Maize Smuggling Worsens Inflation

Tanzania Daily News (Dar es Salaam)

Abduel Elinaza

6 June 2011

RAMPANT maize smuggling to neighbouring Kenya is poised to push up inflation, which is already on the higher side, with the National Bureau of Statistics (NBS) expressing worries that the trend might complicate efforts to control price rises to below single digits.

Reports from border regions of Mara and Kilimanjaro indicate that hundreds of tonnes of maize are now entering Kenya, which is facing acute shortage of cereals due to poor rainfall.

In Tanzania, NBS attributes the inflation to rising costs of production, warning that indiscriminate maize exports will exacerbate the prices of maize, the main staple food.

Director of Population Census and Social Statistics with the statistics body Ephraim Kwesigabo describes the inflation rate though still in single digit as worrisome: “We are in harvesting season that give prospects of cushioning the price of staple food but the high demand for cereals in our neighbours will increase inflationary pressure, internally.”

The country’s inflation rate of 8.6 per cent in April was the lowest in the East African Community member states because of relatively stabilised food prices.

Mr Kwesigabo argues that government policy on cereal exports was inevitable to check inflation from slipping further because, “We can control neither fuel prices nor inflations of our trade partners.”

“The small change in cereal prices impacts heavily on inflation because food has much weight on CPI (consumer price index),” Mr Kwesigabo says. Inflation in Uganda and Kenya has reached 14.1 and 12.05 per cent, respectively, as a result of poor harvests and rising oil prices in the world market.

Though the police at the border posts try to curb maize smuggling, the consignments of the commodity are still crossing the borders as traders embrace the high risk of arrest in pursuance of high returns from high prices offered across the border.

“A big number of cereal dealers are currently in Tarime buying the commodities and smuggling them to Isebania border town in Kenya through Sirari,” Mr Joseph Mwita, a Mara resident, told the Business Standard.

Lucrative prices are attracting farmers to sell their food stocks despite the government ban on food export since last year. In Kenya, a bucket of maize is reportedly sold at over 16,000/- compared to 12,000/- in Tanzania. As the result, the price for a kilogramme of rice has gone up from 800/- last season to 1,500/- while in Kenya, a kilogramme of rice is sold at 2,000/-.

Exporting to Kenya or Uganda is not bad. Actually it is a gain but the country is producing below its potential output. Should Tanzania increase productivity and have surplus for export market, the country will easily easy inflationary pressure from foreign exchange and high oil prices, says University of Dar es Salaam’s economic lecturer Dr Haji Semboja.

“The problem is we are not producing sufficiently for the East African cereal market,” says Dr Semboja, noting that with increased production of cereals, Tanzania can bridge the widening export-import gap and change the country from a net importer to net exporter.

Kenyan President Mwai Kibaki has declared famine as a national disaster allowing traders to import cereals including maize, the country’s staple food, at zero import duty.

This has increased activities in Kilimanjaro which is one of the regions touted as having several illegal routes for smugglers of all kinds of merchandise between the two countries.

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