Alternatives for a maize export pool

July 2010

Dr Kobus Laubscher, CEO

 

The ruling by the Competitions Commissioner about the legality of the proposed export pool once again highlighted the gravity with which the authorities view competitiveness.

Should the proposed export pool operate properly, it would prevent producer prices declining further and as such deny the consumer the benefits of lower prices. The fact that the outcome of such an export pool would lead to increased local producer prices with the resulting higher consumer prices meant that the benefits and disadvantages had to be weighed against each other.

Greater competitiveness has as its basis the protection of the interests of the consumer and any action in opposition to this is considered to be outside the law. The only recourse for the potentially disadvantaged, the producers, is to apply for exemption from the provisions of the relevant legislation.

Such a process then weighs the absence of profitability and the detrimental effects thereof for primary agriculture against the disadvantages for the consumer as a result of increasing prices. Grain SA is in the process of applying for exemption but the process is long and drawn out with a reasonable certainty that the outcome will have no impact on the current market conditions.

That leaves less but still possible strategies for immediate, medium term and long term implementation. Immediate actions include, interalia, to exploit to the maximum any export opportunity. This applies especially to deep water exports and there are indications that administrative red-tape has a delaying effect on any export opportunities.

About this there have already been consultations at ministerial level. The agro logistics will have to complement these heightened actions and as such places inter departmental co-operation in the forefront. Disfunctionality is unacceptable because any actions or lack thereof that might or could hamper exporters will have to be exposed fearlessly.

The level of the import tariff on wheat must urgently be taken further (which in fact is currently in process). The government has in this instance lost a golden opportunity by not in the least utilising the timeousness of announcing of the inadequate level of the import tariff in favour of bigger wheat plantings. By giving logical incentives timeously to wheat producers, a restructuring in terms of hectares utilised would have been achieved. The fact that South Africa for the first time in almost 100 years has to import more wheat than can be produced locally will be consigned to history as an irreversible injury with regard to food security. Those with jurisdiction to review the tariff must be called to order even if legal action is required!

Expansion of the local demand for maize is past the “talk about it” phase. It is just unacceptable that unprocessed grains must be exported whilst a significant amount of food products (with maize as input) are imported. Here the government can play a leading role with protectionist regulations and incentives for investments to add value locally. The overseas demand for exportable maize from South Africa is definitely higher because of the low prices for maize with the resulting under valuing of the South African product.

Expansion of the local demand for maize indisputably points to an urgent review of policies with regard to maize as an input for biofuel. The previous arguments against the inclusion must be challenged and review made unavoidable. The fear for insufficient staple food is unfounded. The opportunity costs of the non-inclusion and the lack of urgency to adjust policy is getting higher and higher and for the account of the primary producer.

Competitiveness with regard to production with a resulting ability to make a profit at export parity prices remains equally important and despite continuing productivity improvements through new technology, the costs of inputs will also have to adjust as the identification and exposure of non competitive business practices get underway. The answer remains to do more with less.

Publication: July 2010

Section: Editorial