NORTHERN MALAWI'S CAPITAL OUTLAWS GRAIN TRADING

UNCLAS SECTION 01 OF 02 LILONGWE 000019

SIPDIS

SENSITIVE
SIPDIS

STATE FOR AF/S G. MALLORY
TREASURY FOR INTERNATIONAL AFFAIRS/AFRICA/BEN CUSHMAN
STATE FOR EB/IFD/ODF LINDA SPECHT
STATE PLEASE PASS TO MCC FOR KEVIN SABA
PARIS FOR D'ELIA
JOHANNESBURG FOR FCS

E.O. 12958: N/A
TAGS: EAGR ECON EAID MI
SUBJECT: NORTHERN MALAWI'S CAPITAL OUTLAWS GRAIN TRADING

REF: 2005 LILONGWE 946

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SUMMARY
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1. (SBU) The city assembly of Mzuzu, Malawi's northern
regional capital, recently voted to ban private maize sales.
The city's chief executive described the ban to us as a sop
to popular sentiment and assured us that it would not be
enforced. In any case, the incident illustrates the
prevalence of Malawi's suspicion of open grain markets and
its irrational reliance on the parastatal ADMARC to keep the
country in cheap maize. At bottom, these attitudes, together
with easy access to food aid, are important in supporting the
GOM's counterproductive food security policy. End summary.


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MZUZU ASSEMBLY BRAVELY FACES THE MENACE OF BAREFOOT VENDORS
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2. (U) During a January 3 meeting with traditional
authorities (the area's "chiefs") and other constituents,
Mzuzu City Assembly acted to prohibit the sale of maize by
any merchants apart from the parastatal ADMARC. (ADMARC is a
vestige of the Kamuzu Banda era, when it was the sole
purchaser and re-seller of agricultural commodiites, both
crops and inputs, and thereby regulated virtually the entire
economy of Malawi.) The Assembly cited a proliferation of
"unscrupulous traders," whom it accuses of buying the heavily
subsidized maize at ADMARC depots to resell on the street.
The Assembly also voted to prohibit children from buying
maize, a measure meant to prevent vendors from hiring child
proxies to stand in the long lines outside ADMARC depots.
The Mzuzu Assembly's actions garnered headlines in both of
Malawi's major daily newspapers. Ironically, on the day the
measure was passed, the Mzuzu ADMARC depot reportedly had for
several days had no stocks of maize to sell. Mzuzu is
Malawi's fourth largest city and the administrative and
commercial center of the country's Northern Region.


3. (SBU) When asked by Embassy staff about the ban, Mzuzu
Assembly Chief Executive Samson Chirwa said that the Assembly
had no intention of enforcing it. (That does not mean,
however, that vendors will be immune from harassment or
abuse.) Evidently the constituents at Tuesday's meeting had
demanded action, and the Assembly agreed to a ban as an
expedient. As at least one civil society organization has
pointed out, city assemblies in Malawi have no authority to
restrict or prohibit commerce--indeed the Malawian
Constitution guarantees a right to engage in economic
activity. Several of the vendors (typically barefoot women
by the side of the road, with a single bag of maize and a
pail for measuring) were quoted in the press as claiming that
they are buying maize trucked in from Tanzania and not
reselling ADMARC grain.


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FAITH IN ADMARC AND 17-KWACHA MAIZE
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4. (SBU) While it is doubtful that the Mzuzu City Assembly
will stop many vendors from selling maize, the incident is an
interesting illustration of the average Malawian's thinking
about market economics, which in turn goes some way toward
expaining the GOM's peculiar approach to food security.
Many--probably most--Malawians are convinced that there is a
"right price" for maize: the ADMARC price of MK17/kg.
Anything above that constitutes "unscrupulous trading." That
even people of the political class believe this is evidenced
by the regular pronouncements by various Cabinet ministers.
Meanwhile, maize is currently selling for twice that or more
on the private market.


5. (SBU) Yet the public, the press, and distressingly many
politicians believe the long lines of buyers outside ADMARC
sales points are evidence not of underpriced maize, but of

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hunger in the countryside. This is not to say that there is
no hunger in the countryside, but the sizable food-insecure
population here has, by definition, neither home-grown food
nor money to buy food at any price. Predictably, ADMARC's
stocks, when they come, sell out immediately, and much of the
cheap maize gets resold at market prices, at least some of it
across Malawi's borders. ADMARC has accordingly had to
ration maize sales, first to 50 kg per person per sale, then
25, and most recently 12.5.


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COMMENT: COMFORT IS THE MOTHER OF INERTIA
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6. (SBU) Despite endless exhortations from food aid experts
to address food security separately from pricing, the
prevalent GOM approach is to take the opposite tack:
guarantee food security by guaranteeing infinite amounts of
cheap maize to everyone. In practice, this approach misses
the subsistence farmers who become destitute when it fails to
rain. (It is those destitute and overburdened families who
benefit from the humanitarian programs operated under WFP and
GOM auspices, programs virtually ignored by the politicians
due to their single-minded focus on ensuring ADMARC grain.)
It does not miss urban residents who would rather not pay
market prices.


7. (SBU) Cheap ADMARC maize has obviously become an
expectation, to the extent that most policymakers view it as
a political necessity. Indeed, most politicians miss the
plain economic reality that plentiful and cheap ADMARC maize
prevents markets from working smoothly by providing exactly
the wrong incentives, thereby increasing, not decreasing,
Malawi's vulnerability to food shortages. In the end, it
hardly matters to them, since the ready availability of food
aid and budget support cushions them from the consequences of
their persistently broken policies. It will be tough and
perhaps impossible to fix the situation by privatizing ADMARC
(a major World Bank conditionality),given the convenience of
the present system and the huge public affection for the
venerable parastatal.


EASTHAM