Experts question minimum prices in Malawi
Market analysts have questioned Malawi Government’s rationale in setting minimum farm gate prices when Malawi is a liberalised economy where market forces determine prices.
Two weeks ago, government announced minimum prices for maize, rice, paprika and other crops to help farmers make informed decisions on types of crops they should grow in the 2012/13 agriculture season.
But Farmers Union of Malawi (FUM) president Felix Jumbe contended that setting prices is in conflict with market liberalisation principles which Malawi adopted in the 1990s.
He argued that in a liberal economy, prices are determined by market forces and minimum prices do not work.
“Malawi will face huge challenges in implementing the minimum price policy. It is inconsistent with free market concept for a country to impose minimum prices for commodities,” said Jumbe
Civil Society Agriculture Network (Cisanet) executive director Tamani Nkhono-Mvula agreed with Jumbe and urged government to look at other aspects of the agriculture sector and not necessarily setting minimum prices.
“We are in a liberalised economy where market forces determine prices and what government should do is to empower Admarc so that it becomes a market leader and other traders should follow it,” he said.
Nkhono-Mvula said farmers sometimes have immediate needs and as a result, they sell their produce at any price regardless of the set prices, especially where there are no penalties for those who breach the minimum prices.
He said government is also to blame because it releases funds late for Admarc to buy farm produce. By the time Admarc comes to the market, traders have already ripped farmers off.
Nkhono-Mvula, however, felt that although Malawi is a liberalised economy, farmers need some form of protection because most of them are illiterate and have problems to understand cost margin analysis.
But Economics Association of Malawi (Ecama) executive director Nelson Mkandawire argued the minimum prices are on a lower side, saying this may encourage some farmers to smuggle their produce to foreign markets where prices are better.
“The prices are low and government should revisit them. These prices are not realistic. This is why some farmers shun the local market opting for export markets. It is wrong to set minimum prices because Malawi embraced a free market economy,” said Mkandawire.
The Ministry of Agriculture two weeks ago released minimum prices to encourage farmers make proper decisions.
Maize, according to the ministry, is expected to sell at K60 per kilogramme from K35 per kilogramme last year whereas rice paddy is now at K110 per kg up from K60 per kg last year.
Price of polished rice has been put at K250 per kg from K90 per kg last year; wheat is now at K150 from K100, paprika grade A is at K350; chillies grade A at K450 per kg and dried cassava is at K60 from K34 per kg last year.
The ministry’s spokesperson Sarah Tione in an e-mail response said the minimum prices will help famers to take good care of their crops because each agricultural crop is variable as long as it is good.
“Marketing is about the buyers and farmers; hence, the ministry’s role is to ensure that all players along the value chain are properly sensitised, especially farmers. This early announcement will ensure that information trickle to farmers in time before they harvest their crops,” said Tione.
