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August 30, 2008

Malawi ban of private maize trading receives mixed reaction

Ordinary Malawians, cheered by the prospect of cheaper food, have welcomed government's ban on the private trading of maize, but food security experts and businesses have expressed concern.

The government recently announced the ban in an attempt to clamp down on hoarding and appointed the state grain marketer, the Agriculture Development and Marketing Corporation (ADMARC), as the sole buyer and seller of maize in the country.

Andrew Daudi, principal secretary in the ministry of agriculture and food security, said the step had been taken to ensure food security. Despite government assurances of a surplus, Malawi's traders expect maize prices to rise later in the year and have been holding on to stocks, artificially pushing up the price at the tills.

The government and food aid agencies projected a food surplus, although the USAID-funded Famine Early Warning Network (FEWS-NET) said it would be lower than initially estimated. The government has yet to release its final figures on the main maize harvest, collected between March and July.

The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) and the Grain Traders and Processors Association (GTPA) both described the ban as "unrealistic," and a disincentive to farmers and traders that would have little impact on hoarding.

Government has fixed the price at which ADMARC will buy and sell maize: the state marketer will pay farmers and traders K45 ($0.31) per kilogramme (kg), or K2,500 ($17.86) per 50kg bag, and sell it at K52 ($0.37) per kg, or K2,600 ($18.57) per bag.

Grace Mhango, president of GTPA, said it was unfair to restrict traders to selling maize to ADMARC at a cheaper price, and hinted that the traders were unlikely to sell to ADMARC.

"They [the traders] started the speculation that there is no maize, when we were told by government that there is enough to feed us till the next harvest. All they wanted was to sell at high prices. They will be compelled to continue hoarding the maize," Mhango said. "How do you expect them to sell at a cheaper price than they bought it?"

A trader in Blantyre, the commercial capital, said he would not release his maize. "Those who need the maize will continue coming to us, and we will go by our terms ... I bought the maize at a high price and cannot accept anything less than the price I want."

Chancellor Kaferapanjira, chief executive of MCCCI, said the fixed price would discourage farmers from producing more maize. Some private traders have been paying farmers and other suppliers K3,000 ($21) per 50kg bag and reselling it to the public at K3,500 ($24.55), and even K4,000 ($28).

"This directive counters food productivity," Kaferapanjira argued. "It is obvious that smallholder farmers will not grow enough maize because they will not make any profits. I believe that farmers who have maize should continue selling to a trader who is offering more money."

Christopher Barrett, who teaches development economics at Cornell University in the US, described the ban as "a throwback to an era of failed state control over food markets", and pointed out that ADMARC was "an organ of the state and thus politically motivated, which adds another level of concern".

"Modern states typically work to reduce monopoly and monopsony power [when a buyer controls a large proportion of the market and drives prices down], to level the playing field for farmers, consumers and traders. This is a move in the opposite direction, reconcentrating market power in the hands of one organisation," he said.

Kaferapanjira said the government should rather opt for reducing the cost of food production by slashing the price of fertiliser. Only vulnerable small-scale farmers have access to subsidised fertiliser, which is available at $0.11 per kg, while others have to buy it from the market at over a $1 per kg.

Barrett suggested the government "would do better to focus on providing the physical and institutional infrastructure necessary for private small traders to blossom, grow, and compete with one another to offer the best prices, quality and service to farmers and consumers alike."

Traders have until 30 September to sell all the grain they have in their stock.

On the other hand, ordinary Malawians have supported government's decision to impose the ban. Mphatso Manda, who lives with her three children in the populous Ndirande township in Blantyre, said the ban would force traders to sell the maize they had been hoarding.

"Since January we have been buying maize at prices that were not justified at all," she said. "With ADMARC as the only buying and selling point we are assured of enough maize at an affordable price."

Christina Gondwe, another Ndirande resident, urged the government to punish private traders who continued to hoard maize. "They [the traders] sold us our own maize at exorbitant prices for no good reasons," she said.

"They started the speculation that there is no maize, when we were told by government that there is enough to feed us till the next harvest. All they wanted was to sell at high prices."

Malawi enjoyed a bumper harvest for two consecutive growing seasons largely because of a successful fertiliser subsidy programme and good rains; this year over 1.5 million households are expected to benefit from the subsidy programme.

IRIN

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