The kwacha’s depreciation will in the long-run negatively impact mealie meal prices, says the Millers Association of Zambia (MAZ).
The kwacha has continued depreciating against major currency convertibles to breach the K12 per dollar psychological barrier for the first time since October, 2015.
According to financial market players, the kwacha breached the K12 psychological barrier per dollar to trade above K12.00 on account of continued heightened demand for dollars on the local market with correspondingly limited supply of the greenback.
The local unit was seen trading at K12.26 and K12.31 by end of day, Friday, for bid and offer respectively, according to the Bank of Zambia, down from an average of K10.99 and K11.06 per dollar 10 days prior, representing an around eight per cent devaluation of the local currency.
In an interview, MAZ president Andrew Chintala said that the depreciation of kwacha has currently not negatively affected the sector because raw materials are sourced locally.
However, upward mealie meal price adjustments could be made to cushion some millers’ increased cost of procuring equipment into the country, according to Chintala.
“When you talk about the depreciation of the kwacha, obviously, there are millers who have just imported equipment to enhance their operations. These will obviously be affected, and they will do everything possible to ensure that they cushion the impact. This will definitely have an impact in one way or another in terms of affecting the supply factors as far as I am concerned. And yes, in one way or the other, millers are feeling the pinch, but I cannot attribute that to be the reason that would affect product pricing. Indeed, when you look some other products, especially when you need to talk about the export of certain other products because we are not importing anything at the moment, that’s the beauty about it. So, the impact that this will have on millers should be about servicing the facilities for those millers that have currently started operating,” Chintala explained.
“Unless there are other factors that will determine the final pricing of the commodity; unless some of these commodities were to move in terms of pricing of maize and other sources of raw material, but as it is, it’s practically a bit difficult because the market seems to be stable though the suppliers of the commodities are very, very slow, it’s a better position than last season. I think for this next [season], we expect the [maize] prices to be as they are currently, if the kwacha does not depreciate further. So, the fundamentals change overnight but the prices should remain the same. The maize marketing season is on-going, and I think so far, we have done well in ensuring that we continue supplying, but I think the supply is slow I must admit that. But I think we are getting what we need for our day-to-day operations. But we expect this situation to improve and the supply of raw materials to improve as well and to have a better situation in as far as supply is concerned. It’s a matter of concern, but we are buying what we need for our day-to-day operations.”
He urged government to institute measures to ensure that raw products, including maize, are not exported.
“As an association, you know, government is promoting value addition and in as far as value addition is concerned, we are against the export of maize in its raw form. And the reason why we are against the export of maize is very simple. One, when I export maize, you are also exporting the other by-products that come from maize when you mill it and you also export jobs, too. This is why we have welcomed the move by government to export value-added products. Because that is positioning ourselves in terms of regional trade is concerned where we have to send our mealie meal and, thereby, creating and returning human resource within the country and retailing some other brands. So, we would like to see a situation that government puts in other measures to see to it that only the finished products leave the country other than the raw materials because by so, we will be returning the jobs as well as encouraging the sector to grow in terms of the capacity,” said Chintala.
Retail prices of mealie meal in Lusaka currently remain stable hovering between K75 and K84 in some outlets per 25Kg breakfast bag.
But the national average prices of the staple commodity has steadily increased to a one-year high, with a 25Kg breakfast bag now costing an average K80.45, according to Central Statistical Office (CSO) data.