An evaluation of the uniform pricing system for maize in Zambia
Date
2011-03-10
Authors
Muntanga, Chrispin M
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Abstract
A uniform price has been applied for each agricultural commodity marketed by the official marketing institutions in Zambia since 1973. The main reason attributed for adopting a uniform pricing system is that of equality. Since its inception, the uniform pricing system has received criticisms because of its inherent inefficiencies in meeting the government objectives of; attaining regional self-sufficiency in food production, and ensuring efficient allocation of resources.
The uniform pricing system has encouraged the production of agricultural products even in geographical areas where it is not economically feasible to do so. This situation has resulted in excessive cost to the government in terms of transport cost for hauling the produce from surplus to deficit regions. This government expenditure has been particularly high for maize which is a relatively heavy but low valued crop.
The objective of this study is to analyze the uniform pricing system. By determining the regional optimal flow of maize and their corresponding equilibrium price differentials, the uniform pricing system can be judged as to whether it is efficient or inefficient
From the results obtained for both years under consideration (1978 and 1981), it is evident that the uniform pricing system is highly inefficient. Specifically, the results show that some regions are not feasible for massive production of maize which currently exist. They also show that the regional price differentials as determined under a free market situation are too wide to justify a uniform price throughout the country.
To revolve the incompatibility between government objectives and regionally differentiated production capabilities, his study proposes a controlled regionally differentiated pricing system for maize. This pricing system takes into account regional demand and supply positions, accessibility to the major markets and agronomic conditions of each region. If this pricing policy is adopted, it will reduce transport cost for hauling maize from surplus to deficit regions. It will also help the government meet its objective of attaining regional self-sufficiency in maize production.
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Keywords
Maize in Zambia-Pricing , Uniform pricing system for Maize , Maize price Evaluation in Zambia