Inflation Fuels Black Market Trade

HARARE - Aug 2/06 - IRIN -- Inflation is forcing Zimbabwe's new farmers to ignore a government directive that compels them to sell their produce to a centralized grain utility, opting instead to take lower prices from black market traders who pay cash on delivery.

Many, if not most, farmers flouting the law are beneficiaries of President Robert Mugabe's fast-track land redistribution program begun in 2000, more widely known as farm invasions, which led to a meltdown of the once vibrant economy and hyperinflation. The Central Statistical Office reported annual inflation for the month of June at 1,180%, the highest in the world.

Joel Samuriwo, a small-plot farmer, said even though the state-run Grain Marketing Board (GMB) offered better prices, delays in payments ate into his profits. Black market traders "give instant cash, whereas the GMB sometimes takes a month or two to issue us with cheques that in turn have to take time before they can mature."

Dodging the GMB undermines the cash-strapped government's efforts to keep grain prices affordable for consumers, and wastes input subsidies provided to farmers, said economist Luxon Zembe. "The fact that they are now going to illegal traders means the government has lost out on a major investment."

Samuriwo harvested 13 metric tons (MT) of grain on his 45-acre plot about 70km southeast of the capital, Harare, and has so far sold 5 MT on the black market at Z$26 million (US$260 at the old exchange rate) per ton - Z$5 million (US$5) less than he would have received from the marketing board.

Parallel market traders are also more efficient in collecting the grain. "I don't even have a scotch-cart to transport my maize to the nearest GMB depot. Officials from the GMB recently sent word that we should put our maize together so that they could come and collect the grain on their own, but weeks have passed and my neighbors have also said they cannot wait," Samuriwo said.

"I have immediate needs to attend to. I must start preparing for the next main planting season and buy inputs now before prices shoot up, as well as meet my family's food and clothing requirements." His five head of cattle also need dipping chemicals.

Burgeoning parallel market trade is creating a shortfall in the grain marketing board's supply to millers. A small-scale maize farmer, who identified himself only as Sam, told IRIN: "You don't ask questions about where they [grain buyers] are coming from, but we have since learnt that they are being sent by millers who are failing to get enough wheat from the GMB."

He said even large-scale maize farmers were finding it difficult to resist the black market traders, but still sold part of their output to the GMB to evade suspicion. Doing business on the black market was not without its risks, said Sam, referring to a neighboring farmer who was recently given counterfeit money as payment but could not report it to the police for fear of being arrested.

Agriculture minister Joseph Made told a recent meeting of the ruling ZANU-PF party's central committee that farmers were delivering 20,000 MT of grain per week to the marketing board, and this season's total maize harvest would be 1.8 million MT, although independent assessors put it at a million tons less because of the severe shortage of inputs.

Renson Gasela, agriculture secretary of the opposition Movement for Democratic Change (MDC), insisted that inflows to the GMB were insufficient.

"Even assuming that deliveries would be coming in at the rate of 20,000 MT per week up to the end of September, when we will not be expecting more to be delivered, that will bring GMB tonnage to a total of 200,000 MT. With the current 100,000 MT Made has said are in the silos, it will bring the figure to 300,000 MT, meaning that there will be a huge shortage of maize."

He said "the law that farmers should sell their grain to the GMB does not make sense - once one produces, it does not matter to who one sells. Of immediate concern to farmers is that they enjoy the fruits of their sweat, and they should be free to keep the harvest, sell to a neighbor or the GMB."

A trader on the parallel market, who did not want to be identified, said he was part of a five-man team travelling the country buying maize, wheat and sorghum to sell to millers.

"The five of us are not employed and we have been doing this for the past three years. We buy the grain and sell it to millers, who cannot access enough from the GMB. We store part of the grain to sell also to other informal traders, particularly from October to March, when grain is hard to come by and the GMB does not have much."

He said they limited their illegal business to Zimbabwe, but some buyers were smuggling maize and wheat to neighboring Mozambique and Zambia.

Copyright (c) UN Office for the Coordination of Humanitarian Affairs 2006

Integrated Regional Information Network (IRIN)

Copyright (c) 2006 UN Office for the Coordination of Humanitarian Affairs