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AMA revival: another Made disaster looms

Vincent Kahiya

AGRICULTURE minister Joseph Made is never short of plans

to wreck the agricultural sector. The agriculturalist who is credited with the uncanny accolade of authoring the country’s hunger, last week unveiled plans to revive the Agricultural Marketing Authority (AMA) and take over the marketing of tobacco.

Made’s list of casualities in agriculture is growing and his move against tobacco should see the industry, once the envy of tobacco growing nations, going up in smoke. His misdirected policies have already damaged grain production, ravaged eco-tourism and reduced production in the horticultural sector. Zimbabwe is no longer a key grain producer in the region and the country is set to lose its position as a world leader in the production of the crop.

The AMA, a relic of the Rhodesian government was established in 1967 and was adopted by the new Zimbabwe government in 1980 to suit its command economy.

The government wants to bring back this remnant of regulation to justify its pro-poor agrarian policy, which is yet to make an impact on economic empowerment of the peasantry.

Made was last Friday quoted in the government press as saying the revival of the AMA would help resettled farmers to adequately finance crop production and also help them to market produce “to the best possible advantage”.

The Agriculture minister said the current auction system used in buying tobacco from farmers did not meet the requirements of small-scale growers who were now the main producers after the demise of large-scale commercial agriculture. Made is proposing a contract system in which the government fixes the producer price of tobacco while becoming the sole buyer of the crop.

“There is indeed nothing wrong with this as it has happened elsewhere in the world,” Made was quoted as saying. “We cannot stand idly (by) when the auction principle has virtually become non-existent, with buyers acting like cartels.”

But as has been the case with his agrarian reforms since 2000, the revolutionary change in the crop marketing policy is bound to fail and with disastrous effects on the country’s sophisticated tobacco industry. 

Tobacco and horticultural produce, with their complex marketing systems have generally remained out of government’s clutches. In the mid-1990s they realised immense growth at a time when other crops were witnessing decline. Zimbabwe has since grown into a country with one of the most sophisticated tobacco industries in the world, which matched its status as a major producer of the crop.

But the lustre of the golden leaf has in the past two years waned as a direct result of government’s exchange control regulations which have made the crop unprofitable.

The current preferential rate of US$1:$824 for tobacco farmers has remained a source of irritation for producers who want an upward revision of the rate to match ever-rising production costs.

As the rate remains depressed, farmers have realised lower earnings, which Made has conveniently blamed on the tobacco floors.

Made believes centralised marketing of crops through the AMA is the panacea to the pricing woes. While he sees nothing wrong with his envisaged new pricing formula, history should remind him that the AMA was disbanded after it became a huge drain on state funds.

The AMA’s single-channel marketing system operated by the marketing board before it was disbanded in 1994, was designed to guarantee state procurement and disposal of surplus production. The effective control of prices by government required suppression of uncontrolled private trading that would interfere with the aims of the official marketing system.

The AMA achieved this by mandating a state monopoly on cross-border trade. It prohibited private movement of controlled products across district or zonal boundaries and ensured the preferential supply of grain to a select group of ‘vertically integrated’ industrial processing firms.

The system saw government marketing crops through four parastatals: the Grain Marketing Board (GMB), the Cotton Marketing Board (CMB), the Dairy Marketing Board (DMB) and the Cold Storage Commission (CSC). The government through the AMA believed then that controlling producer prices would improve resource allocation, promote self-sufficiency in food production, reduce price and income instability, and retain expertise and capital within the agricultural sector

The AMA ensured that producer and selling prices for controlled commodities were fixed by government following recommendations by the Ministry of Agriculture and negotiations with producers. Cost-plus pricing was the main method used to arrive at the price. However, the final price was derived from interrelated factors that were weighted individually according to the commodity in question.

But this came at an immense cost to the economy.  The deficit of the four marketing boards under the control of the AMA amounted to 51% of government expenditure on agriculture and between 3% and 6% of total government spending in the mid-1980s. The drain on the national purse was a major factor encouraging the adoption of market-driven agricultural reforms in 1991.

The system of deciding on producers prices was labourious and bureaucratic while government subsidies failed to match the financial requirements of the agro-parastatals. The results of this were obvious. The boards soon found themselves in huge debt and at one time the GMB failed to pay farmers for maize delivered to the depots. The solution was to commercialise the parastatals.

Reform of the marketing boards began in 1990 with the ultimate aim of full commercialisation with CMB forming Cottco and DMB forming Dairibord, which were both subsequently, listed on the Zimbabwe Stock Exchange.

The government then attempted to withdraw from direct price intervention to give GMB and CSC a measure of autonomy but this withdrawal was soon reversed, especially in the maize sector.

Although the government said it was commercialising the CSC to form the Cold Storage Company nothing tangible has happened beyond the change of name. The company is still debt-ridden and has been forced to close its abattoirs.

The GMB is also labouring under debt, which has continued to grow mainly due to unrealistic pricing decided by the government.

Last year Made ordered the GMB to buy maize from farmers at $130 000 a tonne and sell to millers at $9 600 a tonne. This not only worsened government’s debt and cut deliveries to the GMB, it also fuelled the black market maize trade.

The quest to make the government through the AMA the sole buyer of tobacco, analysts say, could see the illegal trade of the crop across the border to countries operating the floor system. Unconfirmed reports say there was already illegal trafficking of tobacco through Beitbridge to South Africa where farmers secure better prices.

The announcement by Made last week is not surprising as the government under the current land reform policy has already adopted the old AMA measures in the marketing of crops.

During the AMA era government announced producer prices before season’s planting. This it believed would boost producer incentives as it reduced risk and uncertainty and enabled farmers to make decisions based on relative prices.

The government at the time also announced uniform pre-harvest and post-harvest prices, which benefited farmers in outlying areas at the expense of those close to the market.

These measures have already become the hallmark of the grain trade since the government introduced measures to control the trade two years ago.

Agricultural experts said the pre-planting pricing regime and pan-territorial prices policy did not make sense in the prevailing hyper-inflationary environment.  The system only works effectively when farmers have the requisite inputs. Currently the government input scheme has not been translated into productivity due to lack of funding and poor logistics. Farmers using their own resources to acquire inputs have been forced to sell their produce to government albeit at a loss.

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