Welfare and incentive effects of possible changes in the regulatory environment of the maize market in Swaziland - Institutional Constraints to Small Farmer Development in Southern Africa - page 122

as the Swazi Nation Land which is held in trust and allocated by traditional authorities
(Magagula and Faki, 1999; Mkhabela et al. , 2005). With such high dependence on natural
moisture sources, maize production is influenced to a large extent by the weather patterns
which have been quite erratic in recent times, featuring frequent drought conditions.
According to Ministry of Finance (2005), the last 15 years have been particularly difficult
years for maize production, with domestic production consistently failing to meet food
consumption requirements of the population.
In order to meet the shortfalls in the domestic production of maize, the country has resorted
to huge food imports which now dominate the international trade with neighbouring
South Africa. It is estimated that at the minimum, the country derives as much as 60%
of its domestic maize requirements from imports from South Africa (Conway and Tyler,
1995; Thompson, 2004; Ministry of Finance, 2005). Despite this, however, frequent food
shortages still occur and continue to threaten national food security.
At the same time, the government has pursued a food self-sufficiency policy which features
the setting of producer prices above world market prices, the subvention of government
marketing institutions, and control of maize imports. As Magagula and Faki (1999) and
Thompson (2003) have noted, this arrangement presents a real threat to national food
security. In fact, more than any other factors, the present maize crises have exposed the high
degree of efficiency losses arising from the gross misallocation of productive resources as a
result of the regulatory regime being implemented.
The suggestion has therefore been made that full deregulation of the market must be
implemented without delay in order to begin to reverse the damage done by excessive
protection of the market manifested in the on-going food crisis in the country. At a basic
level, the rationale for market deregulation is that it eliminates inefficient production and
service units by transferring resources to their best alternative uses. But to date no studies
have explicitly investigated the effects of the current arrangements and the potential effects
of full deregulation. It is expected that the present study will fill this gap in knowledge and
stimulate discussions on the feasible options for developing the smallholder maize sector
in particular, and the agricultural sector in general.
7.2 Objectives
The main objective of the present study was to examine the welfare effects of regulation in
the maize market of Swaziland, and on the basis of that, determine the likely impact of a
possible deregulation of industry, with emphasis on the social welfare effects. Specifically,
the study concentrated on the following aspects:
1. review of the Swazi Maize Market in the context of marketing policies for possible
market reform;