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Summary
Prior to the reform of South Africa’s maize marketing system in 1997, maize meal prices and
marketing margins for millers and retailers were among the highest in the Southern Africa
region. This article determines the effect of market reform on the size of maize milling/retail
margins in South Africa. Regression models of monthly milling/retail margins are run from
the period May 1976 to September 2003. To assess the robustness of our findings, we
estimate several different model specifications representing structural change, vary the
sample period to examine the sensitivity of findings to unusual weather and market
conditions in the region during the 2001-2003 period, and run the models using different
estimation techniques, OLS with Newey-West robust estimators and Feasible General Least
Squares.
In virtually all models, the results indicate that real maize milling/retailing margins in South
Africa have increased even further since the deregulation of prices and reform of markets in
1997. Controlling for disturbances in weather, wages, exchange rate levels and volatility,
inflation-adjusted margins accruing to millers and retailers has risen 29 to 42 percent between
1997 and 2003. Simulations indicate that the deregulation of maize meal prices has causes a
16 to 20 percent increase in the mean retail price of maize meal since 1997. Maize meal
prices in South Africa remain the highest of all maize producing countries in the region, even
though mean wholesale prices in South Africa are relatively low compared to its regional
neighbors.
Unlike experiences in neighboring countries, the reform of the maize market in South Africa
has not benefited consumers. Further investigation is needed on market concentration and
possible entry barriers in South Africa’s maize marketing system, and the extent to which the
factors leading to high maize meal prices in South Africa are adversely affecting consumers
in the wider Southern Africa region.
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