Experts weigh in on maize subsidy
Corporate governance expert James Kamwachale Khomba says while the decision by government to subsdise maize for low income earners may cause serious concerns about Admarc’s financial sustainability in the short to medium-term, human life with its long-term survival is of paramount consideration.
The expert said Tuesday that it is unfortunate that government is not even giving relief funding to the micro, small and medium enterprises (MSMEs) for their financial sustainability.
“It is a tough and unprecedented situation that requires commensurate tough and unprecedented decisions,” said Khomba.
On Sunday, President Lazarus Chakwera announced that as cushion measure, government will subsidise the price of maize in its Admarc markets to enable those whose incomes have been negatively affected by the Covid-19 pandemic to access food.
In a written response, Admarc public relations manager Agnes Ndovi indicated when government subsidises maize, it bears the price gap between the actual market price and the subsidy price.
Treasury spokesperson Williams Banda said that for social obligations as is the case now, Admarc recovers from government the subsidy component what we call cost recovery.
“This is to make sure that Admarc does not make a loss on the transaction on account of playing a social obligation on behalf of government,” he said.
As at half year of the 2019/20 financial year, Admarc recorded a negative gross profit margin of 0.61 percent which translated to negative K3.8 billion.
The liquidity position of Admarc has also not been good.
Treasury figures show that at mid-year, the current ratio had worsened to 0.91:1 and it was projected to further worsen to 0.71:1 by June 2020 indicating the corporation’s inability to meet short term obligations as they fall due.
The decision to subsidise the maize comes on the back of a K22 billion loan facility which Admarc took in October last year from commercial banks following Treausry’s authorisation.
Already, Admarc has been selling the staple grain at a subsidized price of K160 per kilogramme or K8 000 per 50 kg bag.
However, at this rate, the price is K4 500 below the buying price of K250 per kg or K12 500 per 50kg bag, which was arrived at in November last year.
On the produce retail market, maize is selling at an average of K220 per kg or K11 000 per 50kg bag.
Speaking separately, agriculture commentator Tamani Nkhono-Mvula, while applauding government for the bold decision in the wake of hunger and reduced incomes, observed that the move may not have much of an effect if government is going to meet all the costs incurred to Admarc.
