ABOUT PRICING MAIZE AND MEALIE MEAL: A CATCH 22 PARADOX, OR IS IT?
By Sean Tembo – PeP President
1. The issue of pricing maize, and by consequence mealie meal, is as controversial as the chicken and egg paradox. Which one should be prioritized over the other? Should Government set a low floor price for the Food Reserve Agency (FRA) to purchase maize, in order to ensure affordable mealie meal and consequently force the rural farmer to subsidize the town dweller? Or should Government set a high floor price for FRA to purchase maize and by consequence punish the town dweller with high mealie meal prices while allowing the rural farmer to rejoice in a windfall?
2. Or perhaps Government should walk a tight rope and ensure a balancing act by setting a maize floor price that achieves both objectives of giving the rural farmer a decent return on their investment while at the same time allowing the town dweller to purchase mealie meal at a reasonable price? If so, what really would a rural farmer consider a decent return on their investment, and in the same breath, what price would a town dweller consider reasonable and affordable to purchase mealie meal at? Or perhaps is there a fourth option, and if so, what is it?
3. In order to objectively and accurately answer the questions raised above, it is necessary to look at the past? Obviously the maize – mealie meal pricing paradox was not there during the KK days, largely because mealie meal prices where heavily subsidized. In fact, at that time, the majority town dwellers never used to buy mealie meal, but Government would give it to them free of charge using what was known as Coupons. However, even after FTJ took over in 1991 and liberalized the economy into a free market where price ceilings and price floors were removed, the maize – mealie meal pricing paradox was not there. Even in most of Mwanawasa’s presidency, to the best of my recollection, the maize – mealie meal pricing paradox was not there. This paradox only arose somewhere between the last years of the Mwanawasa administration and the early years of the RB administration.
4. It is worth noting that when FTJ privatized (or perhaps the most accurate term is “sold off”) most of Zambia’s parastatals, he deliberately did not sell off certain strategic State corporations that included ZESCO, ZAMTEL, Nitrogen Chemicals of Zambia (NCZ), etcetera. Nitrogen Chemicals of Zambia had for a very long time supplied all the fertilizer needed by our farmers at a very low price. Whether this low price was cost-reflective or subsidized, is a debate for another day. However, somewhere in-between Mwanawasa and RB’s administrations, Government told us that the machinery used by Nitrogen Chemicals of Zambia was old and rusty and could not produce all the fertilizer needed by the entire nation, and that some of the fertilizer needed to be imported.
5. My expectation at the time was that the importation of some fertilizer would be a temporal matter, and that subsequently Government would pump money into NCZ to modernize it and increase its capacity so that it can once again supply affordable fertilizer to the entire nation. That was more than 16 years ago, and five administrations later, we are still told the same story that NCZ equipment is too old and does not have capacity to produce the desired quantities of fertilizer needed by the entire nation.
All the raw materials we need to produce fertilizer is readily and cheaply available, but 16 years later the Government under 5 different Presidents, does not want to buy the needed machinery at Nitrogen Chemicals of Zambia in Kafue.
6. The importation of fertilizer increased the price at which it is supplied to farmers by more than 5 times, compared to when it was locally produced by Nitrogen Chemicals of Zambia in Kafue. When this happened, the cost of production of maize by farmers skyrocketed, and the rural farmer cried for Government’s protection from briefcase buyers who were exploiting them.
Government responded by entering the market through FRA and setting up a floor price every farming season. At that point, the maize – mealie meal pricing paradox was born, and ever since, successive administrations have sought to walk the thin line of balancing between the plight of the rural farmer who is the producer, and that of the town dweller who is the consumer. In some years, the rural farmer gets a raw deal and in others, the town dweller gets a raw deal. The pertinent question which the Zambian people must ask, however, is whether there is a solution to this maize – mealie meal pricing paradox?
7. The answer to the above question is a definite yes, but it requires a sincere and honest administration in office. From my several decades of experience as a Statutory Auditor, l can tell you that there are three main areas where most administrations steal public funds with relative ease, which are (i) fuel procurement (ii) infrastructure development and (iii) fertilizer procurement. To an innocent Zambian out there, the solution to this maize – mealie meal pricing paradox is for Government to simply buy the needed machinery at NCZ, and since we have all the required raw materials, produce fertilizer at a price as low as K150 instead of the current K1,000 at which farmers are buying fertilizer.
Once NCZ is able to supply fertilizer at the average price of K150 for a 50kg bag, then the farmer would be able to sell a 50kg bag of maize at as low as K100 at still make a good profit, which would allow the town dweller to buy a 25kg bag of breakfast mealie meal at as low as K80. It is quite simple if Government officials had no hidden motive to enrich themselves at the expense of the masses, both rural and town dwellers.
8. Put simply, the solution to the current maize – mealie meal pricing paradox lies in reducing the cost of production for the farmer, by supplying cheap fertilizer which is produced by a state-owned corporation such as NCZ. The solution can never be to unreasonably increase the floor price of maize to say K280, as we have seen the UPND administration do in the 2022/2023 farming season.
Such a move might please the farmer, but will skyrocket the price of mealie meal in urban areas, and by consequence increase the already high cost of living. With a 50kg bag of maize selling at a minimum of K280, it means a 25kg bag of mealie meal will sell at between K250 and K300 when you factor in costs such as transport, insurance, financing, storage, processing, handling etcetera. The question is how many town dwellers can afford a 25kg bag of breakfast mealie meal at K300, given the current high levels of unemployment?
9. Ever since ascending to office in 2021, President Hakainde Hichilema and his Vice President Mutale Nalumango have constantly and continuously promoted a new private fertilizer manufacturing company, as if it is Difikoti promoting a Trade Kings new lotion. They say that in the 2023/24 farming season, fertilizer will not be imported but will be bought from this newly established private company. I want to take this opportunity to warn the Zambian people that this is a scam. I know the players behind this company, and they are all affiliated to the President in one way or another.
I can assure you that the price at which this private company will supply fertilizer to Government will not be significantly different from the exaggerated price at which Government has been importing fertilizer in the past. That means the cost of production of maize will still be high, and the maize – mealie meal pricing paradox will still be with us come the 2023/24 marketing season.
10. If President Hakainde Hichilema was as upright as he often claims to be, the right thing to have done should have been to refurbish Nitrogen Chemicals of Zambia in Kafue so that it can produce all the fertilizer needed by the nation. Even if, for arguments sake, NCZ was not able to produce fertilizer at cheap enough a price to enable both the rural farmer to make a good return on investment as well as allow the town dweller to pay an affordable price for mealie meal, and that there was still need for Government to subsidize the value-chain, it would be more economically effective to subsidize fertilizer production at NCZ than it would be to subsidize privately procured fertilizer to the farmer or to subsidize mealie meal consumption to the town dweller through FRA maize. But President Hakainde Hichilema knows all this fully well, so l am preaching to the converted.
The only stumbling block preventing the President from making sound decisions for the nation regarding the maize – mealie meal pricing paradox is his vested interest in the newly established private fertilizer company. But for how long should the Zambian people suffer, just so that you can accumulate more personal wealth Mr. President sir? Is this part of the reason why you refused to declare your assets? So that you can be Zambia’s first dollar billionaire?
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SET 20.05.2023