FOOD SECURITY – NATIONALISATION, PRICE CONTROL OR SUBSIDIES?

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THE prices of mealie meal have recently sky rocked and the government is worried that the millers are acting unfairly because they are buying maize cheaply from the Food Reserve Agency.

Government officials, including President Edgar Lungu have warned the millers to heed its calls for reduced prices.

Recently, Lusaka Province Minister Bowman Lusambo was reported to have warned the millers of sanctions if they continue defying the President.

As has become routine in the Zambian psyche, the social media has been flooded with stories condemning Government for interfering in private business.

Some have even accused the government of going back to socialist policies of nationalisation while others are criticising the introduction of state-owned solar-powered milling plants.

There definitely seems to be a lot of ignorance over the food security policies all over the world.  Governments in Asia, Europe and America spend substantial amounts out of their national budgets to subsidise and stabilise stable food prices.

In Japan, the government has for decades subsidised rice farmers to keep the price of the staple at affordable levels as well as to make the production of the crop profitable. I quote part of an official report on the Japanese subsidies to convince the doubting Thomases.

“Subsidies paid to farmers under this so-called “gentan” (“gen” means reduce and “tan” is the unit of measure for rice fields) policy will be gradually phased out over the next five years.

The decision was taken at a government committee to rejuvenate the farm sector, headed by Prime Minister Shinzo Abe.

Mr Abe said at the meeting: “We want to create an environment where management-minded farmers can operate. We have to make farming a growth industry that brings farmers more income.

“We also want to promote major reforms in agriculture administration. Anything that goes against structural reforms will be swept aside,” he added.

A final vision for reforming the agricultural sector, containing more deregulation, is expected to be announced by year-end. The end of the “gentan” policy does not mean rice farmers will suffer financially. To prevent over-production of rice, the government will pay farmers for switching from planting rice for the dinner table to growing rice and other crops for animal feed.

There will also be new subsidies for farmers, for reasons such as participating in farmland maintenance, by dredging waterways, and keeping farm roads trim. In total, the new subsidies will raise the incomes of Japanese farmers by about 13 percent.”

The European Union spends US$460 billion on its Common Agricultural Policy which subsidises farmers. A recent decision to reduce this subsidy by five per cent has raised protests from some countries. France was reported to be very angry about the reduction.

According to Reuters:

“The European Commission on Wednesday proposed to reduce farm subsidies and leave more latitude to member-states under the bloc’s Common Agriculture Policy (CAP), drawing swift condemnation from France, which called the move “unthinkable.”

The CAP proposal comes as part of a bigger, new, multi-year EU budget set to trigger battles among member-states over how to fill the funding gap left by Britain’s exit next year.

In an effort to cut costs and promote other policies, farmers will see aid shrink in the 2021-2027 period to 365 billion euros (US$438bn), down five percent from the current CAP, the Commission said.

This would represent a share of less than 30 percent of the total budget of 1.28 trillion euros in inflation-adjusted prices, down from more than 45 percent 20 years earlier.

“The overall cut in the CAP budget is five percent and I regard this as a fair outcome to farmers, particularly given the challenging backdrop of a 12 billion euros Brexit,” European Commissioner for Agriculture and Rural Development Phil Hogan told reporters.

But France, by far the largest beneficiary of the CAP, said the proposals were unacceptable and stressed they were only a starting point for negotiations.

“For Stephane Travert, the Agriculture and Food Minister, such a drastic, massive and blind cut is simply unthinkable,” the ministry said in a statement.

“It poses an unprecedented risk to farms’ viability by seriously impacting farmers’ incomes, for whom direct aid is an essential safety net. France cannot accept any decline in direct income for farmers.”

Farmers across the agriculture sector, from dairy to grains and sugar, have suffered sharp drops in revenues in recent years due to hefty global supplies.

EU farmers group COPA-COGECA, reacting on Twitter, expressed “strong disappointment with the cuts.”

“A strong budget is needed for a sustainable, modern EU agriculture sector delivering on various fronts,” it said.

Many other countries including the United States have food price stability policies. For the wary, I have not quoted the figures from the US because Donald Trump might call it “fake news.”

In our situation, the government is providing subsidies for the staple food by supplying the maize to the millers at below market price levels. The problem is that the millers want to reap profits out of the cheap maize.

My interpretation of this situation is that the millers want to steal the subsidies and deny the citizens their right to enjoy the benefit of the subsidies.

The government should immediately design a contract of supply with the millers which will hold them to an agreed retail price. Those millers who do not respect the agreement should not be sold any maize from the FRA.

Our government also does in a way subsidise the farmers through the input support programme.  Unfortunately, a substantial amount of the inputs are not used for production but are resold to other countries thus impacting negatively on the agricultural productivity.

The current situation is also a wake-up call to the Zambian Minister of Agriculture. The ministry must ensure that there are enough reserves for food security all the time.

Government should never think of nationalisation. We might end up compensating inefficient and loss making millers.

Better management of the subsidies is a more acceptable way of ensuring price stability and supporting productivity among the hard working rural folk.

Yours truly,

TROUBLESHOOTER

ecchipalo@yahoo.co.uk / pentvision@gmail.com / ecchipalo@icloud.com

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