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Title INTERACTIONS BETWEEN FOOD MARKETS REFORM AND REGIONAL TRADE IN ZIMBABWE AND SOUTH AFRICA: IMPLICATIONS FOR FOOD SECURITY
Full text http://purl.umn.edu/11302
Author(s) Jayne, T.S.; Takavarasha, T.; van Zyl, Johan
Abstract 1. INTRODUCTION Throughout the world, the major share of staple food costs to the consumer is typically accounted for by marketing costs. The maize-based agricultural economies of Southern Africa are no exception: in Zimbabwe and South Africa, farm-gate maize prices over the period 1985-1994 accounted for only 37% and 32% of the total value of commercial maize roller meal1.This implies that productivity gains within the marketing system that would reduce marketing costs by 10%, for example, would have a larger impact on the cost of food to consumers than a 10% reduction in farm production costs brought on by new farm technology. Efforts to improve farm-level productivity are absolutely critical to achieve broad-based rural income growth and food security (Mellor 1976; Staatz 1994). Yet, as we indicate below, the potential for future farm-level income and productivity growth in the region may be intimately tied to future productivity growth in the broader food system.2 A major role of agricultural policy is to identify policy changes that may induce technological innovation and productivity growth throughout the food system, in order to increase the living standards of people who must relate to it in one way or another. While food market reform has been subject to contentious and often emotional debate over the last decade in Africa, the debate has generally been over assumptions about how food markets work in reality as opposed to theory, and how markets actually respond to particular forms of policy change (Hewitt de Alcantara 1993; Jiriyengwa 1993; DionÃÆ'Â© 1991; Lele and Candler 1984). The lack of consensus is partially due to a shortage of empirical, ground-level information linking specific policies to specific impacts. It is in this context that we draw on applied analysis in Southern Africa to make some observations on recent food market reforms and their effects on the performance of food systems in the region. Domestic food market reform also has important implications for regional trade. Regional competitiveness is determined not only by differences in farm production costs (soil fertility, rainfall, input costs, etc.) but also on the costs of distribution, storage, and processing that make up the bulk of the final cost of food to consumers. To the extent that food market reform would alter demand patterns, choice of technology, and relative costs throughout the various stages of countries' food systems, regional trading incentives are a function of domestic food policy. The latter part of this paper considers how potential food market reform in South Africa will alter relative prices, trading incentives, and distributional consequences within the region. Particular emphasis is given to Zimbabwe and South Africa, the two largest traders of maize in the region. We highlight five conclusions: 1. Food market reform in Zimbabwe, as in Tanzania, Malawi, and Kenya, has been associated with increased marketing board budget deficits. The marketing boards'financial crises primarily reflected governments' view that they could continue to mandate their food marketing boards to buy and sell at fixed prices throughout the year irrespective of market conditions in the nascent private trading channels legalized through market reform. While market reform, as it has been implemented in these countries, has exacerbated marketing board deficits, this result is clearly not inevitable if reform were accompanied by a more flexible marketing board pricing policy, which responded to changes in private trading conditions. The experiences of these countries have important implications for the design of food market reform in South Africa. 2. Maize market reform in Zimbabwe and Kenya has reduced the margin between the producer price of maize and the consumer price of maize meal, by opening up distribution and milling channels previously blocked by regulation. These developments have had a beneficial effect on household food security. 3. The welfare of South African white maize farmers is indirectly yet intimately tied to the efficiency of South African maize distribution and processing system. The future magnitude and direction of maize trade under a less controlled external trading environment will depend greatly on the nature of impending food market restructuring in South Africa. Food market reform in Zimbabwe, for example, has substantially altered the relative costs of maize meal between Zimbabwe and South Africa. A lack of productivity growth in South Africa's maize marketing system is likely to depress its farmers' maize output, farm prices, and share of the South African maize meal market under a less regulated external trading environment. Farmers in Zimbabwe are likely to benefit from strong incentives within South Africa to import maize meal from Zimbabwe. 4. The foregoing indicates that domestic food market reform in South Africa-- as a means to reduce the margin between farm gate prices and retail maize meal prices--will be a critical prerequisite for the continued viability of the South African maize sector under a less regulated regional trading environment. This conclusion has important implications,not only for commercial farmers, but also for the development of a Black smallholder farming sector in South Africa. 5. Conversely, the beneficiaries and losers of domestic food market reform in South Africa will differ depending on whether controls on external private trade are relaxed as well. 1 For further evidence in Africa and Asia, see Ahmed and Rutaji (1987). 2 The food system refers to the various stages and modes of coordination required to produce food and put it on consumers' tables, including input supply, farm production, distribution, processing, and retailing (see Shaffer 1980). - Food Security and Poverty
Type of publication preprint
Identifier RePEc:ags:midafs:11302
Repository RePEc - Research Papers in Economics
Added to C-A: 2009-06-22;10:17:54