The desperate measures to address the mealie meal shortages won’t do.
The issuing of a Statutory Instrument by the Minister of Finance removing duties on the importation of mealie meal is a really desperate measure.
The real issue that needs to be addressed is maize parity pricing in the region. Our maize is too cheap in comparison to other countries in the region so the pressure of our maize leaving the country will always be there.
If, for instance, we allow regional market prices to prevail in Zambia then the issue of smuggling will be mitigated. However, the consequence of that is that mealie prices will sky rocket to K400/500 per 25kg bag, which the government knows can cause civil strife.
Despite duties being waived, the imported product will almost definitely land at a higher price than local product. A 25 kg bag of mealie meal in South Africa is presently retailing at R240, so add transportation and insurance costs and also financing costs from the banks, and the landed costs will be around K300.
Even under this duty waiver, the export pressure given highly lucrative prices in neighbouring countries will still incentivise the smuggling of the imported mealie meal.
Sadly, the Food Reserve Agency (FRA) stocks have been depleted due to careless release of the maize reserve and, as alluded in my previous articles, we do not have a fallback position.
The challenge the government is faced with here in summary is twofold: trying to control or influence price and secondly, maintain steady supply. Now the laws of supply and demand dictate a price jump should supply lag. So we are caught between a rock and a hard place. Stabilise supply by increasing prices and people will react, increase supply at depressed prices and smuggling will continue with shortages persisting as a result.
Conclusion: it is unlikely that the Minister of Finance’s Statutory Instrument will help solve this problem until parity price in the region normalises.
President of the Socialist Party