In recent days, Malawi Defence Force (MDF) troops have been deployed to the northern border to prevent the smuggling of maize into Tanzania and Zambia. While this action seems a natural response during a year of national food shortage, four factors should give us pause for thought.
Food supplies during the last few months have been much more plentiful than expected.
This is largely a consequence of substantial unofficial imports of both maize and maize flour from neighbouring countries (in particular Zambia and Mozambique). With a normal-to-good harvest expected in 2016/17, maize is no longer in short supply in most parts of Malawi.
Maize prices elsewhere in eastern and southern Africa, in particular Tanzania and Kenya, are now much higher than in Malawi.
By preventing maize exports, the government is both starving Malawian companies of much needed cash for the coming season, while at the same time depriving hungry consumers in neighbouring countries.
The 2016/17 harvesting season has already started in the Southern Region and will begin in most other parts of the country within the next month.
If traders are not permitted to export the surplus maize they purchased last season, they will buy less maize from farmers in the coming months.
This will further depress farm gate prices that are already on a downward trend, thereby discouraging maize production in 2018/19.
A vicious ‘cob web’ of under-production and high prices in one crop year, followed by over-production and low prices the next year could result.
Fourth, the prevention of ‘smuggling’ maize by smaller traders may be to allow larger, better connected companies and parastatal agencies to take advantage of favourable price differentials to export their own surplus and expensively acquired stocks. It is not clear that such preferential treatment will benefit either Malawian farmers or consumers.
Additionally, it should be noted that there is limited evidence that: (i) governments are able to stabilise grain prices effectively; or, (ii) private grain traders make huge profits from ‘hoarding’ during lean times.
Instead, international experience indicates that food price stabilisation is both a complicated and expensive proposition. Well-intentioned government attempts to stabilise food prices often do exactly the reverse.
In addition, a number of carefully researched studies show that, despite popular perceptions, most small and medium-scale grain traders in eastern and southern Africa operate in competitive markets and rarely make excessive profits.
Instead, most grain traders make relatively small profits and perform an important function in keeping prices in different markets and months in line with each other.
Of course, this does not mean the larger traders−particularly those with good connections to Government− may be able to profit from the better information and contacts that they possess, especially in remote locations.
Transparent regulation of the activities of such companies is important to establish a ‘level-playing field’ for all participants in the maize market.
So is it not now time for the government to reconsider its strong belief that the ‘smuggling’ of maize is bad, and to permit a mutually beneficial trade in grains with our regional neighbours?Follow and Subscribe Nyasa TV :