ZIPAR Hails Government's Decision on Maize

The Minister of Agriculture's decisions to expand national strategic food reserves of maize and to suspend maize exports are both commendable and timely. The decision, which comes in the wake of the El Niño related drought in Eastern and Southern Africa and the resulting looming food shortages in the region, are critical for safeguarding Zambia’s food security and supporting its policy objectives on inflation.

The Minister of Agriculture, Mr. Given Lubinda, reportedly announced to Parliament that during the 2015/2016 maize marketing seasons, the Food Reserve Agency (FRA) will double its maize purchases from 500,000 metric tonnes in order to accumulate strategic reserves of one million metric tonnes. He further, announced the suspension for maize exportation until at least September 2016.

According to the ZIPAR Acting Executive Director, Mr. Caesar Cheelo, the Ministry of Agriculture and Central Statistical Office National Food Balance forecasts – based on the 2015/2016 Survey – indicate that on 1st May 2016, commodity traders, millers, brewers, the FRA, the Disaster Management and Mitigation Unit (DMMU) and commercial and small scale farmers were holding maize stocks estimated at 667,524 metric tonnes. The Survey estimated a total production of an additional 2.87 million metric tonnes in the 2015/2016 farming season, implying a total maize stock of over 3.5 million metric tonnes.

The Survey estimated national requirement of maize is about 2.9 million metric tonnes for 2016/2017. This implies that a surplus of 634,681 metric tonnes could potentially be dedicated to commercial maize exports. It further estimates that human consumption needs of maize in 2016/2017 will amount to 1.59 million metric tonnes and initially net strategic reserve stocks were estimated at 500,000 metric tonnes in accordance with the 2016 National Budget was announced last October, but which the Minister has now ramped up to one million metric tonnes. In short, Zambia is food secure for 2016/2017.

Mr. Cheelo, however, observed that with maize being a staple food in Zambia and many other countries in Eastern and Southern Africa, the looming regional food shortages mean regional maize price will start to soar very soon as regional demand for the commodity increases. This will create a strong incentive for the Zambian maize market to export the commodity. Without safeguards, national stocks would quickly run dry well before Zambia can satisfy the regional food demand as well as the country’s own. This would ready result in food shortage in Zambia too later in the year. Ultimately, food prices would escalate and Zambia would be looking for bailout on more than just electricity shortages. Already monthly food inflation has risen sharply and continuously from 7.8% in August 2015 to a peak of 26.5% last month (April 2016), underpinned by the confounded effects of imported food price pass-through effects (as the Kwacha depreciation sharply between September and December 2015) and intermitted mealie meal supply disruptions recently.

The Ministry of Agriculture has foreseen this and is putting safeguard measures. Such strategic calculations are precisely what decision makers, guided by their technocrats, should be doing during a regional economic downturn. This decision is also a commendable demonstration of how sectoral policy decisions such as those in agriculture can support macroeconomic policy objectives such as inflation containment and price stabilization.

Mr. Cheelo said:

"Granted the decision to increase the strategic reverse comes with the tradeoff of additional pressure on an already strained fiscal situation. But this is a worthwhile price to pay in the interest of national food security and price stability. We would only urge the Ministry of Agriculture to treat this market interference as a temporary measure, which should be monitored and lifted once the regional situation normalizes."

Notes to Editors

ZIPAR is a socio-economic think-tank whose mandate is to conduct research and policy analysis. ZIPAR was established by the Government Republic of Zambia (GRZ) with the support of the African Capacity Building Foundation (ACBF).

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