Elita Chikwati THE INTERVIEW
The Grain Marketing Board has been experiencing challenges paying farmers, apparently because Treasury takes long before it releases the funds. This has resulted in farmers preferring to sell their grain to private buyers who offer instant cash. In most cases, the cash buyers take advantage of the situation and offer unviable prices to farmers. The Herald’s Agriculture Reporter, Elita Chikwati (EC), interviews GMB board chairman Mr Charles Chikaura (CC) on the issues affecting the national granary.
EC: GMB has been a target of criticism by farmers over late or non-payment for grain delivered to the national silo. Can you locate the genesis of the problems bedevilling the institution?
CC: As a risk mitigatory measure against drought or similar adversities that may affect grain production and availability in the country, Government mandated the GMB to manage on its behalf a Strategic Grain Reserve (SGR) of up to 1 million tonnes of grain in order to meet food deficits that may occur from time to time. The SGR is replenished from grain deliveries made by farmers to GMB. These deliveries are paid for by Government through the GMB. Almost without fail farmers are paid by the GMB for deliveries made within a week of receiving funds from Government.
Availability of funding to pay farmers therefore depends on the state of Government revenues which in turn are a function of the macro-economic environment prevailing in the country.
The SGR being a State responsibility exercised through the GMB, it is therefore ill informed to single out GMB for criticism for late payment to farmers. Over the last season, Government has assigned the responsibility to mobilise resources for farmer payments to the Agricultural Marketing Authority (AMA) which issues bills in the market to raise the amount required by Government for grain purchases through the GMB.
EC: What is your assessment of the past four or five seasons in terms of grain deliveries? What would you attribute this trend to?
CC: Grain deliveries have generally exhibited a declining trend from a high of 244 942 metric tonnes five years ago to 33 273mt two years ago before increasing to 220 366mt last year. The deliveries over the period generally approximated GMB intake projections with deliveries in 2011-2014 adversely affected by drought conditions reflecting the country’s overdependence on rainfed agricultural production.
For the past five years the grain deliveries have been below the volumes required for the SGR. The SGR should have at least 500 000 tonnes of grain for national food security.
Farmers delivered 244 942 tonnes of maize in the 2010-11 marketing season, 2012-13 the intake stood at 81 190 tonnes, 2013-14 GMB received 33 273 tonnes and the 2014-15 season farmers harvested about 1,4 million tonnes and 220 366 tonnes were delivered to the GMB depots.
Grain deliveries to the GMB have been generally low since 2009 when the marketing for local grain was liberalised. Since 2009, GMB is now competing in the market with grain merchants for grain deliveries. Farmers are free to sell their grain to grain merchants of their choice and this choice is dependent on prevailing market conditions including price and payment terms.
EC: For the past season, how much grain have you received so far from farmers and what is your target intake?
CC: GMB has to date received 33 306mt of maize from local farmers. By the end of the marketing season on 31 March 2016, it is envisaged that a total of 141 000mt will have been received from local farmers.
EC: How much money have you paid to farmers who have delivered their grain to GMB depots?
CC: Payment to farmers is an ongoing exercise informed by the availability of financial resources from Government. To date, 85 percent (US$73 million) of maize deliveries from the previous season have been paid. Government is mobilising resources through AMA and other sources to clear outstanding payments for the previous season deliveries as well as current season deliveries.
EC: GMB has been attacked for poor storage at the GMB depots which has resulted in the country losing thousands tonnes of maize. Why have you failed to protect the grain from deterioration?
CC: Admittedly, the GMB is experiencing grain storage challenges due to the poor state of the silos and inadequate intake and storage resources. This resulted in about 6 percent of its maize stock being downgraded to stockfeed in 2013 when the GMB stockholdings were at record levels at a time when its storage capacity was stretched. It is important, however, to note that there was no financial loss incurred as the downgraded maize was sold to millers as stockfeed at market prices. Since 2013 no maize has been downgraded due to implementation strategies including provision of UV-stabilised empty bags, tarpaulins and dunnage.
EC: How much money would you require to protect the grain in the SGR?
CC: The amount of money required to manage grain is a function of the actual grain stored at any given time. However, there are also fixed costs that GMB incurs whether there is grain in stock or not. Such fixed costs amount to about US$1,5 million per month and cover rates, water, electricity and staff costs among others for the 84 depots countrywide
It costs GMB an average of US$14,50 per month to handle and store 1mt of grain. In addition to these handling costs GMB requires approximately $31 million to rehabilitate and refurbish its silo infrastructure together with an annual maintenance budget of $1 million. Currently, it is costing the GMB $2 million per annum to maintain the infrastructure before rehabilitation.
EC: Do you not feel that it is ironic that while farmers do not get paid in time, if at all, the country would pay for maize imports?
CC: The Government has never failed to pay farmers for grain delivered into SGR. Government only imports grain to meet local demand when there is a shortage in local grain production.
EC: What do you think should be done if GMB is to regain farmers’ confidence and retain the SGR?
CC: In an environment where there is sufficient fiscal space, Government should fully and urgently operationalise a SGR Fund managed by the GMB as per the Debt Takeover Agreement signed between Government and the GMB in 1996. This will allow:
i. Timeous payment to farmers on delivery of their produce thereby gaining the farmers’ confidence, and
ii. Meeting handling, storage and infrastructure maintenance costs.
The GMB will remain accountable to Government on the operation of the SGR Fund.