Subsidy slippery slope


The looming shortage of wheat that Government is trying to avert contrasted against the glut of maize which Government intends to subsidize, raises serious questions of priorities.

How will the Government target the population to benefit from the subsidized maize or are we all going to benefit and if so why? Subsidies are expensive and very cumbersome and unless properly implemented will distort the market and create loopholes for abuse. 

The parallel existence of subsidized and non subsidized maize in the same market is a recipe for confusion from which the unscrupulous will make a killing.

Should the Government subsidize maize meal or use the same money to encourage more farmers to produce wheat so that we satisfy the local market and export the surplus?

It is true that wheat has failed this year because of poor rainfall, but it is also true that not enough farmers produce wheat because of lack of acumen and experience. However like every crop incentives can be created to ensure that more farmers enter into this field.

With a surplus of maize but a deficit in wheat, it would stand to reason that Government effort should be directed at ensuring that more farmers, especially Zambians are introduced to wheat farming, while maintaining the status quo with our staple.  The beauty with wheat is that it can be irrigated during the dry season and rain fed.

It is simple arithmetic that the more wheat we produce the more money we shall earn from local and export sales. Wheat is on average fetching US$238 per ton while maize is fetching US$174 per ton on the international market.

There is no question that the subsidy from Government will run into billions of Kwacha while the impact at the household level will be minimal and in some cases totally insignificant, and yet the same money used as seed capital for production would contribute more by , for example, increasing wheat output and subsequent earn from export.

If the truth were to be told many urban dwellers are indifferent to price variation and yet these are ones who will benefit from the subsidy. The lessons of the UNIP coupons are highly instructive.

For various reasons we are not utilizing our arable land to the maximum. The Government should focus on the bottlenecks and help citizens enter uncharted and yet proven agribusiness ventures including the production of nontraditional crops such as wheat.

The commendable Government decision to ban importation of cooking oil should open another avenue for the production of oil seeds, but venturing into large scale production will invariably involve Government support.

Ordinarily the introduction of consumption subsidies is good news for the consumer in the long run but certainly bad news in the short run.

It is said that the road to hell is littered with good intentions. Indeed subsidies are well intended, but ultimately benefit the wrong people, who do not need such subsidy. This is true of most employed Zambians, especially civil servants whose monthly salary is equivalent to the annual earning of a peasant farmer who will not benefit from the subsidy.

As a social mechanism for resource distribution, subsidies are inefficient, cumbersome at worst a recipe for abuse.

Instead of subsidizing maize, the money should be spent on production. Farmers should be encouraged to grow wheat and other crops that will support non-traditional exports.

The Government neither has the capacity nor indeed the physical means of ensuring that subsidized maize will reach the hardest hit consumers in the outlying areas where consumers are paying up to K100 for a K25 bag of maize meal.

Worse the Government will be very hard pressed to ensure that that none of the subsidized maize is exported as was the case in the past, when some millers reportedly abused the system.

Short of introducing price control, it will be very difficult to ensure that  public money put into direct consumption will actually provide the social cushion that is intended because intermediary costs in milling and transportation command a separate regimen of costs which the consumer must meet- the Government has no hand in this.

At the end of the end of the day the Government will be spending billions of kwacha on consumption as against providing beds and other requirements in such places as the University Teaching Hospital where patients are forced to sleep on the floor.

We have said before and would want to repeat that maize is a very political crop. The best Government could do is subsidize production in order to create a glut than attempt to intervene from the market side. 

Categorized | Editorial

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