Agriculture expert Tamani Nkhono Mvula has said the price at which the Agricultural Development and Marketing Corporation (Admarc) is selling maize does not make any business sense and is a dent on the parastatal’s efforts to turn around its economic standing.
A Monthly Maize Market Report for December published by the International Food Policy Research Institute (IFPRI) shows that Admarc sales were reported in 11 out of the 26 markets monitored by the organisation, where the commodity was selling at K205 per (kg), 35 percent higher than the average retail price in December 2021.
The Daily Times understands that the maize which Admarc is currently selling was procured in 2020 at a price of K200 per kg.
In an interview, Nkhono- Mvula said the K5 margin does not make any sense unless the government is subsidising the price.
“This maize was bought in 2020. If we put into consideration the cost of storage and staffing, selling at a margin of K5 does not make any business sense to me. What Admarc should have done was to add value to the maize so that the price was higher because they are now in competition with the maize that is on the market; so, if they sell at a higher price than what is on the market, they may never sell,” Nkhono-Mvula said.
Chief Executive Officer of the African Institute for Corporate Citizenship Driana Lwanda said, in any business, any profit margin of 2.5 percent is low for running that business.
However, she was quick to mention that the volume of the commodity being sold also plays an important role in as much as businesses are concerned.
“The expectation is that Admarc should be able to bail out food insecure households in cases where maize is not available to the rural masses. With the current economic situation, Admarc is expected to operate at higher standards of corporate social responsibility than their private and other trading counterparts; as such, the issue of making more profits at this stage would not make sense to the rural masses.
“…as long as there is a percentage of profit margin on the maize price at hand, it does give Admarc room to venture into that business. However, factoring the other costs on transportation, handling and storage costs, apart from other logistical and administrative fees, Admarc is likely to make a loss in relation to is price due to the high transaction costs which may be higher than the K5 margin,” Lwanda said.
Admarc spokesperson Agness Chikoko Ndovie referred us to the Ministry of Agriculture, saying the prices are decided at ministry level.
Spokesperson in the Ministry Grecian Lungu said the price was considered for the parastatal to be able to service a loan it got to buy the maize.
“In that price there is a social aspect and we will be giving them money to cover up that aspect but we also considered that they have kept the maize for two years and out of the 255 metric tonnes they were keeping, they have only sold 37 metric tonnes, meaning there is still a lot of maize on the market,” Lungu said.
Cash-strapped Admarc has, since June last year, been looking to borrow K95 billion from lending institutions for running the company and implementing a turnaround strategy.