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MAZ isn’t a regulatory authority to control mealie-meal prices – ZCC

MAZ isn’t a regulatory authority to control mealie-meal prices – ZCC
Written by Fridah Zinyama and Chiwoyu Sinyangwe
Friday, November 14, 2008 8:02:16 AM

ZAMBIA Competition Commission (ZCC) has said the Millers Association of Zambia (MAZ) is not a regulatory authority to control mealie-meal prices pegged by its members.

And Agri-Africa has warned that the Southern African Development Community (SADC) states are headed for a serious food crisis as South African grain farmers are likely to further scale down maize production.

Meanwhile, the Zambia National Farmers Union (ZNFU) has said it is still studying MAZ's statement that Zambia is currently facing a grain crisis because some local farmers objected to the importation of maize early enough when it became apparent that the country was headed for a maize deficit.

ZCC executive director Thula Kaira observed that the control of prices by MAZ was an offence under Section 10 of the Competition and fair Trading Act CAP 417 of the Laws of Zambia.

"The following practices conducted by or on behalf of a trade association are declared to be anti-competitive trade practices if, (a) unjustifiable exclusion from a trade association of any person carrying on or intending to carry on in good faith the trade in relation to which the association is formed; or (b) making of recommendations, directly or indirectly, by a trade association, to its members or to any class of its members which relate to - (i) the prices charged or to be charged by such members or any such class of members or to the margins included or to be included in the prices or to the pricing formula used or to be used in the calculation of those prices," Kaira explained. "The terms of sale (including discount, credit, delivery, and product and service guarantee terms) of such member or any class of members and which directly affects prices or profit margins included in the pricing formula."

Kaira stated that the current situation in the milling industry would hamper the government's efforts to reduce poverty in the country if organisations such as MAZ continued with anti-competitive pricing strategies.

"The anti-competitive pricing strategies which are being disguised as ‘recommended prices’ may in fact be prices above what would obtain if a competitive pricing regime was left to operate at millers' level - and not at the retail trade," he observed.

Kaira explained that where there was a production-supply distortion, it would naturally spill over into a distribution-retail distortion.

"The problem of high prices of mealie-meal is not because the traders are not adhering to a recommended price," he stated. "The problem is that such recommended prices were not there before until last week when the MAZ members uniformly increased the price at the same time and then blamed the retail trade for the high prices."

Kaira stated that the long-term bottle-neck factor to price stability of mealie-meal was MAZ, which was operating like the Organisation of the Petroleum Exporting Countries (OPEC), a production and price cartel.

He stated that to a large extent, millers control the upstream and downstream dynamics of maize and mealie-meal and thus they were the ones who had the solution to the determination of the market price of mealie-meal.

"With the reduced fuel prices, which are likely to reduce further, there would appear to be no justification for the latest increase of mealie-meal," he stated.

Kaira stated that MAZ needed to review its objectives and realign them with competition principles.

"Considering the high number of milling companies, closer cooperation through MAZ is likely to forestall competitive pricing in maize meal," stated Kaira.

And Agri-Africa, a South African-based group of agricultural consultants, stated that farmers in South Africa where most countries are looking up to as a possible solution to the current grain crisis were expected to cut down on maize output on account of the current financial crisis.

"Rising production costs, lower commodity prices and further consequences of the ongoing global financial crisis have forced South African grain farmers to further scale down the production of maize," Agri-Africa observed. "If South Africa fails to produce enough maize during the current season, it will be a recipe for a humanitarian catastrophe for many of its neighbouring countries."

Agri-Africa stated that both the government and consumers would have to foot the expected rise in the price of maize in the local market which it says would at least be up by another R1,200 (about US $116) a tonne or more if the country has to import maize next year.

Agri-Africa further stated that producers had no other choice but to scale down production from 2.8 million hectares this season to two million hectares in the coming season as the sector could not sustain another surplus maize crop at lower export parity prices.

And ZNFU president Jervis Zimba yesterday said the union was still studying the matter before they could issue a statement.

On Tuesday, the ministries of agriculture and commerce attributed the current increase in prices of mealie-meal to some millers who they said were hoarding maize stocks to embarrass the government.

But on Wednesday, MAZ chairman Caleb Mulenga described the government's claim that millers were hoarding maize as a lack of appreciation of how the industry works.

Mulenga said counter accusations would not solve the current problems of high prices of mealie-meal.

Mulenga said despite millers in the country questioning this year's crop forecast, some interest groups like ZNFU opposed the importation of maize, saying it would hurt the small scale farmers who at the time were active in the grain market.

But agriculture permanent secretary Professor Isaac Phiri insisted that high prices of mealie-meal were being caused by millers who only wanted to buy maize from cheaper sources.

Labels: CALEB MULENGA, INFLATION, MAZ, MEALIE-MEAL, MILLERS, ZNFU

posted by MrK @ 8:04 AM