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 146

finding is that the maize industry is highly financially unprofitable and that Swaziland has no
comparative advantage in the production of maize. The indication provided by the use of the
Domestic Resource Cost (DRC) measure is that domestic resources employed in the maize
industry are not being used efficiently. This situation seems to arise from the high degree of
subsidy that still characterizes the industry despite recent claims that the maize marketing
system is liberalized. This is clearly disturbing in the light of the on-going calls from the
policy and academic communities for the maize marketing industry to be fully deregulated.
A sensitivity analysis based on expectations of favourable changes in maize pricing and
yield shows that both the maize industry and the wider economy will benefit substantially
from trade liberalization. The sensitivity analysis was based on a forecast period of 20 years
during which the gross margins steadily improved, making the sector to break even by the
8 th year and eventually showing reasonable profit up to the end of the forecast period. The
evidence based on the conservative assumptions is that the maize industry will become
increasingly competitive as the government removes all existing restrictions on the industry
and the Ministry of Agriculture concentrates on the expansion of investment in research,
information and extension to support the maize producers, especially the small-scale
producers on the Swazi Nations Land.
The principal findings can be summarized as follows:
1. The current market policy structure favours producers while taxing consumers. Winners
of this market arrangement are the small number of surplus producers who enjoy the
benefit of higher product prices than would have prevailed in a less regulated market.
Again, the distorted market inhibits the production of more competitive crops. The
monopolistic power of the market contributes significantly to the thin rural markets,
lack of surplus production by most maize producers, and the absence of a well-developed
small-scale processing and trade sector.
2. The surplus gain to production is by far greater than the loss to consumption as a result
of the high consumer prices. It would seem that the subsidy given to the National Maize
corporation (NMC) has moderated the consumption losses somewhat although they
remain high.
3. The government benefits from the current market policy in form of receipts of tax
revenue and channels this fund into subsidizing parastatals like NMC, thus sustaining
the current inefficiencies.
The agricultural sector of Swaziland is facing a serious crisis with potentially more adverse
implications for the country's food security. It is now clear that the current policy of food
self-sufficiency is not working and is at the root of the crisis in the sector. Strident calls are
now being made for a more deregulated regime for the maize marketing system. The gains
from deregulation of the maize sector are numerous and include progress towards ensuring
increased food security for the population. It is also widely believed that a deregulated