Making Maize Markets Work For All in Southern Africa | Oxfam | Maize

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In most of sub-Saharan Africa, maize is a staple food crop – grown on some 33 million hectares of the total 194 million hectares of cultivated land. Southern African also has some of the highest malnutrition rates in the world. Small-scale maize producers in the region face numerous obstacles and are both buyers and sellers of maize. So how maize markets work is fundamentally important – and currently they work badly. This paper explores some of the reasons why and argues that a major reason markets fail is because there is so little trust or cooperation between governments and private traders, both large and small. It concludes that unless the trust deficit is addressed, markets will continue to operate at woeful levels of inefficiency, no matter what other reforms are undertaken. 
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  OXFAM BRIEFING NOTE 12 SEPTEMBER 2016 Nalukui is a farmer in Zambia. She harvested only 10kg of maize this year due to drought, and has been forced to weed other people’s farms for 12 hours a day to make enough money to purchase food for her family. Photo: Misozi Tembo MAKING MAIZE MARKETS WORK FOR ALL IN SOUTHERN AFRICA In most of Southern Africa, maize is a staple food crop, but the region also has some of the highest malnutrition rates in the world. Small-scale maize producers face numerous obstacles as both buyers and sellers of maize. So how maize markets work is fundamentally important – and currently they work badly. A major reason markets fail is that there is so little trust and cooperation between governments and private traders, both large and small. Unless the trust deficit is addressed, markets will continue to operate at woeful levels of inefficiency, no matter what other reforms are undertaken. www.oxfam.org   1 INTRODUCTION ‘Maize is life’ – chimanga ndi moyo –  is a common saying in Malawi and a general sentiment across Southern Africa and beyond. It is impossible to exaggerate the importance of maize as a food crop 1 . High in calories, maize alone makes up 90 percent of dietary calories in poor households in Malawi. 2   Across sub-Saharan Africa, maize is grown on some 33 million hectares of the total 194 million hectares of cultivated land. 3  Despite this, Southern Africa has some of the highest rates of chronic malnutrition in the world. 4  That is the case even in normal years. In bad years, hunger and malnutrition increase to catastrophic levels. Clearly, many things are going wrong. Producers in the region living in poverty face numerous obstacles. What is sometimes less well understood is that most poor producers are both sellers and buyers of maize – sellers after the harvest, buyers before the next. How maize markets work is fundamentally important. But maize markets work badly. This paper explores some of the reasons. It argues that a major reason markets fail is that there is so little trust or cooperation between governments and private traders, both large and small. It concludes that unless the trust deficit is addressed, markets will continue to operate at woeful levels of inefficiency, no matter what other reforms are undertaken, perpetuating a history of poverty and malnutrition. 2  2 MAIZE, MARKETS, AND HUNGER Clearly many things are wrong. Small farmers in Southern Africa are locked into a set of vicious circles whose end product is hunger. The problems start with production, but production is only one aspect of the problem. Malawi, for example, has produced a national maize surplus in nine of the last 11 years from 2006/7 onwards; 7  yet every year families suffer months of hunger. The way maize is traded is loaded against the tens of millions of small-scale farmers who are both sellers and buyers of maize. Smallholder farmers toil unceasingly and with great skill and ingenuity to farm well. They seek to spread risk by varying their planting times and, if possible, locations. But they face enormous obstacles. A lack of basic irrigation infrastructure and a lack of access to capital to purchase fuel for pumps means that most maize is almost entirely rain-fed, and often on tiny plots and in poor soils 8 . In Southern Africa, where there is just one rainy season, farmers face the danger that the rain will not coincide with crucial stages of the crop’s development, combined with the threat of long spells of excessively high temperatures. Climate change is increasing these risks 9 . Farmers are frequently ill-served by their governments and by markets when it comes to being able to acquire essential inputs of seeds and fertilizers. If the cycles of the weather are erratic and hard to predict, the economic laws of the market have a grim inevitability. It is what happens after the harvest that determines whether and when people go hungry. Maize prices follow the laws of supply and demand. Very few small-scale farmers grow more maize than their family requires; most do not grow enough. Nevertheless, when the harvest arrives (from about March through to April/May), poor households face enormous pressures to sell a large amount of what little maize they have. They have to pay back debts incurred in growing the crop and they need money for school fees and to buy other necessities. With so many people pressed to sell, prices fall. Small-scale growers may sell some maize themselves, sometimes travelling long distances to market; or they sell to village maize-buyers and petty traders who aggregate supplies. “IT IS WHAT HAPPENS AFTER THE HARVEST THAT DETERMINES WHETHER AND WHEN PEOPLE GO HUNGRY.” The petty traders in turn have little access to credit or storage. They too may travel long distances, including across borders, to sell maize and/or to buy it; but with so many people trading, competition is high and returns may be low. Samson, a trader from Malawi, told Oxfam how he went to buy maize flour from Zambia along a 47km road which is almost impassable in wet weather. He said : ‘I have spent three days on the road, got soaked in the rain just to bring 25 bags of flour. On the three days I was away, people were calling me [to ask] when would I bring the commodity because they have no food’.   Headline figures Zimbabwe Rural poverty: 76% Child stunting: 32% 6   Child underweight: 10% HIV/AIDS prev.: 15% Malawi Rural poverty: 57% Child stunting: 47% Child underweight: 13% HIV/AIDS prev.: 11% Zambia Rural poverty: 78% Child stunting: 40% Child underweight: 15% HIV/AIDS prev.: 13% Mozambique Rural poverty: 57% Child stunting: 43% Child underweight: 19% HIV/AIDS prev.:11% 3  Small traders therefore quickly sell much of their stocks to larger traders. Larger traders accumulate the maize and pay to transport and store it –therefore bearing the costs and risks. They then release it for sale when there is peak demand, and higher prices. This occurs as the lean season draws on again, which may be from November/December onwards, but which can come much sooner for the poorest households. The drought of 2015/16 meant that for many of these, the lean season has started as early as August/September. The lean season starts when families have eaten the maize that they have kept and must go to the market to purchase more – in effect buying back the maize they produced just a few months earlier. But at this point, there are many buyers, and the price also reflects the costs incurred for storage and transport (which are significant, given the often dilapidated state of the infrastructure). So prices escalate, reaching a peak from January to March,  just before the next year’s harvest . Poor households, who sell the least maize and purchase the most, must sell low and buy high: the essence of a poverty trap.   Extreme reliance on maize for food – in culture and psychology the terms are almost synonymous – has a further cost too, in terms of health. Although it is a good source of calories, as well as some vitamins and minerals, a diet of little else but maize can cause protein and nutritional deficiencies, especially in children. Vitamin A deficiency in particular is widely prevalent because the preferred white maize does not contain beta-carotene, which the body converts into vitamin A. This season’s maize harvest across Southern Africa was hit by drought caused by climate change and El Niño. Poor households had little to sell and when they came to start buying maize again, they found prices had sharply increased; average maize prices in Malawi even in June were 193% above the five-year average. Steve, a small-scale trader in Mulanje, Malawi, said: ‘If we reduce the price, say to 200 Kwacha (US$ 0.30), we will be out of business. Market forces are determining the price and it is hurting consumers, but there is nothing we can do, we are in this problem together.’ “EXTREME RELIANCE ON MAIZE FOR FOOD HAS COSTS IN TERMS OF HEALTH.” Furthermore, poor people must have the money available to be able to buy back their maize. Again, the laws of supply and demand govern availability and remuneration for labour. Especially in times of drought and agricultural and economic stress, as happened in 2015/16, more people – both men and women – are out looking for work as farm labourers, but farms with poor crops have few labour opportunities and wages are low. Loss of livelihoods and cash shortages in turn hit the incomes of the small traders trying to sell maize. Women are core participants in the whole market chain, as growers, workers and traders. Yet, as is well documented, women have limited access to and control of resources, and the additional roles of caring for children and the household. In rural households in many parts of the region, women may be acting as caregivers not only for their own children but also for numbers of orphans due to HIV and AIDS. They may be sick themselves. This increases the necessity for women to participate in the economy, and limits their ability to ‘The marketed agricultural surplus is exceedingly concentrated among a small group of relatively larg e smallholders’. 10   Less than 3% of rural farm households in Malawi sell more than 100kg/adult of maize as net surplus. 11  More than 90% of rural farm households either break even, or are net maize purchasers. In Zambia, officially a lower-middle income country, over 70% of households either break even or are net maize purchasers. 12   Transportation costs are exceptionally high in the landlocked countries of Southern  Africa, primarily as a result of clearance delays at borders and the poor state of road infrastructure. 13   4
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