HomePoliticsGMB forecast to incur $302b loss

GMB forecast to incur $302b loss

Itai Dzamara

THE Grain Marketing Board is forecast to make a $302 billion loss as a result of government’s land reform programme and its populist policy of price controls, investigations

by the Zimbabwe Independent have revealed.

Documents in possession of this paper show that the parastatal has been trading maize and wheat at huge losses to cover up for the acute shortages caused by the chaotic land reform.

In his submissions to the Budgetary and Development Committee for the 2003-2004 recurrent and capital expenditure budget, GMB acting chief executive officer Colonel Samuel Muvuti said the parastatal would make a loss of $301,7 billion. He attributed the loss to the controlled prices of wheat and maize.

“The year 2003/2004 recurrent budget shows a budgeted loss of $301,7 billion against a loss for 2002/2003 of $24,8 billion,” said Muvuti.

“The budgeted loss is largely attributed to trading activities in major crops which are not viable. The loss will arise from the controlled prices of wheat and maize. The two crops will account for almost 100% of all commodity-trading activities,” he said.

While Lands and Agriculture minister Joseph Made has imposed price controls on the commodities, government has failed to pay a subsidy to keep GMB viable.

“For the past three years government has not provided money for the board’s recurrent and capital expenditure despite sometimes having to direct/instruct the board to sell below cost, particularly for maize and wheat,” Muvuti said.

The GMB has been buying local maize at $130 000 a tonne, while importing at US$169. The parastatal would then sell the maize to millers at the controlled price of $9 600 a tonne. The GMB has been buying local wheat at $150 000 a tonne and importing at $212 000 before selling the commodity at $30 100.

The losses incurred by the GMB through the trading of maize and wheat easily eroded little profits realised from the selling of other crops, the majority of which have been notching profit margins of below 1%.

The GMB however hopes for a reprieve from the recently approved “break-even prices” for maize and wheat. The government has approved a maize selling price of $272 987 a tonne and $305 487 for wheat.

The sharp increase in the selling prices of the maize and wheat has inevitably triggered off chaos on the consumer market with millers raising prices of flour and maize meal. Bakers have also responded by increasing bread prices by over 100%.

The effectiveness of the break-even prices in extricating the GMB from losses hinges on availability of foreign currency because more than 80% of the country’s wheat requirements for the current year have to be imported. Wheat imports of 334 000 tonnes would require US$83,5 million while 816 525 tonnes of maize would require US$163 million, Muvuti said in the submission.

The ability to stave off the serious deficit through the new pricing regime also depends largely on the official exchange rate. Forecasts were made using the official exchange rate of $848/US$1.

The other options through which the GMB could achieve viability would be to borrow from the market as well as obtaining a government subsidy. Muvuti however cast doubts over both options.

“The GMB cannot sustain an (accumulated) debt position of $365 billion,” said Muvuti.

“The current sentiments on the market indicate that financial institutions will find it difficult to support Grain Bills of this magnitude.

“For the past three years, government has not provided money for the board’s recurrent and capital expenditure,” he said.

An analyst said the huge deficits incurred by the GMB could have been avoided had government taken note of calls to decontrol trade in wheat and maize.

“Individual millers should have been allowed to import wheat, thereby dictating realistic prices of flour and bread on the consumer market. The $105 billion deficit caused by wheat trading could have been avoided,” the analyst said.

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