The Sword of Damocles
For those who are not familiar with the above saying, it is used to
a situation where a heavy fighting sword is hung by a thread from the
over the head of a person who was strapped down underneath it and
death. The Zanu PF regime is in just such a position and during the
of Finance's address to Parliament last week, he held a knife against
thread and threatened to cut it and in so doing, in my view, he would
the death of Zanu PF and his own regime. The issue he was talking about
one that I have addressed several times before - the price of maize.
Maize is that stuff the Americans call corn and feed to their hogs and
In Africa - certainly southern Africa, it is the primary food staple
eat huge quantities of it every day. It is cooked as porridge and eaten
some form of 'relish'. Perhaps oil and vegetables, a bit of meat with
gravy or sour milk, sometimes even rough peanut butter. The great
of Zimbabweans have not 'eaten' if they have not had 'sadza' at least
day. Most poor families would have cold sadza for breakfast (left over
the evening meal) and then at least one large meal at lunch or in the
evening with hot sadza as the main course.
We eat 115 kilograms of maize meal per capita per annum. It is
very important component of daily life and the key to the tenuous
of Zimbabwe lies in the fact that it is cheap and reasonably available.
there is a price to pay for this and no one - except poor old Herbert,
to talk about it.
The facts are as follows: -
1. We need 1,2 million tonnes of maize a year for human consumption -
assuming no cross border activity.
2. We need another 600 000 tonnes for animal consumption as stock feed.
3. We need about 100 000 tonnes a year for industrial use - the
of breakfast cereals and snacks, starch and alcohol.
4. We produced last year, about 700 000 tonnes of maize in Zimbabwe, we
imported over 1 million tonnes and maize was constantly in short
5. This past season the government claims a crop of 1,7 million tonnes
most observers think the actual crop is less than 900 000 tonnes and
expectation is that we will again have to import over a million tonnes.
6. The Grain Marketing Board has a total monopoly over maize grain
purchases and sales. The Police and the military enforce this.
The economics of this trade are astonishing - even in a country and a
continent where politically inspired skewed economic policies are rife.
South African grain industry grew a crop last year of over 10 million
and with domestic consumption at about 7 million tonnes, had a
surplus for export. This gave rise to price levels in South Africa at
parities and generally below R1000 per tonne. At one stage the price
low as R700 per tonne and this threatened the viability of the whole
This past year, South African farmers have cut back on their maize
and will produce less than 6 million tonnes - output will be below
consumption for the first time in many years. As a result prices have
sharply and are now running at about R1500 per tonne. South Africa is
importing grain from abroad (mainly yellow maize for stock feed) and is
continuing to export white maize to the region.
This price translates to a landed cost of maize imported to Zimbabwe of
R1750 per tonne. Transport charges from silos in South Africa to the
silos in Zimbabwe have to be paid in foreign currency. This suggests a
landed cost of Z$60 million at bank rates and Z$140 million at parallel
market rates. Local producer prices are currently set at Z$31 million
These price profiles must be set against the selling price that has
prevailed now for a considerable period of time of Z$600 000 per tonne
R17,50 per tonne - 0,1 per cent of the actual cost of imports and 0,2
percent of the local producer price.
This enormous price differential (administrative costs at the GMB are
times the selling price) leads to massive market distortions - cross
trade is huge as the cost of maize meal in Botswana and South Africa is
equal to about Z$280 000 per kilogram compared to Z$18 000 to Z$28 000
kilogram in Zimbabwe, depending on source and quality. Technically
no reasons why a local farmer should not sell to the GMB. On paper the
retail price of maize meal is so low that the GMB price should be very
attractive. In practice this is not happening - deliveries to the GMB
been less than 100 000 tonnes total so far this year. With stock feed
compounders paying the full price for imported maize and sourcing all
foreign exchange to do so in the parallel market, they offer high
producers even though this is illegal. Roadblocks are routinely manned
GMB staff to prevent this trade, but it happens - the differentials are
But the main impact lies with the GMB which, even though the World Food
Programme is importing food to feed up to a third of our population,
itself import about 50 000 tonnes of maize a month to meet domestic
for human consumption. The numbers are frightening: -
1. At official foreign exchange rates of 250 to 1 for new dollars to
dollar, the cost of imported maize to the GMB is Z$62 500 new dollars
tonne. Add to this handling charges of Z$10 000 per tonne and the cost
of a GMB silo is Z$72 500 per tonne.
2. The GMB recovers only Z$600 per tonne from sales leaving a deficit
Z$71 900 per tonne or Z$3,6 billion new dollars a month. (US$14,4
3. The cost of these direct imports will be US$150 million a year
in combined losses of Z$43,2 billion new dollars.
With total foreign exchange availability to the Zimbabwe government via
Reserve Bank at about US$560 million per annum - all at about Z$250 to
is most unlikely that the hard currency for these essential imports by
GMB will be available - competing demands for fuel and electricity and
essential imports will consume most available resources. I still think
likely that someone or another government is in fact funding the supply
maize to the GMB at present. Traders tell me they have no idea where
money is coming from. One local maize importer says he knows but will
tell me who it is. Whoever it is should take note that a new government
will never repay such loans - designed, as they are, to simply extend
life of a bankrupt and repulsive regime.
For the rest, it's back to that statement by old Herbert and his threat
'review' the selling price of maize to millers. When he said that I bet
every Zanu PF leader in the country shivered. Can you imagine what
happen if a 10 kilogram bag of this basic essential suddenly rose in
by 10 times. There would be a revolution. Herbert knows that time is
out - such distortions in prices simply cannot be sustained
there are limits to the pockets of foreign donors. But for Zanu PF, the
sword of Damocles hangs by a slim thread, rubbed day-by-day,
by the winds of inflation.
E G Cross
Bulawayo, 5th August 2006