Friday, February 23, 2024

Economic and Trade Implications of Export bans

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By Isaac Mwaipopo CTPD Executive Director

The Centre for Trade Policy and Development (CTPD) urges Government to remove all restrictions that make it difficult for local traders to export agricultural commodities. CTPD is concerned that the continued application of administrative delays and statutory instruments in managing agricultural commodities exports end up hurting the growth of the sector.

Following the good rainfall experienced in the last agricultural season and timely delivery of inputs, CTPD anticipates a bumper harvest this year. We urge Government to take advantage of this and open for trade, as there are more benefits that can accrue to the weakling Zambian economy when we aggressively engage in trade, especially now that we have the Africa Continental Free Trade Initiative.

CTPD has observed that despite Zambia having the potential to become the food basket for Central and Southern Africa, the country has continued to pursue policies that discourage investments in the Agricultural sector, including the imposition of export bans done through the use of Statutory Instruments (SI). This has, in many marketing seasons, done less to achieve the intended purpose of the ban but often results in activating illegal grain trade done through informal channels of the countries’ border posts.

These bans have a tendency of hurting domestic producers and traders by hindering their access to lucrative prices in international markets and it is very important to note that in the long-run export bans may affect food security of the country. A decline in the production of grains such as Maize for example, which is a staple food for Zambia, resulting from farmers reducing the production of Maize or switching to the production of stable and less regulated crops may lead to long-run food insecurity.

CTPD also observes that, whereas the immediate result of the export ban is reduced prices for consumers, loss of revenue from grain export duties and taxes impedes domestic resource mobilization, thereby making efforts to reduce the financing gap and restore fiscal fitness prove futile. Further, this policy works against the economic diversification agenda envisaged in the Economic Recovery Program as it denies the country a viable alternative channel to gain foreign exchange inflows and strengthen the Kwacha, reduce debt service costs, and create some fiscal space, especially now that the country is pursuing ways to reinvigorate the negative economic growth rate of -2.8% recorded in 2020.

Moreover, given that Zambia is a member of the African Continental Free Trade Agreement (AfCFTA), it will be good for the country to portray good policy governance and work towards creating a predictable market for investment flow in the Agricultural sector. Since the bans are often ad-hoc, they tend to trigger market uncertainties which may have a long-run impact on growth of the economy as a whole, and the agricultural sector in particular. Export ban damages Zambia’s reputation as a reliable supplier and has the potential to destroy its market and trade opportunities in free trade areas such as the AfCFTA, and the TFTA. It is therefore very important for Government to refrain from implementing export ban policy.

Based on the above reasons, As CTPD we recommend that export bans should be avoided. While they may be necessary in extreme circumstances, they are always unreliable economic management tools. If the aspiration is to encourage food security and keep domestic food prices low, then, agriculture financing and investments to grow agriculture productivity by way of providing irrigation systems, farm machinery and affordable inputs towards enhancing small scale farmers productive capacity for seasonal farming are more likely to be effective and sustainable than bans on grain export.

8 COMMENTS

  1. Unyambara, be specific when you make important calls on Government. It’s not all commodities that are controlled but maize. Indeed the restrictions in maize trade deprives farmers of an opportunity to earn a good income from the lucrative export market. The reason is that Government has failed to clearly define food security and agro business. FISP has reduced the Ministry of Agriculture to a FISP Ministry. There’s more to agriculture than FISP. If you look at how much Govt spends on maize alone you’d wonder why maize farmers are still poor. Let’s revisit the policy and make radical changes

  2. Congratulations PF for holding useless convention without pangas and no one died this time. Keep copying from UPND.

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    • I thought this article talks about incentives for growing the sector. How do we encourage farmers to grow soya if they cannot fetch good prices? How do we benefit if there is very limited production due to suppressed prices locally?

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  3. We need to look at this from both angles. If the government does not come in and control the export our farmers will look for market outside the country and sale all their products leaving the local to suffer and those with products will hike the prices to local. Meaning prices local will go beyond what we are experiencing now. Bane ba UPND you sometimes think like you know better and yet you know nothing

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  4. I can’t imagine, having a farm and producing corn and I want to sell my crop to the highest bidder and then Government says No. Then we don’t have a free enterprise economy . For a Government to do that, then they need to give farmers subsidies. A flat ban on trade is not going to encourage investment into farming because in a way, the Government is detecting your price and your market. It is backwards. He is right. They need to remove this hurdle and only then will we see rampant investment.

  5. @Alam, at which cost is imported soya landed? Those in meat and stockfeed production don’t have a consistent supply of soya beans. To which market are you going to export and at which price? I don’t think Zambia needs to export soyabeans when we can’t produce enough for the local market. We risk having the same soya coming back through imports

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