The Effects of Market Reform on Maize Marketing Margins in South Africa: An Empirical Study

This paper determines the effect of market reform and price decontrol on the size of maize milling/retail margins in South Africa. Regression models of monthly milling/retail margins are run over the period May 1976 to September 2003. To assess the robustness of our findings, we estimate several different model specifications for representing structural change, vary the sample period to examine the sensitivity of findings to unusual weather and market conditions in the region during the 2001-2003 period, and use different estimation techniques, OLS with Newey-West robust estimators and Feasible General Least Squares. In virtually all models, the results indicate that real maize milling/retailing margins in South Africa have increased since the market deregulation in 1997. Controlling for disturbances in weather, wages, exchange rate levels and volatility, inflation-adjusted margins accruing to millers and retailers have risen 29 to 42 percent between 1997 and 2003. Unlike experiences elsewhere in the region, maize market reform in South Africa has not benefited consumers.Maize milling/retailing marketing margins, Market Reform, Ordinary Least Squares, Feasible General Least Squares., Crop Production/Industries, Marketing,

Measuring Integration and Efficiency in Maize Grain Markets: The Case of South Africa and Mozambique

Price transmission between the South African market and other regional markets is not as straightforward, despite South Africa’s role of a surplus producer for the region. There appears to be a host of local factors that must be taken into account in order to anticipate the likely level of regional food prices. This article assesses the degree of market integration and the speed of price adjustment to spatial price differentials between the SAFEX maize price in South Africa and maize grain and maize meal prices in Maputo, Mozambique. The findings of this study indicate that under certain trading regimes, there is no evidence of a long-run relationship between Mozambican and South African maize grain prices. This implies that any large deviations, within these regimes, which exceed transaction costs, could continue to grow with no tendency towards equilibrium. However, the trade volume data indicates maize grain exports from South Africa into Mozambique in every month except for three within the sample set. Hence, the empirical findings of this paper are unexpected given a simple arbitrage argument. Possible reasons for these findings are highlighted in the article. It is interesting to note that when the same empirical analysis is undertaken for the SAFEX maize prices and maize meal prices in Maputo then there is in fact evidence of a long-run relationship between these prices in a high import regime. These findings are not surprising and are what we would expect since two of the largest milling companies, located in Maputo are responsible for the majority of the volume of maize grain imported into the country from South Africa.price transmission, market integration, cointegration, trade regimes, Crop Production/Industries,

Trends shaping Africa's agricultural landscape

International audienc

Modelling wheat and sugar markets in Eastern and Southern Africa. Regional Network of Agricultural Policy Research Institutes (ReNAPRI)

The medium-term outlook for wheat and sugar markets in Kenya, Tanzania, South Africa and Zambia depicts a mixed picture with regard to production, consumption, prices and trade development. It takes the latest trends, policies and market information into consideration, but remains subject to many uncertainties on upcoming market development, macroeconomics or policy changes over the period 2015 to 2024.JRC.D.4-Economics of Agricultur

Megatrends and the future of African economies

This article argues that these projections about Africa’s future are a good deal less certain than the conventional wisdom might suggest. Foresighting exercises are often based on tenuous evidence of key underlying trends and tenuous assumptions about the degree to which these trends are inevitable exogenous forces. Most current trends are neither irreversible nor inevitable. Just as the current trends being observed in African food systems are the outcomes of the policies and public investment patterns of prior decades, the future will be shaped and transformed by today’s policy actions—either those taken proactively or those taken passively as a result of no action (Seidman 1973). This point may be underappreciated by development thinkers who speak in terms of inevitable transformationsNon-PRIFPRI1; ReSAKSSWCAO; ESA

An assessment on the impact of agricultural spending types on agricultural growth: A case for Zambia, Malawi, South Africa

AbstractThis study examines the relationship between agricultural GDP growth and government spending on input subsidies, agricultural research, price support programs and infrastructure development in Zambia, Malawi and South Africa. The study compiled government expenditures to different agricultural areas from the year 2000 to 2014 using a variety of data sources such as government budgets, public expenditure reviews, and working papers. The Augmented Dickey-Fuller test was used for unit root testing and the variables were found to be non-stationary at their levels but stationary after differencing. After testing for co-integration among the variables, the error correction model (VECM) was then employed using the Stata software to assess the impact of government spending components on agricultural GDP growth. The study found agricultural research expenditure to be more growth-enhancing only in Zambia and South Africa. A positive relationship was obtained between agricultural growth and infrastructure expenditure in Zambia and Malawi while spending on infrastructure in South Africa had a lower growth impact. Even though spending on input subsidies in Malawi positively influenced agricultural GDP, contradicting results were observed in Zambia and South Africa. The study recommends the governments in the three countries shift their spending priorities and disburse more funds to more growth-enhancing areas. This study differs from previous studies in that it disaggregates total government expenditure into four crucial components that dominate budgetary expenditures in Sub-Saharan countries and examines as well as compares their impact on agricultural growth

Understanding the smallholder farmer in South Africa: Towards a sustainable livelihoods classification

Smallholder agriculture in South Africa has been identified as the vehicle through which the goals of poverty reduction and rural development can be achieved. To fulfill such potential, the need arise to understand diversity among these households to formulate effective policy interventions. This paper develops a farm typology of smallholder households according to their dominant livelihood strategies. Using multivariate statistics, Principle Component Analysis (PCA) and Cluster Analysis (CA), farming households are grouped in 7 distinct, homogeneous clusters. Results show the importance of social grants, specifically old age pensions and child support grants, in determining livelihood strategies of many smallholder farmers in the former homeland regions. Further evidence suggests that only a small number of households are able to market their produce. Essential characteristics of this group are the prevalent labor market attachment, higher usage of family labor and access to credit

The Effects of Market Reform on Maize Marketing Margins in South Africa: An Empirical Study

This paper determines the effect of market reform and price decontrol on the size of maize milling/retail margins in South Africa. Regression models of monthly milling/retail margins are run over the period May 1976 to September 2003. To assess the robustness of our findings, we estimate several different model specifications for representing structural change, vary the sample period to examine the sensitivity of findings to unusual weather and market conditions in the region during the 2001-2003 period, and use different estimation techniques, OLS with Newey-West robust estimators and Feasible General Least Squares. In virtually all models, the results indicate that real maize milling/retailing margins in South Africa have increased since the market deregulation in 1997. Controlling for disturbances in weather, wages, exchange rate levels and volatility, inflation-adjusted margins accruing to millers and retailers have risen 29 to 42 percent between 1997 and 2003. Unlike experiences elsewhere in the region, maize market reform in South Africa has not benefited consumers

Opportunities to Improve Household Food Security Through Promoting Informal Maize Marketing Channels: Experience from Eastern Cape Province, South Africa

Maize meal is a staple food in South Africa, particularly among the poor. The South African government by the mid-1980s enacted a series of legislations aimed at reducing the role of government within the market and placing increasing reliance on market forces and the private sector. Ex post studies of the impact of maize market reform in neighboring countries found that, in general, the reforms led to lower maize milling/retailing margins in real terms. However, in the case of South Africa, recent analysis indicates that maize market reform has not reduced processing and retailing margins in the maize meal supply chain. The study objectives are to determine actual and potential consumer demand for the types of maize meal capable of being produced by small-scale mills, to measure the potential impact of small-scale grain retailing and milling channels on households’ disposable income and food security, and to identify the factors responsible for the negligible role of small-scale milling sector in South Africa