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IMPACT OF COMPETITION
REFORMS ON MARKET,
PRODUCERS AND
CONSUMERS
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Presented by ROBERT NHLANE ON BEHALF OF
KELVIN MULUNGU
AND JOHN N. NG’OMBE
18 Nov, 2014
7/16/2016
Outline
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Chosen policies
 Methodologies
 Data Sources
 Influence on competition
 Input Market Subsidies- Distributional Effect
 Maize Floor Price- Raising Welfare
 Millers Subsidies- Changing Market
Structure
7/16/2016
 Conclusion
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Chosen Policies
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1.
Government support to smallholder farmers inputs
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2.
Maize floor price through the FRA
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3.
Farmer Input Support Program (FISP)
One of the two programs with FRA that take up about
60 % of MAL budget
Has big impact on consumer and producer welfare in
years of deficit/surplus
Support to millers through subsidies from FRA
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Has potential for changing market landscape
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Methodologies
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Used a combination of different econometric models
These included:
→binary regression models-dependent variables being
binary or dummy
→propensity score matching-matching based on
observable covariates/independepend variables
Motivation behind: To yield more consistent and
unbiased results
This would help better policy and minimize bias.
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Data Sources
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Primary data collected from both Lusaka and
Chipata
These areas were chosen as they were
representative of other similar areas in Zambia in
terms of maize production and consumption.
Other data were retrieved from secondary sources
:IAPRI, MAL and Grain Traders Association of
Zambia
Other sources: from literature reviewed, it filled
gaps that primary data fell short of.
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Impact on competition
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Floor price may be ‘price setting’ for other players
Government’s ability to occupy a large market
share may change market concentration of others
Overall: private players face stiff competition from
government and maybe ousted out of the market or
even resort to buying other products that
government is not buying.
Fertilizer support in the existing form is likely to
crowd out the private players →reducing competition
among players since registered and existing distributors
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are more likely to enjoy a large share of
contracts.
Impact on competition
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Selection for distributors may influence landscape
depending on who gets the ‘big’ contract
Millers who do not get subsidized may be
disadvantaged out of the market
Might result in different prices to consumers
Overall: This policy gives less competition to those
millers who belonged to Millers Association of
Zambia
More likely crowded out newly emergent millers
located in non or semi-urban areas 7/16/2016
Input Support (FISP)
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FISP is government support programme to
smallholder farmers by providing inputs (fertilizer
and seed) at subsidized rate
Evidence shows that the private players have been
crowded out in areas where they are relatively
developed
In poorly accessible areas, there has been desired
effect of crowding-in the private dealers
Gains on production are more farmer specific
FISP has positively contributed to recent
bumper
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harvests experienced in Zambia
Floor Pricing (FRA)
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Floor prices are higher than the market prices for
most years- this has also benefited the sellers to
FRA
This has benefited only the well to do farmers who
sell to FRA at the expense of poor households
Private players have usually lost out to FRA in
accessible areas-raising their cost meaning buying
at much lower price to remote farmers
Smallholder farmers also complain that FRA should
buy from farmers and not traders
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Subsidy to Millers
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Mostly given to big millers who are members of
MAZ
Financial gains from subsidies accrue to these ‘big’
millers
Even after the removal of the subsidy, the prices for
sometime showed to be within the historical range
There is a general perception among consumers that
removal of subsidies has solely led to price
increases- hence should be restored
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Advocacy Strategy
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FISP needs to be more targeted (Input Vouchers) to
the non-private sector serviced areas to develop
the market and crowd-in the private dealers
Input vouchers: farmers directly go to distributors
and claim their inputs using an electronic system like
automated teller machines (ATM) service.
Allocation through bidding for the distributors and
manufacturers needs to encourage market
development rather than promote the already
established ones
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Advocacy Strategy
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To reduce the negative distributional effects of floor
pricing, FRA needs to buy more from remote areas
and include less well to do farmers
There is also need to consider majority of FRA
beneficiaries especially net sellers who would be
positively be affected by the higher prices offered
Subsidies removal has evened the market and
allowed competition among millers- should still be
checked to avoid exploitative pricing
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Conclusion
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In conclusion, the effects of the chosen policies vary on
their impact on competition and market structure. The
effects on welfare of consumers and producers also
varies and the relationships are too dynamic and need
further meta-analysis detailed studies. However, the
recurring theme is the negative distributional effect;
poor producers are harmed by FRA price; small millers
who do not benefit in subsidy program are
disadvantaged. Only exception is FISP developing
market in more remote areas and by crowding in
private player- good for producers 7/16/2016