The government of Zimbabwe will, going forward rely on a coupon system to avail mealie meal to households under threat of hunger given the unattainable prices of the commodity. This comes only a few days after the Minister of Finance was pleased to announce a price increase that would bring comfort to the Millers. The coupon system is meant to allow better targeting of the subsidy which has recently fueled the black market for the commodity.
The coupon system was announced by Information and Publicity Minister Monica Mutsvangwa in a post-cabinet briefing on the 13th of February 2020. While the minister said the creation of the database of the recipients was at an advanced stage she spoke very vaguely of the way the system would work. So perhaps the idea is not as advanced as we would like to think. Interesting to note is how this follows as the next natural step from the revelations of the last few weeks of proof of residence to purchase mealie meal. The minister did say the coupons will be issued within a week on a per household basis.
The mealie meal subsidy which was cut by Finance and Economic Development minister Mthuli Ncube in his 2020 budget statement last year was quickly revived by President Emmerson Mnangagwa. In a sadly predictable turn of events cutting of price on the basis of the subsidy system, which paid millers directly based on production, resulted in the scarcity of the commodity and the creation of a black market. Black markets arise when a control price is lower than a market price, this is referred to in economics as a binding price ceiling. The subsidy which it was claimed is funded out of the proceeds of the hardest working citizen in Zimbabwe, the Intermediated Money Transfer Tax, has seen trouble with funding as it is believed due to favouring foreign currency transactions for purchases the tax revenue has declined in real terms.
After a drought season, the supply of maize has been low on the market and government eventually conceded allowing all with free funds to import maize and other grains. The catch is of course that the government continued to mandate a selling price on mealie meal with a subsidy to make up the difference. All well and good at the time but the depreciation of the Zimbabwean dollar has made this deal ridiculously unattractive. Remembering that the maize is imported or as good as imported.
The price increase announced by the minister placed mealie meal at ZW$70 for a 10kg bag while the black market charges up to ZW$200 for the same item. Retailers are bound to honour the gazetted price. This takes us all the way back to practices of the 2000s where a retailer would divert the product to the black market, sell for $200 and ticket the sales at $70, keeping the difference and doing so off the books. The subsidy system gave unfair rewards to retailers and black-market participants while punishing millers who used scarce foreign currency to import maize.
The coupon system is a great idea in theory. Simply put it better addresses the needs of the vulnerable. By giving them access to the product directly. It is unclear yet whether they will receive product coupons or discount coupons. Either way, it certainly does a better job than the subsidy but it is prone to some weaknesses. Firstly, identifying the vulnerable is not as easy as it sounds and there are two major risks of not identifying those in need and incorrectly identifying those in need. Secondly, systems are only as good as the people in charge of them so there is a great risk of the system being abused. Third, the vulnerable are in those positions because of deeper reasons than the price of mealie meal. What would prevent them from opting to sell their allocation if it yields good money, perhaps even in US dollars? Again in the 2000s farmers were allocated subsidised diesel under a government program and went on to sell that diesel on the black market as it was a scarce resource.
These are concerns that come to mind before the working of the system is laid bare. We remain optimistic that the cabinet will shed more light within a week and we can gain an understanding of how the system will work. Meanwhile, the subsidy will not be entirely abandoned.