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Zimbabwe wheat flour tariff being questioned

06 August 2012

According to press reports, the Grain Millers Association of Zimbabwe (GMAZ) ‘is lobbying government to review customs duty on imported wheat flour… to protect local wheat agro processing, farming and milling companies from extinction’. The GMAZ chairperson claimed that the waiver on wheat flour imports introduced to mitigate shortages prior to the dollarisation of the Zimbabwean economy ‘was no longer necessary’, as the milling industry was now in a position to ensure sufficient supplies of wheat flour. GMAZ urged the government to reduce imports of wheat flour through a review of customs duties. However, the Minister of Finance said the government would take no action which could negatively affect the price or availability of wheat flour in the country.

Traditionally local companies milled imported wheat to meet domestic demand, alongside locally produced wheat. Installed wheat milling capacity stands at 65,000 tonnes a month according to GMAZ. In this context GMAZ wants a duty review that will allow local millers to ‘operate viably and keep our local wheat farmers alive’. GMAZ is not looking for an import ban: in 2011 Zimbabwe produced 41,000 tonnes of wheat, while national consumption was 450,000 tonnes. GMAZ has also pointed out that ‘when duty on maize meal was reinstated the milling industry did not increase the prices of maize meal and never failed to supply.’

USDA reports a likely decrease in Zimbabwean wheat production to 20,000 tonnes in 2012/13, compared to 23,000 tonnes in 2011/12. Zimbabwean wheat production has been on a declining trend since 2001, attributed in the USDA report to government policies on foreign investment, non-payment or late payment of farmers by the Grain Marketing Board, a lack of longer-term credit and more recently a lack of fertiliser, which simply resulted in many farmers not planting wheat this season. In this context, ‘wheat imports for the 2012/13 MY are expected to reach 250,000 tonnes.’ 

Editorial comment

The debate in Zimbabwe on the duty to be applied to imported wheat flour raises the issue of the use of trade policy tools in supporting the re-establishment of the Zimbabwean agro-processing industry. This needs to be seen in relation to the trade policy commitments which the Zimbabwean government has entered into at both the intra-regional (COMESA) and inter-regional (EPA) levels.

Trade in cereals-based products is problematic in the SADC/COMESA region, where a 35% value-addition rule is applied, in a context where wheat grain constitutes about 90% of the value of wheat flour. This poses problems for the use of non-originating wheat in flour intended to be traded regionally. In Kenya there have been concerns about wheat flour imports from Mauritius and Egypt. Mauritius produces no wheat, while Egypt does produces wheat but also imports high volumes of it, which are converted into flour, some of which is then exported. The issue of problematical rules of origin remains unresolved.

These experiences suggest the need for a more nuanced approach to rules of origin for wheat products, possibly within the framework of safeguard arrangements (e.g. as has been the case in Kenya). While there may be good reasons for the imposition of higher duties on wheat flour imports in Zimbabwe, a sound justification for such a protectionist move needs to be provided and subjected to critical review.

Such a critical review would need to take into account broader issues, including the steps government needs to take to re-establish wheat production, while in the interim ensuring that millers do not exploit protectionist measures to the detriment of poor consumers. This needs to form part of a clearly defined framework for the restructuring of the wheat product industry, to ensure that such the measures are only short-term in nature.

At the inter-regional level, wheat flour is included in Zimbabwe’s list of products excluded from tariff reduction commitments under the EPA (alongside a range of other ‘products of the milling industry’ – CN11), implicitly excluding it from the EPA prohibitions on increasing import duties (Article 14). However, for other cereal-based food products (including products falling under CN19, ‘preparations of cereals, flour and starch’), a number of tariff reduction commitments are made.

This suggests that EPA provisions will place limits on the extent to which tariffs can be increased to promote the re-establishment of cereal-based food product industries in Zimbabwe. While bilateral safeguard provisions allow reintroduction or increases in tariffs to prevent serious injury to an existing sector, it is unclear whether such provisions (Article 21) could be applied to support the re-establishment of industries which have largely disappeared as a result of the economic crisis in Zimbabwe in the last 10 years.

In this context, protecting wheat millers could simply make it more difficult to re-establish value-added cereal-based food product sectors.

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