Maize Marketing and Strategy in Zambia Legal and Economic Implications

Maize marketing and strategy in Zambia – legal and economic implications

Gregory Cornhill

Coillard Hamusimbi

STATEMENT OF PROBLEM

The Government of Zambia has spent colossal sums of money to enhance production of maize. While production has increased exponentially, there is no correlative wealth creation. Producers remain very poor and there seems to be no end to the financial hemorrhage. The paper identifies the pitfalls in the strategy and posits for economic and legal solutions to ensure profitability in maize production.

1. ORIGINS

2. The crop was first domesticated in Mexico 10,000 years ago. It was introduced to Africa in the 16th century vide the golden triangle trade between Europe, the Americas and Africa.

3. DEVELOPMENT IN PRODUCTION

(a) Due to its high yield in flour and the fact that it could be introduced to hammer mills without de-hulling gave maize preference over the existing cereals sorghum and millet.

(b) The growth of settlements and subsequently townships promoted by mining activities increased rural urban drift resulting in higher demands for food in centralized locations.

(c) The introduction of mechanized milling plants first in Kenya in the 1920s, then Southern Rhodesia in the 1930s and later Zambia in the 40s, created a value add to the crop.

(d) The growing demand incentivized the colonial regime in Kenya to embark on seed research, Southern Rhodesia followed suit, but Zambia remained dependant on South Rhodesia for seed propagation and research.

4. MARKETING

Colonial maize marketing was designed to promote settler farmers. The following mechanisms were employed:

(a) the distinct demarcation of land for the settlers known as crownlands, reserved the most fertile and accessible land to the settlers, leaving the locals confined to native reserves far from the markets;

(b) early legislation maize marketing promulgations prohibited the natives to access the millers and the townships, restricting them to consumption; and

5. POST INDEPENDENCE

Policy

a. Post independence government assumed the role of ensuring self sufficiency in food, notwithstanding cost or logistical challenges.

b. The post independence government also made a social contract to reverse the manifest colonial discrimination against local producers.

6. PRODUCTION

(a) Post independence Zambia invested heavily in inputs and credit to farmers. In 1992, the subsidy component of the landed cost of fertilizer was 62%.

(b) The Government invested heavily in roads and storage facilities in collaboration with CIDA.

(c) The Government also invested in seed production resulting in the formation of Zamseed and Seed Certification Institute with financial assistance from SIDA.

(d) Government participated directly in maize production through state owned farms and the security forces.

(e) Lending institutes specifically for farmers were introduced e.g. Agriculture Finance Company, Lima Bank which were not run as commercial entities, and subsequently floundered.

7. MARKETING

(a) Post independence maize marketing was a carryover from the Colonial Maize Marketing Board, through Namboard.

(b) Namboard was wholly state financed to purchase agricultural products.

(c) Government policy attempted to provide the farmer with a high return for his investment, Namboard in Zambia and Grain Marketing Board in Zimbabwe purchased maize locally at prices higher than international market prices.

(d) Namboard was also compelled to buy all the maize on the market notwithstanding logistical challenges and storage limitations. Accounting for logistical costs and crop losses, Namboard occasioned colossal revenue losses on government. In 1974 the estimated losses were 17% of national budget.

(e) In pursuance of its policy to ensure food self sufficiency, government again compelled Namboard to sell the crop at a price lower than cost

8. ATTEMPTS AT REFORM

· Deliberate efforts to reform and liberalize the maize production and marketing policy were made in 1992/93.

· The reforms were necessitated by:

i. fiscal constraints due to sub optimal but excessive investments in the first 25 years after independence;

ii. declining product yields due to weather patterns; and

iii. donor fatigue in supporting the unsustainable production and marketing policy.

(a) Early reforms included:

i. liquidation of Namboard;

ii. allowing the private sector to participate in input procurement and marketing of products; and

iii. reduced state participation through F.R.A which focused solely on procuring food reserve.

9. CURRENT SCENARIO

A. Production

· The procurement of inputs is more liberalized and allows private participation making it possible to deliver inputs to the farmer.

· Government subsidizes inputs and in some cases provides fertilizers for free.

· Massive investment in road infrastructure has reduced logistical challenges in delivery.

· Failure to conduct soil analysis has standardized inputs to urea and D compound notwithstanding spatial diversity affecting soil fertility and yield per hectare.

· Land limitations and sheer lack of capacity has drastically reduced average maize fields from the optimal average of 25 acres to between 2-5 acres, further reducing yield and profitability.

· Commercial farmers have reduced participation from 400,000 metric tons in 2010 to 163,000 metric tons in 2016, due to policy inconsistencies and price manipulation further reducing requisite scale production.

· Extension services are virtually non existent due to urban drift.

· The crop contributes very little in terms of public revenue for employment creation and attendant infrastructure.

B. Marketing

· F.R.A is slowly replicating the role of Namboard in attempting to purchase entire crops notwithstanding logistical challenges.

· It faces financial challenges annually to pay farmers for crop, making the poor farmers poorer.

· It’s growing hierarchy represents a non nutritional cost.

· The combined effects of excessive purchasing and growing hierarchy create financial hemorrhage on the treasury.

· Procurement beyond storage capacity causes wastage of purchased crop to microbial and weather agents for nil consideration.

· With F.R.A crowding out private enterprise, the crop has not yielded employment opportunities or support industries storage and transportation.

· Due to lack of harvest forecasting and crop assessment, G.R.Z frequently bans export of product and by products creating a glut, which reduces prices or portends to waste of product.

· The banning of exports has discouraged participation of private commodity dealers.

· There has been very little proliferation of value added products like breakfast cereal, corn flour, corn chips.

WAY FORWARD

· Due to the fact that maize is a low value crop, farmers without the requisite scale have to be introduced to higher value products, small livestock like sheep and goats or local poultry are easier and most cost efficient substitutes thereby reducing FISP expenditure and increasing farmers incomes.

· The Agricultural Fertilizers Act Cap 226 requires further development to cover soil analysis and recommendation of suitable fertilizers for each farming area instead of the current standardization to urea and D compound.

· The application of the Agricultural Credits Act No. 35 of 2010 which provides for charges on agricultural stocks to securitize lending and provides for notice of the charges and has very elaborate legislation on warehouse management, can increase capacity and enhance security of the crop.

· The implementation of the Agricultural Statistics Act Cap 229 on collection of Agro data will enable G.R.Z to make decisions on production and marketing based on verifiable and independent duties instead of panic or political convenience, creating stability and predictability in the industry.

· The Control of Goods Act as amended by Act No. 12 of 2004 provides for a transparent procedure before an adjustment plan can be ordered by the President, its implementation will reduce the annual bans of export of maize and by products.

· The Public Finance Act Number 13 of 2004 has very stringent budgetary provisions designed to avert budget overruns and financial hemorrhage. Section 47 prohibits misuse of public funds. It implementation would avoid the financial crisis wrought by the maize policies of the seventies and eighties.

· Lastly, the Bill of Rights in the constitution provides for protection of property, which right is routinely contravened in respect to maize producers and traders by unwarranted restriction of marketing channels and imposition of pricing. Its enforcement or observance will incentivize farmers or entrepreneurs to participate in the market and yield value.