Agriculture Reference
In-Depth Information
7. Welfare and incentive effects of possible changes in the
regulatory environment of the maize market in Swaziland
Ajuruchukwu Obi and Nkosazana N. Mashinini
Abstract
Maize production in Swaziland has been falling in recent years, forcing the country to
increasingly rely on imports from neighbouring South Africa. Weather patterns that have
featured unrelenting droughts in the country, as in the other Southern African countries,
have contributed in no small way to this situation. But it is also considered that excessive
regulation of the maize market by the statutory body, the National Maize Corporation
(NMC) has played a major role. For instance, it has the sole responsibility to anticipate
domestic maize demand based on which imports are programmed. In turn, importation
of maize can only be done upon receipt of an import license which is not only costly but
also involves very cumbersome processes. With the threat of food insecurity growing,
suggestions have been made to deregulate the market for maize in order to make the
system more efficient possibly by eliminating inefficient production and service units
and transferring resources to their best alternative uses. However, to date, no studies have
explicitly investigated the likely effects of the current marketing arrangements and how
they will differ in a fully deregulated environment. The purpose of this paper is therefore
to present the results of a study that examined the welfare effects of regulation in the maize
market of Swaziland as a basis for determining the likely impacts of a possible deregulation
of the industry, emphasis being placed on the social welfare effects. The study utilized a
partial equilibrium model to quantify the distortions in the maize industry. It also drew
from the methodological guidance provided by the Comparative Advantage Studies for
Southern Africa sponsored by the United States Agency for International Development
(USAID). The study established that the maize industry of Swaziland is uncompetitive
and that this situation gives rise to the serious distortions in the maize market. It was
also observed that the system features high degree of efficiency losses as a result of the
misallocation of resources in the economy. Prospects for any improvement look quite
bleak. The paper concludes by recommending the full deregulation of the maize market
and dismantling of the statutory structures that currently manage the system. Implications
for effective food chain management are highlighted.
7.1 Introduction
Maize is the staple food grain in Swaziland, the small, land-locked, former British colony to
the North-East of the Republic of South Africa. About 90% of the crop is grown primarily
under subsistence, largely traditional, rain-fed cultivation systems on communal land known
Search WWH ::
Custom Search