Cheap maize imports tilt trade balance for SA

Kenya’s hope of checking its trade imbalance with South Africa faces a major setback as demand for cheaper unmilled maize imports grows, despite the bumper short season harvests in the local market.

Market players say sub-standard grain resulting from poor storage and the high cost at which the local farmers are selling their produce has created an avenue for maize from southern African countries like Malawi, South Africa and Zambia which have all experienced bumper harvests.

“Even a bulk buyer like WFP last week raised concern over the poor storage conditions for grains and may discontinue procuring from local sellers if things don’t change,” said Mr Steve Muchiri, CEO, Eastern Africa Farmers Federation (EAFF).

In a message posted on its website, the country officials of WFP say high food prices have hit many households in spite of the ongoing heavy rains.

“In many places, the market price for maize is 70 to 80 per cent above the long-term average while in urban areas, around 3.5 million Kenyans are struggling to buy sufficient food on the market,” says the WFP.

A difficult domestic market is likely to create loophole for the cheaper southern Africa maize to swamp the local market.

The price of maize has fallen drastically in Zambia, Malawi and South Africa to equivalent of Sh1,000 a bag compared to the Sh2,300 at which the government buys maize from local farmers.

Under the East African Community external tariff arrangement, maize from South Africa attracts 50 per cent import duty to enter the region’s market, meaning clever merchants can still ship in the commodity in large quantities to benefit from economies of scale.

Last year, a duty free maize import window created by the government to boost food security in the country only widened the trade imbalance with South Africa, thwarting the efforts of a joint trade commission formed by the two countries to correct the terms of trade.

Under the duty free facility, Kenya’s maize import from South Africa jumped from Sh5.57bn in 2008 to 23.64bn last year pushing imports from South Africa up by 51.1 per cent from Sh46.69bn in 2008 to 70.56bn last year.

Players in the grain sector have expressed concern that this trend will continue unless concerted efforts are put in place to address the existing supply bottlenecks.

South Africa is currently struggling to find a market for over 13 million tonnes of maize— its second largest maize harvest on record.

“The problem with southern African maize is that most of it is genetically modified, meaning it gets to the local market without proper vetting,” said Mr Muchiri.

Kenya passed its Bio Safety Act last year but the Agriculture ministry is yet to operationalise it.

The Act envisages the creation of a Biosafety Agencies to approve and vet the importation of GM foods.