Economy

Amid Food Crisis, Foreign Donors Criticize Zambia’s Maize Subsidy

In recent weeks Zambia has experienced growing levels of social unrest due to rising prices of cornmeal, the basic food staple, while at the same time foreign donors are demanding that the government cut back on its subsidies to maize farmers.

According to a new report released by a British Parliamentary committee, the Zambian government was spending $358 million annually trading maize at a loss in 2011, which represents 8% of the state budget.  This figure vastly outweighs the annual foreign aid from the United Kingdom to Zambia, which sits at approximately $87 million.

Record maize harvests in 2010 meant the government was forced to spend $280m on 840,000 metric tons of maize, making a $140m loss. The problem was repeated in 2011.

The report by the Commons International Development Select Committee described the maize subsidy which was introduced by the previous MMD government as “excessive,” pointing out that its removal could pay for secondary education for 300,000 children.

Chairman of the Committee Malcolm Bruce MP stated “The Zambian economy has grown significantly over the last ten years, but the country is still one of the poorest in the world and will not meet many of the Millennium Development Goals without a renewed focus on maternal mortality, secondary education and rural poverty.”

As stated within the conclusions section of the DFID report, “We believe that the Government of Zambia wants to do something about it, but faces serious political constraints.”

While the UK report suggests making some painful reforms, the advice comes at a precisely inopportune moment, as some areas of Zambia are experiencing a maize shortage.  Stocks of Mealie-Meal, the popular cornmeal product, are reported to have reached dangerously low levels at the Food Reserve Agency (FRA), leading some critics to call upon the government to impose an export ban.  Given the artificially lower prices created by the subsidy, many traders have made a business out of exporting artificially cheap maize to neighboring countries, while inflationary pressure drives up the prices at home.

The FRA has also apparently encountered difficulties in purchasing product from millers on the open market, as foreign buyers have offered better prices in bulk.  The disorganization of the purchasing process has come under criticism by the opposition.

“The biggest problem this country has is that this PF government is running the affairs like Ifintu nibwangu bwangu,” said Hakainde Hichilema of the United Party for National Development.  “There is no proper buying of maize. If millers now can afford to buy from the open market at K65 000 a bag, why not FRA provide the same maize at the same price too? The fact is that the country has run out of maize and this government is keeping quite and not explaining to the people what is happening about the increase in prices,” he said.

The executive director of international charity Caritas, Sam Mulafulafu, has made several appeals to the government, asking them to explain the shortages:  “They (government) should explain the shortage, it is clear that for the past seasons we have had bumper harvest. To date we are receiving information that there is uncollected maize which is rotting. So it will be in the best interest of the nation for the Minister of Agriculture to explain why we have these shortages at the Food Reserve Agency (FRA).”

Giving oral testimony as a witness before the House of Commons, Mike Hammond, who is head of office for DFID Zambia, said that the Patriotic Front government of Michael Sata is aware that the subsidy needs to be scaled back, but is afraid of losing the rural vote:

“I think what we found with the PF Government is it is in their manifesto that they will do something about it; they recognise it. The cost to the budget, as the Minister has said, is actually around 8% of the budget. It is larger than the DFID programmes; it is 1.7 trillion kwacha a year,” Hammond said. “We have been lobbying very hard, with others, and we have been trying to provide a political alternative: “This is what you could do with the money that would not dent the popularity of the PF Government.” Their main concern is that they would lose the rural vote that helped get them into power. They are a new government, 20 years in opposition; they are wary about making changes.”

Hammond continued:  “They have not made a decision yet. There has been lots of lobbying both ways, and we continue to lobby, using budget support as an instrument to get ourselves to the table, and the Secretary of State raised it with President Sata when he was here in London last week.”

 

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