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Maize Subsidies Go Against the Grain in Malawi - 2002-12-05


In an effort to reach millions of hungry low income people, the government of Malawi has limited the price of maize to 17 kwacha – or about 28 cents per kilogram. Up to three million Malawians face food shortages due to two straight years of poor harvests from flooding and drought.

But the plan to cut the market price of maize by nearly 50 percent for everyone has brought criticism from some donors. They say only about a third of all consumers need the subsidies. The rest, they say, can either afford market prices, or are already receiving free food from non-governmental groups.

Roger Yochelson is the USAID mission director for Malawi. He says there are three categories of consumers in Malawi -- those who can afford to pay the full commercial price of maize, subsistance farmers who have sold off their goats and chickens in an attempt to stave of hunger during last year's food shortages, and those who have some resources left. He says those with no resources at all are being fed for free by relief groups, but it's the last group -- those who still have some resources to sell or trade -- or need the subsidized maize.

The most prominent critics of the across-the-board cuts are five members of Britain’s International Development Committee in the British House of Commons. In a letter to Britain’s Department for International Development in October, they complained that the World Bank should not have provided an aid package to the Malawi government to help it subsidize maize imports. Under the plan, the Bank is providing a 50 million dollar credit, part of which will go toward buying the subsidized maize. The British MPs said the credit was approved without consulting donors who were working on a targeted – or limited – subsidy. They say the government could have paid for a limited subsidy from its own resources.

The letter says the universal subsidy will cost 50 million dollars -- or five percent of Malawi’s gross domestic product -- and add 29 million dollars to Malawi’s debt through the loan element of the credit.

Other donors –- including USAID’s Roger Yochelson -- are concerned that some traders will buy the lower priced grain and sell it at higher prices when maize again becomes scarce: "What happened last year is folks with money filled up trucks with people who got off the truck half a kilometer from the depot. They stood in line, picked up their one bag of maize, and collected it back to the truck. The owner of the truck went back and sold it."

He said people of influence would also drive up to a distribution site and demand access to the cheap maize: "Some poor little fellow working in rural area in a depot is in no position physically or politically to object and they empty the depot at preferred rates. The maize gets into the country, but it is not being targeted at the people who cannot afford the high prices."

Mr. Yochelson says the targeted subsidy would have been easy to implement. But Malawi’s Minister of Agriculture, Aleke Banda, disagrees: " The reason why we are for the generalized subsidy is that the vouchers sound very good on paper but they are very difficult to implement. Sixty percent of our people are very poor –- how do we decide who gets the voucher and who pays the commercial price? In one village, one area, that is the recipe for social tension. That is the major reason why we said no, this will not work. "

Mr. Banda also denies that there are currently any people hoarding grain -– or that there were any attempts at stealing maize last year: "Last year, we brought in 150 thousand metric tons of maize from South Africa and we sold it at a subsidized rate of 17 kwachas. Our [depots] were given instructions not to sell large amounts to people, to try to ration it; secondly, the communities themselves do the policing. If someone turns up with a pick up or lorry to buy maize, they will not allow them. If someone with money would organize young people to buy bits and pieces of maize, the community will find out something is going on. There was no evidence last year of any hoarding of this maize sold at the subsidized price and we thing this year is will be the same."

Meanwhile, the World Bank director for Malawi, Dunstan Wai, says there is a high-level task force that includes the Department of Agriculture and donors who monitor the delivery of food. He says so far, there have been no complaints about hoarding. He says the Bank does not usually support subsidies. But, he says an exception was made because people were dying of hunger.

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