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THE
GRAIN AND OILSEED INDUSTRY
OF SOUTH AFRICA – A JOURNEY THROUGH TIME
ႃႊ
Stabilisation fund
After the very good profits the Maize Board had made with exporting maize in 1950
and 1951, the idea developed to start a stabilisation fund. Two schools of thought
existed about this: On the one hand there were persons who believed that the
government was responsible for stabilising maize prices and that the profits and
losses with respect to exports should be for the government’s account. On the
other hand there were those who maintained that the profits that were realised
with exports should go to the producers.
Eventually the Stabilisation Fund was established in 1953/1954 when the Maize
Board decided to pay the profits that had been made with maize exports in previous
years, together with the contributions of consumers and the government, into
a fund that could be used to cover possible future export losses and contribute
towards the stabilisation of the producer price for maize. At the same time the
Maize Board decided that the Stabilisation Fund would in future be supplemented
by contributions by producers as well as consumers and the government.
Analysts from the maize industry are of the opinion that the price policy followed
by the Maize Board contained an incentive that was big enough to stimulate in-
creased maize production, which ultimately led to overproduction. This resulted
in several years of the Maize Board having to export the surplus maize at a loss
because the domestic producer price was higher than the ruling prices globally.
The Stabilisation Fund made valuable contributions towards recouping export
losses and stabilising the industry in various other respects, often by subsidising
the producer price for maize.
At times the Stabilisation Fund was very strong, but because of losses with the ex-
porting of maize in the period since the 1977/1978 season, interest that had accrued
on the accumulated debt and deficits that had arisen from an exchange transaction
with Romania, the Stabilisation Fund was eventually exhausted.
On 1 May 1980 the Stabilisation Fund still had a positive balance of R5,2 million.
However, from the 1981/1982 marketing year the practice of using production
costs as the basis for determining the producer price for maize was gradually
replaced by a system in which the producer price was set by the Minister after
negotiations with the Maize Board. The levels at which the producer price was
fixed in this period were often higher than the international price, so that surplus
maize was exported at a loss. These losses were borne by the Stabilisation Fund
and eventually contributed to the deficit that developed in the fund.
In 1982 the deficit in the Stabilisation Fund was roughly R53,7 million, but by
April 1983 it had already grown to R213 million. The position worsened further and
on 30 April 1987 the deficit in the fund amounted to approximately R481 million.
Representatives of the Maize Board sign an export contract with the Republic of China
in 1986.