Windhoek, 4 April 2016: The current drought that has crippled most of the agricultural sector in southern Africa was the focal point in the recent Grain South Africa Conference, held in Bothaville in South Africa. The Conference is an annual event where issues pertaining to and influencing the producers of grains, especially white maize, are discussed and shared. A Namibian delegation comprising Mr Christof Brock, CEO of the Namibian Agronomic Board, Mrs Antoinette Venter, Administrative Manager and White Maize and Wheat Manager at the Namibian Agronomic Board and Mr André Compion, Vice Chair of the Namibian Agronomic Board and Chairman of the White Maize and Wheat Advisory Committee attended the event. “The drought situation in South Africa and how is has impacted on production is extremely bad,” says Christof Brock, “we were given presentations that illustrate how badly the different production areas have been affected and it is clear that South Africa will be importing about 1.1million tonnes of maize to meet its own needs as well as those to whom they regularly export,” he adds.
Under normal production conditions, South Africa produces enough grain for its own needs as well as for export to neighbouring countries. Factored into the 1.1 million tonnes is what South Africa will need to meets its own consumer demand as well as the needs of countries to which it normally exports. Namibian millers normally procure a reasonable amount of white maize from South Africa on an annual basis while countries such Zambia and Malawi that do not normally have to import white maize via South Africa now have no choice but to do so. Under the current circumstances, these sporadic importers will need to import much larger volumes than Namibian millers and South African suppliers are faced with prioritising their supply to Namibian millers whose needs are smaller yet whose annual patronage to South African suppliers is constant, consistent and loyal versus a supply of much higher volumes to countries who do not import as regularly.
Namibia’s annual imports from South Africa to meet consumer demand has resulted in a streamlined and effective process flow from producers to millers and finally to end consumers in the grain industry. This process includes the issuing of import permits to millers, the smooth operation of grain carriers and logistics that support the grain sector, the effective storage of grain and the milling, packaging and supply of the processed product for end consumers. For countries that do not import as frequently, this kind of smooth process flow could prove to be a challenge and affects how quickly processed product is made available for consumption.
Under normal production conditions in the Republic of Namibia, producers of white maize produce half of what is consumed in our country. Of that amount, crops under irrigation and crops cultivated under rain-fed conditions contribute about 50/50 to the total maize harvest. During a typically good year, Namibia produces an average of 65 000 tonnes. While production under irrigation is anticipated to yield slightly less because of the harsh climatic conditions, the total estimated harvest for the entire production period during the current drought is estimated at 45 000 tonnes. This number has been recently adjusted from 37 000 and is in line with an anticipated slight increase in yield due to late rains that have led to a more optimistic outlook by rain fed producers. Nevertheless, this pushes up the import requirements from 85 000 tonnes during a normal good year to 135 000 to meet current end consumer needs.
Good news for Namibian consumers is that despite the local production of white maize being in decline because of the drought, the milling industry is confident that it will secure enough white maize from South Africa to fulfil its milling needs after the local harvest that is marketed has been bought and partially milled. There is also a distinct possibility that some of the larger millers may import white maize direct from the world markets through the Port of Walvis Bay. With these options open to the milling fraternity, there is a guarantee that there will be white maize on the shelves for end consumers to purchase in the Republic of Namibia. There are not many countries in Africa where the consistent and constant supply of maize meal can be guaranteed.
The economic impact of the current white maize scenario in southern Africa and how it impacts the end consumer comprises a smorgasbord of import and export pricing formulae and the fact that white maize is traded on world markets in US Dollars (USD). The recent fall of the South African Rand against the USD adds to the increase in cost of purchasing from the world markets. Then there is the impact of the price formulae. Normally, South African pricing for its white maize is based on export parity; an industry accepted pricing formula whereby producers sell their white maize at a set price per tonne to millers locally or regionally at a price that is on par with the cost of exporting their grain to foreign countries. This cost would normally include shipping to overseas markets and transportation costs to the miller’s door. However, under the present circumstances, South Africa, who usually exports has had to become an importer of maize for its own consumption and for reselling to its neighbouring countries, which means that they have to charge for their white maize on an import parity formulation. This is where millers buy their grain locally or regionally, at a price that is on par with having to import grain direct from world markets. This pricing calculation includes the anticipated shipping costs from the country of origin, having their grain landed at Durban harbour and transported to the final country destination for storage, milling and packaging. The difference between these two calculations is substantial.
The outlook is not all bleak. Namibians will have access to maize meal on our shelves but with the South African switch from export to import parity price calculations for the price of maize and the weakened South African Rand against the US Dollar, the real impact will be felt by consumers when they pay for their maize meal at the tills.