REVELATIONS that the government could be on the verge of losing $280 million at the Grain Marketing Board (GMB) because of arbitrage has all the markings of a huge scandal.
GMB is buying grain at $390 and selling at $250 per tonne, meaning the government body is making a $140 loss per tonne.
There can never be a justification for the selling price to be lower than the buying price, as this just does not make economic nor common sense and it needs to be addressed.
In spite of GMB claiming it has controls to ensure that only millers have access to grain at $250, the reality is that there will be loopholes and this opens the way for some people — who are obviously connected to the government and Zanu PF — to benefit.
Before looking at the economic fundamentals, it is important to point out that at $390 per tonne, Zimbabwean grain is overpriced and far more expensive than in other countries in the region, who are buying maize for almost half of what GMB is paying.
The laws of supply and demand dictate that where there is a surplus, demand is low and the price of grain, therefore, must come down.
If reports that Zimbabwe achieved a bumper harvest in the last agricultural season are true, then it follows that the price of grain cannot be maintained at $390, the same price during the previous season, where there was a drought.
The problem with Zimbabwe is that the government still has a command approach to the economy, where they want to set prices instead of letting market forces decide, thus, opening avenues of avarice and greed.
What GMB ought to be doing is buying and selling maize at competitive prices, so that it does not open the door for people to benefit unduly.
A GMB spokesman claimed the variance in prices was due to a government subsidy to farmers, which is a fair point, but then there should be better ways of subsiding farmers so that the taxpayer’s money is not abused.
For example, command agriculture and the Presidential input scheme are all forms of subsidies, hence, there is no need for farmers to be subsidised right up to the GMB.
What is important now is for Zimbabwe to plug all loopholes for corruption and we are afraid the differences in prices opens the door for graft, which could blow up into a massive scandal.
The best way to avoid looting at GMB is to ensure that grain is sold and bought at market-determined prices, as this will deter greed and corruption.