000 recorded in September 2012 and October 2012, respectively, other towns across Zambia showed varying increases in the commodity price.

The remaining towns recorded varying mealie-meal price increases from September 2012 to October 2012, respectively; K46,300 to K54, 500 in Kasama, K37, 300 to K41, 600 in Livingstone, K42, 200 to K46, 300 in Mansa,K49, 200 to K49, 700 in Ndola, K49, 000 to K49, 300 in Luanshya and K43, 400 to K43, 900 in Monze.

That the price of mealie-meal continued to be high implies government’s intervention was not effective in making the commodity affordable across the nation. Not long, government directed that the retail price of a 25Kg be K50, 000 (KR50). Yet again this intervention was not effective. Last week government intervened again to raise prices of Mealie-meal from their earlier ceiling price of K50, 000 to K55, 000 per 25 Kg bag. This was done on account of factoring in the transportation costs.

(Source : JCTR)
In short price controls are not the answer. What we need is to get agriculture policy back on track by dealing with the big issues : FRA reforms; improving commodity exchange; removing export and import restrictions; improving physical infrastructure; widening credit access to smallholder farmers; improving "market discovery" for small farmers; better investment in education and research.; targeted subsidies to support mechanised farming, coupled with the on-going policy of farming blocks; and, removing distortions in fertiliser / input market by giving the private sector a greater role. More discussion of these ideas here

Copyright © Zambian Economist 2013

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