Agricultural and Food Policy, Downloads July 2008-July 2009: 38,

Chisvo, Munhamo

Jayne, Thomas S.

Johansson, Robert C.

Mukumbu, Mulinge

Santos, Paula Mota

Soroko, David

Tschirley, David L.

Weber, Michael T.

Zulu, Ballard

English

Research Papers in Economics

Page 1
Global Bureau, Office
of
Agriculture and
Food Security
Office of Sustainable
Development
POLICY SYNTHESIS
for USAID - Africa Bureau
Office of Sustainable Development
         Number 39                              February 1999
SUCCESSES AND CHALLENGES OF FOOD MARKET REFORM:
EXPERIENCES FROM KENYA, MOZAMBIQUE,
ZAMBIA, AND ZIMBABWE
By
 David Tschirley, T.S. Jayne, Mulinge Mukumbu, Munhamo Chisvo, Michael T. Weber, Ballard Zulu,
Robert Johansson, Paula Santos, and David Soroko
Food Security II Cooperative Agreement between U.S. Agency for International Development, Global Bureau, Economic Growth Center, Office of
Agriculture and Food Security and Department of Agricultural Economics, Michigan State University
BACKGROUND:  Governments in Eastern and
Southern Africa have transformed their food
economies over the past decade.  Despite much
evidence showing the impressive achievements
of food market reforms, the reforms have
created acute political dilemmas for governments
amidst protests by powerful groups who
perceive their interests to be threatened by the
reforms.  As a result, policymakers have faced
difficult decisions in defining a consistent and
effective role for the state in the newly emerging
food marketing systems.
A key feature of each of these challenges is the
need for a better understanding of how to
stimulate private investment in the food system;
this understanding may be critical to avoid
situations in which perceptions that “the private
sector will not respond” become a self-fulfilling
prophecy.
OBJECTIVES AND METHODS:  This paper
describes the different courses of food policy
reform pursued in recent years by four countries
in Eastern and Southern Africa, and documents
their differential effects on farmer and consumer
behavior.  Results are based primarily on a
survey and synthesis of recent analysis.   The
paper highlights lessons learned and thus provides
insights into the costs and benefits of alternative
strategies for promoting national food security
and enhancing producer and consumer options. 
FINDINGS: Maize during the post-
independence period became the cornerstone of a
“social contract” between governments and the
African majority, in which the controlled
marketing systems inherited by the new
governments at independence were viewed as the
ideal vehicle to redress the historical neglect of
smallholder agriculture and at the same time
ensure cheap food for the urban population.
While this approach achieved uneven success in
promoting smallholder incomes and consumer
welfare, one result in all cases was an
unsustainable drain on the treasury and resulting
macroeconomic instability
1. This instability culmi-
nated in structural adjustment programs being
implemented in each country.
It is this fiscal crisis and pressure from
international lenders, more than local
commitment to the process, that have been the
principal driving forces behind food market
reform.  As a result, each country has, to varying
degrees, suffered from policy reversals and 
FS II Policy Synthesis No. 39
Page 2
60
80
100
120
140
160
Wholesale markets, Lusaka Into-Mill price, Indust. Millers
May Jul Sep Nov Jan Mar
c
o
n
s
t
a
n
t
 
1
9
9
4
 
Z
K
 
p
e
r
 
k
g
Figure 1. Seasonal Average Maize Grain Prices in
Zambia, Wholesale Markets vs. Into-Mill Prices
for Industrial Millers, 1993-1998
inconsistent and unclear policy directives.  The
difficulty of competing with government
subsidies, and the uncertainty about what
government policy will be, have created a
situation where the common perception that “the
private sector won’t respond” to liberalization
threatens to become a self-fulfilling prophecy. 
One area where the private sector has responded
vigorously to reform is in informal marketing
and small-scale milling, with important
implications for consumption by low-income
consumers.  Due to lower unit processing costs,
retail prices of whole meal are typically 60% to
75% of refined meals.  Poor consumers respond
to these lower prices; by 1994 whole meal
accounted for 40%-60% of urban meal
consumption in Zimbabwe, Kenya, and Zambia
(Jayne et al. 1995).  The increased availability of
whole meal at  these reduced prices has largely
offset the adverse effect of eliminating consumer
subsidies on roller meal.  Similar benefits have
been achieved in rural grain-deficit  areas that
were formerly dependent on refined meal.
The next sub-sections briefly review the maize
system reform experiences of Zambia, Kenya,
Mozambique and Zimbabwe, highlighting key
lessons and challenges for each.
ZAMBIA:  Zambia has made major strides
moving from a state-led to a market-oriented
food economy.  The maize marketing board was
abolished in the early 1990s, and the milling
industry was privatized in 1995.  Multinational
firms are now active in  maize and fertilizer
marketing in smallholder areas, and controls on
private maize importation have been relaxed.
Zambia needs to import maize during most
years.  Political and economic stability are tied to
ensuring adequate supplies at tolerable prices in
urban and mining areas.  This fact, and lack of
government confidence that the private sector
would adequately respond to the challenge, have
lead to government actions making it more
difficult for the private sector to play a positive
role in ensuring food security for consumers.  In
1995 the government established the Food
Reserve Agency (FRA), officially charged with
holding strategic grain reserves.   In practice,
FRA has also subsidized industrial-milled meal by
making subsidized maize available to selected
industrial millers.  In so doing, the government
has disadvantaged the small-scale millers who had
been the most vigorous in responding to the
liberalized policy environment.  FRA has also
imported maize and sold it on local markets,
sometimes at below market prices.  These
operations create great uncertainty for private
traders regarding the FRA sales price and its
ability to effect the needed imports.  Foreign
exchange shortages also limit the amount of grain
local millers and traders can import, while
conveying advantages to international firms with
ready access to foreign exchange.  These are clear
cases where government actions threaten to lead
to the self-fulfilling prophecy that “the private
sector will not respond.”
One result of these policies is that consumers pay
more for maize meal than they otherwise would.
Figure 1 shows seasonal maize grain prices in
Lusaka in open wholesale markets, and at
industrial mills for the period 1993-1998.  In the
harvest and early post-harvest period, maize is
readily available and prices in open markets are
substantially below those in industrial mills. FS II Policy Synthesis No. 39
Page 3
Later in the season, supplies in these markets
dwindle, while millers gain access to imported
and FRA supplies, the latter frequently
subsidized.  As a result, open market prices
exceed into-mill prices later in the season.  The
higher prices and reduced availability of maize
on local markets results in real losses for
consumers: estimated expenditures on maize
meal by urban consumers would decline by
roughly 11%, or US$12 million annually, if
imported maize grain and buffer stocks were
released onto public markets instead of being
channeled to selected millers.
2 
KENYA:   Like Zambia, Kenya has transformed
its maize marketing system over the past decade,
with one crucial difference: the private sector
now handles all maize grain imports.  Thus,
Kenya has eliminated the primary source of
policy uncertainty and private sector disincentive
that continues to negatively affect the Zambian
food system.
3
Kenya has very high proportions of net buyers in
rural areas, 61% nationally and over 80% in
some areas.  Not surprisingly, in a national
survey conducted in 1997, most rural households
stated a preference for low rather than high grain
prices, and this preference was stronger among
net buyers of maize.  About 60% of households
surveyed felt that the availability of maize grain
for purchase had improved since the transition to
a liberalized system, and majorities in every area
felt that it had become easier to sell grain under
the current system.  Overall, 61% of respondents
said that they preferred the current liberalized
system to the previous system of greater state
control.  
Due perhaps to this widespread satisfaction with
the results of market reform, the Kenyan
government has made few policy reversals.  The
one exception is external trade: import tariffs on
maize were introduced in 1996.  Though meant
to protect producers, the high proportion of net
maize buyers in rural areas suggests that most
rural households will be disadvantaged by these
tariffs; urban consumers will clearly suffer from
reduced purchasing power.  Recent research has
indicated that the maize market reforms have
reduced expenditures on maize meal by roughly
US$10 million per year by Nairobi consumers
alone, by raising their access to low-cost grain for
milling (Argwings-Kodhek and Jayne 1997).
Rural net buyers have also benefitted.  The
savings for both these groups would be still
greater in the absence of the current import
tariffs.
MOZAMBIQUE:  Liberalization of
Mozambique’s economy began earlier than it did
in Zambia, Zimbabwe and Kenya, and in many
respects has been more complete.  Mozambique
currently has no price controls on maize, the
government plays no role in domestic marketing,
and imports and exports are handled entirely by
the private sector.
4  Two key positive results have
emerged from this aggressive liberalization. 
First, Mozambique has probably the most regular
availability of maize grain and whole meals of any
country in the region, thanks tothe rapid
emergence of the informal marketing and small-
scale milling sectors.  Table 1 shows that in the
country’s three principal cities, maize grain and
whole meal have been nearly constantly available
in local markets since January 1993.  By
purchasing grain and having it milled, urban
consumers in producing areas of the country
enjoy whole meal prices ($190/ton in Beira,
$150/ton in Nampula) among the lowest in the
region, while prices in the capital Maputo lie
between those in Kenya and Zambia ($250/ton in
Maputo between 1993 and 1998, compared to
$272 in Kenya and $204 in Zambia). 
FS II Policy Synthesis No. 39
Page 4
Staple
Maputo Beira Nampula
% of
wks
avail.
Mea
n
price
(US$
/kg)
% of
wks
avail.
Mean
price
(US$
/kg)
% of
wks
avail.
Mean
price
(US$
/kg)
Maize
grain
100 0.23 99 0.16 99 0.12
Refined
meal,
imported
89 0.47 5 0.65 1 0.38
Refined
meal,
domestic
49 0.42 8 0.42 1 0.33
Whole
meal,
market
price
89 0.32 95 0.35 100 0.28
Whole
meal,
derived
price1
100 0.25 99 0.19 99 0.15
1 Price of maize grain plus milling charges.  “Percent of
Table 1. Percent of Weeks Available and Mean Prices
of Maize Grain and Meals in Three Urban Markets of
Mozambique, 1/93-9/98
The second positive effect of Mozambique’s
liberalization is price stabilization in the South
through regional trade.  Maputo has for at least
10 years imported grain and meal from South
Africa and Swaziland to complement the
supplies it receives from the Center and North of
the country.  No other city in the country has
relied on trade as has Maputo.  Between 1994
and 1998, the coefficient of variation of retail
prices in Maputo was approximately one-half
that in other cities of the country; mean seasonal
price rises during this period in other cities
ranged between 66% and 121%, compared to
36% in Maputo.
5 
Mozambique faces at least three continuing
challenges to creating an efficient and low-cost
maize production and marketing system. First, it
would benefit from a more active role on the part
of the national government in explaining and
championing liberalization policies in the
provinces; perceived ambivalence at the national
level has at times created an environment in
which local officials can actively hinder trade.
Second, the North of the country, isolated by
distance and poor roads from the country’s major
urban centers, needs to continue developing its
export markets for maize as well as diversifying
into high-value crops, if it is to realize its high
production potential. Finally, the country must
identify ways to encourage greater private sector
investment in the system, to increase traders’
scales of operation and reduce their unit costs.
ZIMBABWE:  Zimbabwe presents a stark
contrast to Mozambique, Kenya, and Zambia in
its recent management of food security and
consumer price instability.  The Grain Marketing
Board (GMB) remains a major player in the
domestic trade, where it practices pan-territorial
and pan-seasonal prices fixed by government, and
is the sole legal importer and exporter of maize.
Though private trade has been allowed since
1994, prices of maize meal have again come
under government control.
Zimbabwe’s policy approach has diverged most
significantly from the other three countries since
early 1998.  At this time, government imposed
price controls on maize grain and meal in the face
of market price increases sparked by fears of
production shortfalls during  the 1997/98 El
Nino.  As a parastatal, GMB has been unable
flexibly to adjust its pricing structure to rapidly
changing market conditions.  This situation is
creating two serious problems. First, it leads to
periodic large adjustments in the official
marketing system, which have caused civil
disruptions in the past.  Second, the government
has implicitly reintroduced subsidies on industrial
roller meal.  Winners in the market are beingFS II Policy Synthesis No. 39
Page 5
1. For example, in the early 1990s, the deficits of
Zimbabwe’s Grain Marketing Board’s were 5% of GDP
(Jenkins 1997). By the late 1980s, Zambia’s subsidies to
the maize sector reached 17% of the government budget
(Howard and Mungoma 1997).
2. These conclusions are based on simulation analysis in
Jayne et al. 1995.
3.  However, legislative rules have not been changed in
Kenya, and scope exists for the state marketing board to
resume importation in the future.
determined more by who can gain access to
cheap GMB stocks than by who is most
efficient; wholesale market prices of maize grain
in Harare have averaged over 30% higher than
the GMB selling price.  Ironically, while the
Government’s return to price controls in 1998
was in response to perceptions of an
oligopolistic industrial milling sector, the
controls have weakened the position of their
primary competitors – the small-scale milling
sector – who must source grain at substantially
higher market prices.
The probable effects of the reintroduction of
controls on the price of roller meal are threefold.
First, we anticipate an increase in the quantity of
roller meal demanded and a decline in demand
for grain through the informal trading and
milling channels; this will reduce competition in
the maize processing industry.   Second, the
subsidy will disproportionately benefit high-
income consumers, who are the principal
consumers of roller meal consumption.  Third,
the Government’s budget deficit will increase.
Thus, the major winners will be large-scale
millers and high-income consumers, while the
major losers will be small-scale millers, private
traders, and the treasury. 
POLICY IMPLICATIONS:   Key implications
of these findings are as follows.
First, food market liberalization has
generated more successes than generally
recognized.   Examples of these successes are
rapid entry into grain retailing and milling,
greater availability of maize grain in rural grain
deficit areas, and the rise of regional trade
patterns, which is playing a critical role in
promoting cost effective food systems in cases
where this is allowed. 
Second, the private sector’s response to
liberalization is sensitive to a broader range
of government actions than commonly
understood.   Types of activities likely to impede
overall private sector response to liberalization
include (a) state importation and sale of maize at
below-market prices to selected buyers; (b)
subsidized commodity distribution schemes; (c)
restrictions on private import or export; and (d)
policy vacillation. 
Third, consumer vulnerability to price
instability under liberalization has not been as
severe as often portrayed.  Private investment in
grain distribution, processing, and cross-border
trade as a result of the reforms have expanded
consumers’ options and ability to stabilize
expenditures on maize meal. 
Fourth, positive government actions to reduce
market instability is needed and is beginning
to work in selected cases.  These needed public
sector investments include:  (a) improving the
transport infrastructure; (b) promotion of regional
trade; (c) improved market information system;
(d) improved communication infrastructure; (e)
nurturing the development of market-oriented
mechanisms (e.g., commodity exchanges) for
handling price risk; and (f) alleviating the
constraints on private access to foreign exchange.
Importantly, these types of investments may
reduce political risks associated with liberalized
food markets, and thereby promote policy
stability and consistency – key factors in
promoting desirable private investment in the
system. 
FS II Policy Synthesis No. 39
Page 6
4.  The marketing parastatal ICM has received only
private financing since it began operating in 1996, and
behaves as a private trader, paying and receiving market
prices.
5.  The other cities used in this calculation are Beira in
the Center, Quelimane in the Center-North, and
Nampula in the North.  The analysis used US Dollar
prices.
REFERENCES
Argwings-Kodhek, Gem, and T.S. Jayne. 1997.
Relief Through Development: Consumer
Response to Maize Market
Liberalization in Urban Kenya.
Tegemeo Working Paper 2. Njoro:
Egerton University.
Jenkins, Carolyn. 1997.  The Politics of
Economic Policy-Making in Zimbabwe.
Journal of Modern African Economies
575-602.
Howard, Julie, and Catherine Mungoma.  1997.
Zambia’s Stop-and-Go Maize
Revolution.  In Africa’s Emerging Maize
Revolution, eds. D. Byerlee and C.
Eicher.  Colorado: Lynn Rienner
Publishers.
Jayne, T., L. Rubey, D. Tschirley, M. Mukumbu,
M. Chisvo, A. Santos, M. Weber, and P.
Diskin. 1995.  Effects of Food Market
Reform on Household Access to Food in
Four Countries in Eastern and Southern
Africa. MSU International Development
Paper No. 19.  East Lansing:  Michigan
State University.
*Special support for this study was provided by the Food Security and
Productivity Unit of the Productive Sectors Growth and Environment
Division, Office of Sustainable Development, Africa Bureau, USAID
(AFR/SD/PSGE/FSP), USAID/Zambia, and USAID/Kenya through the
Egerton University/KARI/MSU Kenya Agricultural Monitoring and Policy
Analysis Project.  The research was conducted under the Food Security II
Cooperative Agreement between AID/Global Bureau, Office of
Agriculture and Food Security, and the Department of Agricultural
Economics at Michigan State University.  Thanks to Jan-Joost Nyhoff and
Joseph Rusike for comments on earlier versions of this report.  The views
expressed in this document are exclusively those of the authors.
This paper has been published separately by Tegemeo Institute of
Agricultural Policy and Development, Egerton University in the Proceedings
of the Conference on Strategies for Raising Smallholder Agricultural
Productivity and Welfare, Egerton University, Njoro, Kenya, forthcoming.
This paper is a summary of a report entitled Successes and Challenges of
Food Market Reform: Experiences from Kenya, Mozambique, Zambia,
and Zimbabwe. MSU International Development Working Paper No. 72. It
can be obtained by writing to:
MSU Bulletin Office
10-B Agriculture Hall
Michigan State University
East Lansing, MI 48824-1039

Relief Through Development: Consumer Response to Maize Market Liberalization in Urban Kenya. Tegemeo Working Paper 2. Njoro:

The Politics of Economic Policy-Making in Zimbabwe.

This paper is a summary of a report entitled Successes and Challenges of Food Market Reform: Experiences from Kenya, Mozambique, Zambia, and Zimbabwe.

Zambia’s Stop-and-Go Maize Revolution.

Successes and Challenges of Food Market Reform: Experiences from Kenya, Mozambique, Zambia, and Zimbabwe

Successes and Challenges of Food Market Reform: Experiences from Kenya, Mozambique, Zambia, and Zimbabwe

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