The competitiveness and comparative advantage of maize and wheat production in Zambia

Abstract

Given the long history of government involvement to varying degrees in the marketing and input supply sides of some agricultural commodities in Zambia, there is need to examine what the overall effects have been on the agricultural sector's growth and the current situation. This paper examines the trends in agriculture since 1990 and the impact of policy on sustainability, competitiveness and comparative advantage of maize and wheat production in Zambia. To study the trends of agriculture, changes in two indicators of agricultural production were used; the percentage of total land used for agricultural purposes and the agricultural productivity measured as value added per worker. These two indicators were graphed to get an overview of yearly changes hence giving an insight into the general changes in agricultural production. The Policy Analysis Matrix (PAM) framework is an analytical framework commonly used to measure efficiency, competitiveness, and the comparative advantage of production under prevailing policy conditions. The PAM approach is in this study to get the competitiveness and comparative advantages of maize and wheat production in Zambia. It was also analyse the sustainability of local production. The trend analysis showed that agricultural land in Zambia has been growing at an average annual rate of 0.5 percent from 1989. However, agricultural productivity had been constant ranging within 200 and 250 throughout the two decades with the exception of 1992 and 1994 when it fell below 200. The results from the PAM showed that domestic production of maize under the current policy environment was heavily subsidised, as tradable inputs were only about 50 percent of the world prices. The PAM for wheat however showed that wheat production was sustainable. The tradable inputs in wheat production were only about 8 percent cheaper on the domestic market than they were on the world market. From the two PAMs for maize and wheat, both commodities could be said to be competitively operating under the country's policy environment as both systems had Private Cost Ratios (PCRs) less than 1. It was also observed from the Domestic Resource Cost ratios (DRCR) calculated that both systems enjoyed a comparative advantage under the current policy environment. Both DRCRs calculated were below one indicting comparative advantage for both systems. From an allocative efficiency point of view, it would be recommended that the subsidies on maize production be designed in the best way possible in order to achieve sustainable agricultural growth in the sector. Taxation on wheat output may also be reduced to give more incentive for farmers to produce wheat in the country.