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Malawi's Government Limits Price of Maize - 2002-12-13

In an effort to reach millions of hungry people, the government of Malawi has limited the price of maize to about 28 cents (17 kwachas) per kilogram. But some say the strategy is too expensive for the government's meager budget.

Up to three million people in Malawi face food shortages due to two years of poor harvests from flooding and drought.

But the government's plan to subsidize maize imports in order to cut the market price by nearly 50 percent has brought criticism from some aid donors.

The critics say only about one third of all Malawi 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. "There are three categories of consumers: at the low end are the poorest of poor, with no money to buy maize," he said. "These are subsistence farmers with very little money from last year's poor harvest. They have sold their chickens, goats, and bicycles and they do not have a lot of resources with which to barter to buy maize. Those are the people we are targeting with humanitarian assistance. That category I am not worried about - none of that maize will go to anyone who does not need it. Then there is the middle third those who have some money, some resources, and they are the ones who should benefit from a subsidized scheme."

The most prominent critics of the across the board cuts are five members of Britain's International Development Committee in the House of Commons. They say 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 credit, part of which will go toward buying the subsidized maize.

The British lawmakers say the government could have paid for a limited subsidy from its own resources. They say the subsidy for all Malawi consumers will cost $50 million and add $29 million to Malawi's debt.

World Bank director for Malawi Dunstan Wai says the Bank does not usually support subsidies, but an exception was made because people were dying of hunger.

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," said Roger Yochelson. "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. The second thing that was happening was that people of influence would roll into the facility and say, 'I want 10,000 tons of maize'. Some poor little fellow working in a 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. There is no way to avoid that under the current scheme this year. The World Bank and IMF have acceded to that and the government is moving ahead with that."

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," he said. "60 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. "

He 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 150,000 metric tons of maize from South Africa and we sold it at a subsidized rate of 17 kwachas," said Minister of Agriculture Banda. "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 think this year is will be the same."

The World Bank's Dunston Wai says a high level taskforce that includes donors and Malawi's Department of Agriculture is monitoring the delivery of food. He says there have been no complaints about hoarding.