GMB failing the nation

via GMB failing the nation | The Financial Gazette by Maggie Mzumara 12 Dec 2013

THE Grain Marketing Board (GMB) is not what it should be with silos not storing enough grain for the nation.Neither is it performing as many would expect it to.

Under-capitalisation as well as government interference are some of the reasons why the parastatal is where it is.

But what else?

How did the GMB get to this lacklustre state?

Established as the Maize Control Board, under the Maize Control Act of 1931, in the same year, the GMB has over the years been modified from being a developmental or social institution to include being a commercially-oriented commodity trading organisation.

Supposed to be the country’s leading grain trade and marketing company, as its website claims, the GMB’s basic responsibilities are to accord producers their fair share of the local and export markets, to provide them with a guaranteed outlet for their excess controlled products and to ensure the availability of adequate supplies for the local demand either from internal production or from exports.

“The role of GMB is to receive, store and distribute,” says Muriel Zemura corporate communications manager at the parastatal.

However, by many accounts, the parastatal is failing the nation.

It is failing in its bid to ensure food security and there is not one of the objectives listed above it is achieving effectively and timeously.

Effectively and timeously being the operative words.

Although the GMB does provide a guaranteed market for excess controlled products such as maize, there has been growing reluctance from farmers to sell to the parastatal due to its inability to pay for the produce on time.

While the parastatal boasts of offering the highest price on grains like maize, the fallacy that has been produced by its inability to pay the said prices on time would be laughable if it was not sad for the nation.

“The GMB maize producer price is premium price as it pays way above other players in the industry,” boasts Zemura, self praise which defeats its own purpose because of the delays in making the payments.

By the time the payments are made, farmers will be in major financial dire straits, a direct result of the delay.

Currently the price of maize for a tonne is US$378 while private buyers pay $350.

How much it pays, is not the issue. Rather when, it will pay.

“It is always unknown when the GMB will pay farmers for their maize. Sometimes it takes years for the parastatal to pay,” says vice president of the Zimbabwe Farmers Union, Berean Mukwende.

“We currently have farmers who have not been for maize they sold this year and even for the maize they sold last year.”

Such a delayed payment regime sabotages the very production of grain which the parastatal seeks to promote and serve.

By the time farmers finally do get their payment, Mukwende says, overheads cost will have soared beyond manageable levels.

“Farmers will have defaulted on bank payments; utility bills will have accumulated; interest charges accrued; penalties will have been levied; school fees for children, medical bills for family and relatives will not have been paid; general upkeep of the farmer and his family will have been grossly affected.  Labour costs also will lag behind,” Mukwende says.

Experts say a number of factors render the GMB ineffective.

And the impacts are far reaching, they say.

“The GMB has not been effective in ensuring national food security firstly by not paying farmers on time and sometimes paying in kind (fertiliser & seed) when farmers need real cash for school fees and other requirements that have nothing to do with inputs,” says Charles Dhewa, an agricultural expert.

“The  fact that GMB offers high prices than private buyers but does not pay that high price, has the effect of encouraging farmers to produce hoping there is an assured buyer only to struggle negotiating with private buyers who offer low prices.”

Additionally, Dhewa says, the GMB model in which it waits for farmers to bring maize to its depots is not viable.
“Transportation is a big issue with farmers in remote areas.  Private players like ProBrands are filling this vacuum by going to service centres where they buy maize in all kinds of different quantities from anyone.  These guys have snatched business from GMB under its nose. Expecting maize to be ferried in sacks, weighed and graded is no longer a strategic business imperative in this competitive environment,” he says.
Transport woes were also an issue recently when maize imported from Zambia was due to be distributed to hunger-stricken countries in the southern parts of the country.
Also, for GMB, diversifying into milling has been an ill advised move given the prevalence of local millers and ordinary zvigayo (grinding mills) in rural areas.
With frequent droughts resulting from climate change, Dhewa says there is always lack of maize for milling and that means milling equipment not doing anything much of the time.
The pricing system of maize for instance, though not the mandate of GMB but government’s, opens itself up to arbitrage — a practice where millers and others will buy maize from GMB, and instead of milling themselves will resell it to GMB a higher price than they bought it for.

This arbitrage is an opportunity that only comes about because of it price inconsistencies and price loopholes.
Like other parastatals, GMB is in the practice of awarding top management hefty salaries and plush perquisites (perks), never mind the background of low performance and non-profitability.
Consequences be damned.

However, GMB’s ineffectiveness is just but a part of a bigger national problem.
“GMB is part of the broad value chain.  The parastatal has a funding problem.  It is a national issue,” says Charles Taffs, president of the Commercial Farmers Union.
“GMB is battling and not performing as it should.  But the challenge is bigger than GMB. We need to get back to the basics of economics and address the whole value chain.  That is the only way we can resolve challenges in the agricultural sector.”

GMB’s overall ineffectiveness can be traced to under-capitalisation; government interference; and not being run as a commercial and profitable entity.
“The problem with GMB is that where it makes one step forward, by the same token it makes two steps back,” Mukwende said.
But the GMB claims that, current board has ushered in some improvements and made some achievements.
At the time of going to press the Financial Gazette’s questions to the GMB requesting concrete examples of the claims had not been answered.