Impact of High Corn Meal and Corn Prices in Zambia

By Professor Mwiine Lubemba

My suggestion to Mr. Ellias Chipimo’s Parallel Universe: Mealie-meal crisis in Zambia is that he should have tried to answer the following current frequently asked questions about the corn situation in two or three sentences so as to state his position clearly.

What is happening with food prices in Zambia?
Why is this happening?
What are the implications?
Is there relief in sight? Or should there be any relief at all?
What can and should be done?
Likely implications of price controls and export ban
What can the PF Government do to help?
How should the PF Government provide additional financial assistance if any?

In addition he should have left us with a clear Conclusion

In its present form Mr. Chipimo’s stated suggestions are ambiguously confusing and leave Mr. Chellah with ample room to counter his suggestions. In essence he clearly acknowledges the high world corn prices due to drought in the major corn producing countries BUT does not propose how the government should mitigate the high subsidy going to corn production and consumption so that the market and the whole economy is not distorted as a result. The corn subsidy can indeed create other sectors of the economy to distort and even lead to a market downgrade in the nation’s political-economic outlook and credit rating.

Mr. Chipimo suggests the PF government should try to encourage migration from corn to millet but does not say if millet is cheaper than corn even if it needs little or no chemicals and fertilizers. If millet is not much cheaper than corn and if it’s more complicated and consumes more energy to prepare than corn, the migration becomes academic. We can therefore say that any grain that is to replace corn MUST be cheaper and more or equally convenient to prepare. In addition can millet Nshima be eaten with mabisi or sour milk? How long can it keep in the open etc?  And if I were Mr. Chipimo, I would leave out any mention of unscientifically proven attributes of corn Nshima linkages to diabetes or any other serious medical side effects. That’s being alarmists. In any case if any of his accretions were scientifically proven, corn meal would have long been banned by the FAO or WHO. Americans, Portuguese, Spanish and Italians eat lots of it and Mexicans rioted when the price of their staple tortillas made from 100% corn increased only two years ago.

Mr. Chipimo gives a good account of local and export distortions in corn marketing but does not address in full the economic reasons and impact such as FRA export prices at $170mt or K44.2 per 50kg bag being lower than local corn purchase price by FRA at K65. In addition, even at a subsidized K60 per 50kg to the millers, corn prices are still more expensive in Zambia than in drought stricken countries at average $7.11 per 50 kg bag or K37 per bag. The question therefore would become; would it be cheaper to import our corn to replace exported or smuggled local production?

Therefore we see that bulk Corn can still be imported from places such as Brazil much cheaper to these neighboring countries than purchasing from Zambia. But if we look at it another way we see a miller who smuggles subsidized corn he now buys at K60 per bag can makes as much as K23 per 50 kg bag compared to export prices in corn producing countries. In addition when the miller mills the corn he losses 10% plus say additional local transportation, energy, wages costs at say another 15% basically encoring a 35% cost/loss on his 50kg bag which means he sells the processed 50 kg bag for K65. If we now deduct the K60 he bought the corn, he is now reduced to making only K5 on the bag or K2.5 on a 25 kg bag of breakfast meal.  Here we see that the temptation to smuggle small quantities of the whole unprocessed corn bags he bought at K60 and make K23 is not unpredictable. Having said this, the smuggled corn quantities on bicycles and boats are not large to cause the current market distortions.

My prediction for the next corn marketing season is we shall see a larger participation of private players in the corn buying sector who will want to cash into this regulative export sector due to this season’s fiasco. Regulating or banning exports, in other words, will encourage more smuggling. Price controls will make it worse even in the event of making it a treasonable national security offence that will attract a death penalty.

But smuggling is not likely to happen if business men have confidence in the economic politics and if they can be assured that foreign exchange restrictions will not be introduced. The S.I 33 sent some shivers in many foreign business men who released their kwacha holdings and bought corn for export as a means of hedging to freely externalize their kwacha. Initially most corn was exported legally by FRA to Zimbabwe but it ended up in China.

We cannot pretend anyone in the country has a fireproof solution to cheap food with no shortages. Only Jesus was able to fee 5000 men the other book says 4000 men with two fish and five loaves of bread free of charge. I doubt President Sata, with all his good intentions, has the slightest of such abilities to perform such a miracle. Even in time of plenty corn harvests in the past MMD governments, food and price distortions in the market existed.  We all remember President Chiluba resorted to importing mealie meal and the famous Chani Fisheries K15, 000 per bag mealie meal. President Sata was Party Secretary General and he is aware of the intricacies that were done to increase food availability competition in the market and create an oversupply. But even then private millers continued to sell at exorbitant prices and people, even the so called poor, bought the expensive mealie meal in preference to the alternative cheaper mealie meal that was abundantly available. In a free market it is always better to let market forces play out to the acceptable levels of supply and demand.

My proposal to the PF and President Sata in particular is to introduce an alternative cheaper mealie meal brand on the market through the FRA or Disaster Management Department and leave it to the people to choose what they want to buy and eat. To force the millers to reduce the prices may stifle their businesses and cause more problems in the employment sector. To do this the government can use the millers to contract mill their mealie meal product packs. The PF don’t need to erect new milling companies and create milling production over capacity. Tenders can be floated to anyone with a milling company or hammer mill if the case be for rural areas. The government mealie meal can be coded or labeled as such “Product of the Republic of Zambia” Not for sale above K25, 000 per 25 kg bag or whatever price will be determined. In addition the PF should then do the same for stock feed especially to pig and fowl farmers to mitigate the protein provision sector. The proceeds can then be rolled over and used in the next maize purchases from FRA.

Sincerely,

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