High Maize prices to hit Malawi

Malawians should again brace for expensive maize this year because government has not budgeted for sufficient funds to stock up the commodity for lean periods and help stabilise prices, Weekend Nation has learnt.

The potential crisis comes about as government has only allocated K1.3 billion in the 2013/2014 National Budget instead of K18.3 billion required by the National Food Reserve Agency (NFRA) to buy 80 000 metric tonnes of maize, according to documents we have seen.

The budgeted sum represents seven percent of the required amount.

The 80 000 tonnes is the volume that government agreed with Development Partners (DPs) as its part of the bargain to add to the 30 000 tonnes that donors committed to finance.

Combined, donors and government maize purchases were expected to give Malawi a 110 000 metric tonnes cushion against maize shortages which, when released to the market through Admarc, could help bring down prices.

By failing to buy maize from the market, government allows private traders to move in and snap up the grain, hoard it for months and sell it at thrice the price that State grain marketer, Admarc—which caters for low income earners—charges.

This was the case between November 2012 and February 2013 when Admarc was selling maize at K3 000 per 50kg bag against private traders’ K10 000.

But because maize supplies at Admarc were erratic since government had not bought enough during harvest time, people still relied on profiteering private grain traders  who were selling at the exorbitant prices well beyond the minimum wage of about K6 000 per month.

Maize is Malawi’s staple grain that traditionally impacts the country’s economy given its skewed influence in determining inflation rates as it makes up more than 50 percent of the items in the Consumer Price Index (CPI) that determines the average rise in the cost of living.

The grain’s shortages and resultant price hikes—which become acute between November and February—were the chief reason the country’s inflation rate shot to more than 30 percent and has remained there, forcing the Reserve Bank of Malawi to increase interest rates, which now stand at more than 40 percent and is hitting business output and consumer spending hard to the detriment of economic growth.

In December last year, government signed a memorandum of understanding (MoU) with several donors, including Norway and Ireland, to co-finance the purchase of maize under the Support to Replenish the Strategic Grain Reserve for NFRA in an effort to respond to predicted acute maize shortages nationwide.

Initially, the donors committed to fund the purchase of about 50 000 metric tonnes of maize at $12 million (about K4 billion) but their money can now buy about 30 000 metric tonnes due to changes in maize prices, leaving government to fill the remaining 80 000  metric tonnes gap.

But despite the agreement being signed several months ahead of the formulation of the 2013/14 National Budget, and almost six months before Parliament passed the new budget last month, government allocated only K1.3 billion for the purchase of maize.

The K1.3 billion can only buy about 11 700 metric tonnes, a quantity far below the 80 000 metric tonnes gap which government needs to fill, according to Ministry of Agriculture and Food Security officials.

This means there is a gap of about 68 300 metric tonnes of maize needed to be replenished in the strategic grain reserves whose funds government did not allocate in the new budget.

The MoU, signed by Ministry of Agriculture and Food Security and donors, shows that President Joyce Banda appealed for donor support to ensure the country’s grain reserves have a minimum of 75 000 metric tonnes needed to respond to food shortages in the country.

At the time the MoU was being signed, maize reserves in NFRA’s storage sites were estimated to have dropped to less than 25 277 metric tonnes due to the agency’s release of maize for humanitarian assistance in several districts where millions of people were starving.

The country’s strategic grain storage capacity has since increased to 240 000 metric tonnes with the construction of new silos in Mzuzu, Luchenza in Thyolo and Mangochi. The main silos at Kanengo in Lilongwe have capacity to keep up to 180 000 metric tonnes of maize.

NFRA acting chief executive officer Clement Lwanda refused to comment on the situation on Thursday saying matters of government funding can competently be answered by the Ministry of Finance.

But Ministry of Finance spokesperson Nations Msowoya said the ministry has not received any communication from Ministry of Agriculture or NFRA requesting allocation of additional funds for procurement of maize.

“The K1.3 billion allocated in the budget is going to buy 11 700 metric tonnes of maize. Ministry of Agriculture officials are the ones who can comment on the gap of 80 000 metric tonnes. As Ministry of Finance, we are only looking at the K1.3 billion,” said Msowoya.

In an interview on Friday, Deputy Minister of Agriculture and Food Security Ulemu Chilapondwa said NFRA already has K1.5 billion which, he said, the agency is using to buy maize.

“The K1.3 billion in the budget is for Admarc to buy about 12 000 metric tonnes of maize from farmers to replenish the strategic grain reserves. Government has also just authorised Admarc to borrow K4 billion from commercial banks to buy maize,” said Chilapondwa who admitted that government needs to fill a gap of about 80 000 metric tonnes in the grain reserves.

He said the ministry is also banking on other donors to provide additional resources for replenishing the maize reserves.

“Donors will come in if the gap is still there because it is a fact that this year we will have food shortage. The donors are just waiting for government to declare the situation and gap of maize stocks that needs to be filled.

“USaid, DfID [Department for International Development] and other donors are ready to come in and narrow the gap further. If there is no maize in the country, government is ready to import maize from other countries so that people do not die,” said Chilapondwa.

But Civil Society Agriculture Network (Cisanet) national director Tamani Nkhono Mvula warned yesterday that delays by government to stock enough maize in the strategic grain reserves threatens its ability to address hunger which, he said,  is likely to hit many districts that did not record good maize harvests.

“The challenge is that districts such as Salima, Nkhotakota and parts of the Lower Shire didn’t have enough rains. If Admarc will not buy enough maize, it will create a very big problem in terms of food security. Unless government puts enough resources for the purchase of maize, we [will] go back to the same situation we had last year,” said Mvula.

Irish Aid official James Sherry on Friday said they agreed to provide one million euros (about K448 million) to contribute towards the replenishment of the strategic grain reserves whereas Norwegian Ambassador Asbjørn Eidhammer said his government commited up to NOK 50 million.

Eidhammer further said Malawi Government’s failure to allocate adequate funds towards replenishment of the strategic grain reserves will not affect Norway’s position on its support towards the programme.

“It is up to Malawi Government to decide on how much grain needs to be procured for the grain reserve. Norway has no particular position on that issue,” he said.