Are Agricultural Marketing Boards still relevant in Swaziland?
By Thembumenzi Dlamini
In recent years, Agricultural Marketing Boards have come under heavy scrutiny in both developed and developing countries including Swaziland. The cause of disagreement has to do with their relevance.
Whereas National Marketing Boards in Swaziland have a huge role to play in farmer development such as provision of inputs, extension, and marketing services (and collectively contribute towards improving food security at the household level); scholarly evidence has shown that local Marketing Boards have failed to achieve their mandate of assisting the country attain food security at the household level . This has delayed farmer development and plunged many households in rural Swaziland into poverty.
As it stands: The 2014 Vulnerability Assessment Committee (VAC) documents that in 2013 an estimated 67,592 of 1.2 million people required immediate food assistance and 29% of the population were living below the extreme poverty line .
Moreover, the 2010 Swaziland Household Income and Expenditure Survey (SHIES) shows that the country is unceasingly food self-insufficient and food insecure at the household level – which suggests that there is a need for the country to transform its agricultural development programmes and policies including Marketing Boards to promote food production.
Sketchy evidence suggests that the support provided by National Marketing Boards to producers is limited in its reach. Farmers face high transaction costs, low farm-gate prices set by National Marketing Boards, delayed payments by the Boards, and fail to meet the Boards’ high grading standards which contribute to spoilage of commodities . These erode the profitability of farm enterprises and cause many to become discouraged and exit agriculture.
Against this backdrop, a question of policy interest then is: are Marketing Boards still relevant?
Any attempt to answer this question may not be valid without considering an enterprise that receives marketing services from a local Marketing Board. To illustrate: SWADE-LUSIP farmers received a producer price of E70 for a grade A crate of bananas from NAMBoard, while at the informal market the same crate fetched E75.00 in 2016. In addition, NAMBoard paid farmers a measly E80.00 for a 30 Kg of fresh tomatoes, while the same size and quality earns E150.00 in the informal market, an almost 50% difference between the two markets.
Confounding the situation is that the low producer prices stimulate informal trade. Farmers are profit-maximisers who prefer to sell where they will get maximum returns. The farmers’ excessive reliance on informal trade has consequences on demand and supply, as there is no monitoring of outputs and prices.
The excruciating effects of this on prices are seen during commodity shortages. In such instances, food prices usually shoot-up uncontrollably becoming unaffordable to a large proportion of the population. The uncontrollable food inflation during the drought is a case in point.
As illustrated, poor farm-gate prices undermine the main objective of commercialising local farmers and giving them first preference to local food markets. It also makes it impossible for the country to recover the costs invested in pro-poor infrastructure projects, which makes it quite challenging for policymakers to provide evidence for the value of such investments.
In the Revised Draft National Development Strategy of 2014, the government makes the point that it seeks to bring stability into agricultural markets in Swaziland. So, how do we achieve stability in agricultural markets in Swaziland?
To start, it was the expectation of the Government of Swaziland that Agricultural Marketing Boards would bring the much-needed stability in agricultural markets in Swaziland. However, study after study suggests that the Marketing Boards, given their current configuration, are part of the problem.
In 2006 a study conducted by Nkosazana Mashinini and others at the University of the Free State, it was found that the agricultural marketing policies do not benefit farmers and consumers. The Board failed to support farmers and as such farmer productivity and, by default, perpetuated the current marketing inefficiencies that the government essentially wants to eradicate. The study found that NMC was an unnecessary cost to taxpayers and consumers. As a solution, the authors suggested to deregulate the national maize marketing system in Swaziland.
A recent study conducted at the University of Pretoria reaches the same conclusions. It finds that the regulations set by NMC hampers the flow of prices from South Africa to Swaziland. This infers that domestic agricultural marketing policies impede regional price signals from flowing through to the Swazi market. This is a major setback to the economy of Swaziland given the sheer importance of agriculture and the agriculture sector.
As a small economy, Swaziland is expected to set flexible agricultural regulations that will conveniently allow international price signals into the domestic market, in particular to commodities, which cannot be produced sufficiently, such as maize. For example, Dlamini and Louw show that maize is a cheaper commodity in South Africa compared to Swaziland , even when transportation costs are considered! In their conclusions, the authors note that the regulations are responsible for the high domestic prices and also inhibit the flow of reasonable prices from international to domestic markets. As a solution, the authors recommend a more liberal policy dispensation that allows free trade to enhance price transfers that will improve food affordability and accessibility in a bid to reduce food insecurity.
One may argue that this boils down to the trade-off between self-sufficiency and food affordability. Indeed, the removal of boarder restrictions could allow an uncontrollable influx of cheap imports. This is not news. Swaziland is heavily reliant on agricultural imports to feed its people! This is notwithstanding the presence of self-sufficiency regulations, indicating their ineffectiveness and frail promotion of farmer development and productivity.
To illustrate, in 2014, milk import figures were 64.05 million litres, while maize imports were 90, 282 tonnes . The high imports imply transfer of labour and job opportunities into the exporting country. If Swaziland could invest more into local agricultural industries and expand its production, it could create more job opportunities and retain local labour.
However, because of the stringent regulations by local Marketing Boards, consumer prices are high, while producer prices are low! This shows that local Marketing Boards operate as income generating enterprises rather than social entities as prescribed by their mandates. This punches holes on the relevance of the Marketing Boards as the country enters the last five years of the NDS, which recognises the need to improve the agricultural sector.
So what can the country do to get out of this situation? There is no magic bullet! The privatisation of National Marketing Boards is the solution. Local Boards are no longer serving their purpose as social entities – they are no longer relevant.
Swaziland can learn from other countries such as South Africa and Canada, which had similar challenges but averted them. In these countries, heightened focus on marketing efficiency (balance between supply and demand) and food security at the household level – which are the indicators for improving economies – was brought back into government policy through market reforms in the form of state free markets that allow efficient marketing and prices to be determined by market forces, thus expanding food access.
Adopting such a school of thought could satisfy the Swaziland National Food Security Policy objectives; aiming to improve agricultural market systems and infrastructure and to have prices determined by free market forces. Commodity cooperatives are also a good place to start.
New generation cooperatives have taken a storm in most agriculture industries. Farmers pool their resources together in order to access credit, inputs, involvement in value addition, and trade commodities in domestic and external markets. These cooperatives are hardwired for this century’s heterogeneous markets and enable farmers to improve their productivity through self-reliance, involvement in decision making and setting of prices, self-responsibility, and social responsibility.
While sceptics could contend that the cooperatives are not enough to replace National Marketing Boards; a national body, call it a council, to regulate the flow of commodities may be established. This council would solely be involved in the provision of market advisory services to key stakeholders.
About the author: Thembumenzi Dlamini is a graduate research intern at the Swaziland Economic Policy Analysis and Research Centre, and can be reached at firstname.lastname@example.org. She writes in her personal capacity.