Zambia – the new bread basket of Africa?

  

A recent Reuters article reports that Zambia has enough maize stocks to help partly fill a regional gap as a supply crunch looms in southern Africa, pushing up futures prices for the staple and accelerating food inflation.

It is exporting to South Africa, Zimbabwe, Democratic Republic of Congo, Kenya, Mozambique, Botswana, Burundi and Namibia. “We are monitoring the situation very carefully to ensure that we don’t end up importing maize. I think we are standing on very firm ground in terms of food security,” Zambia’s agriculture minister Emmanuel Chenda said, striking a rather cautionary tone. “We had more than one million tonnes of surplus maize. We decided to export 600,000 tonnes because we didn’t have storage space and so far we have sold 200,000 tonnes,” he said.

Analysts are, however, concerned about Lusaka’s costly spend on maize purchases from farmers, done via the Food Reserve Agency. Brian Tembo, an Economics Association of Zambia analyst, said the government was buying the maize at above market prices and selling it at reduced prices. He said this meant the government was effectively using “treasury funds to subsidise the region”.

Zambia harvested 3m tonnes of maize in the 2010/11 season, from 2.8m tonnes the previous season. Zambia’s maize season runs from October to August. The country’s big yields have been attributed to government subsidies to peasant farmers in the form of fertiliser and seeds. However, the crop ultimately depends on rain and the agriculture minister has said the 2011/12 season had gotten off to a bad start because of erratic weather.

South African maize prices are around record highs as stocks remain tight until the next marketing season starts in May. South Africa has so far imported from Zambia and Romania and producers say the country may need to import about 700,000 tonnes of white and yellow maize to make up for shortfalls. “There are some people that are getting desperate to try and find some maize … On the white maize side, we are definitely in for a very tough time between now and May,” Jannie de Villiers, Grain SA’s chief executive, said.

South Africa previously had a surplus, but new demand came from outside of the region and so the market overcommitted itself.

Over in Malawi, maize exports have been suspended after reports that 10 of its 28 districts faced food shortages. “We want to make sure that we have enough in stock for distribution to the affected families. We have set aside 400,000 tonnes to distribute to an estimated 200,000 families,” said Erica Maganga, principal secretary in ministry of agriculture.

Malawi’s maize harvest fell to 3.2m tonnes in the 2010/11 season from 3.5m tonnes the season before. Maize prices have jumped by almost 50% to USD 18 per 50 kg bag.

It is clear that food security remains a challenge that sub-Saharan African governments need to address. Zambia’s effort towards increasing yields by subsidising small-scale farmers is commendable and perhaps other regional governments should follow suit. However, bumper harvests should also be managed well to ensure consistent food supply in future periods.

In a presentation by MACO MLF-Zambia in January 2010, they highlighted Zambia’s agricultural potential, stating that only 14% of arable land was being utilised. Moreover, the country has abundant water resources to ensure all-year round agricultural production. We believe the country should develop the agricultural sector further so as to reduce its dependence on copper mining.

Imara is an investment banking and asset management group renowned for its knowledge of African markets.




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