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Opinions of Monday, 14 March 2016

Columnist: CUTS Report

Are farmers and consumers being fleeced by maize market queens?

Maize market queens procure more than 90% of total maize produced in the country with the National Food and Buffer Company (NAFCO) taking less than 5% and other entities procuring the rest. Maize procurement is more of an informal sector trading. The market queens travel to the farming communities and procure the maize from the small farmers. They interact with the farmers and bargain to arrive at the price at which the produce should be sold. The queens seem to have upper hand in the price negotiations. Sometimes, they dictate the price offer to the farmers and most of the small holder farmers have no alternative than to sell t produce at the offered price.
Regrettably, most of the farmers surveyed have not been able to economically account for the true cost of their production.

According to the research findings from the Competition Reforms in Key Markets for Enhancing Social & Economic Welfare in Developing Countries (CREW) Project, it has been revealed that maize markets in Ghana are fairly competitive as there are large numbers of maize sellers and buyers, selling identical goods (maize), free entry and also free exit.

However, the presence of many players in the procurement segment (specific to maize) has not contributed towards an efficient market. For instance, the players do not necessarily compete among themselves. The network of market queens have allocated some markets to themselves and prevent other sellers from entering the market. Further, the queens act like cartels operating to exert their monopolistic powers and attempt to control both the demand and supply. These anti-competitive practices sometimes cause artificial shortages of the produce which in turn causes the price to spike in the consumers market. There is anecdotal evidence that these associations of traders collude to fix prices in the markets and prevent non-members from selling in the areas designated for specific maize traders unless they acquire permit and pay some registration fees.
On the supply side, maize are procured without proper standardization of bags (weights and measures) at the farm gates. This has created an opportunity for the farmers to be fleeced through often “oversize bags.” These examples display the difficult relationship between the farmers and the market queens/ trade associations.


The Shiny Side of the Queens
The market queens (market women) in the informal sector play critical roles in supplying the food needs of the growing urban population, source of revenue, provision of income to households, development of entrepreneurial skills and provision of employment opportunities for the labour force and providing a market to the farmers. These roles need to be acknowledged by policy makers. The research has revealed that regular capacity building programmes for market queens, access to credit, and improvement in road/transport infrastructure, establishment price information centers, regulation of standards for measurement and formation of farmer based organizations could enhance the operations of the women in the market and reduce uncompetitive practices in various markets and lead to better food security.

Recommendations
While the market queens have been in maize trade for several decades, their activities are faced with multiple challenges and the formation of market traders association has the potential of influencing the efficient conduct of the market. To enhance the activities of this market queens and also prevent anticompetitive practices in various market centers like price fixing, collusion and cartelization, Government’s action would greatly enhance the role the market queens play in food supply chain and the development of the country.


Provision of Credit Facilities
Although entry and exit into markets for new entrepreneurs is free, most of the women are faced with inadequate working capital. An improvement in credit facilities for traders would increase market competitiveness. Given the large proportion of maize purchased by these market women, their inability to continue the business due to high cost capital will lead to the collapse of the maize trade sector. A specialised small loan scheme can be established under the MASLOC to attend to the needs of these market queens because of the critical role they play in the food production, marketing and distribution in Ghana.

Improvement in Road Infrastructure
Improved road network reduces risk and marketing costs, attracts more vehicles and stimulate competition among traders. Moreover, lower marketing costs and reduced risks help reduce the margin between producer and consumer prices. It is therefore recommended that policy initiatives be directed towards ensuring efficient transportation of agricultural commodities across various markets. These include investment in new road construction especially the truck roads and maintenance of the old ones.

Establishment Price Information Centers
The creation of price reporting and information services for major agricultural commodities would lead to better transparency. Prices should be broadcasted daily. This price information service requires the introduction of a grading and a uniform measurement and weighing system for the entire country in order to reduce cheating of famers. There is a need for re-organization and re-equipping of the Statistics, Research and Information Division of Ministry of Food and Agriculture in terms of finance, facilities and personnel to be able to effectively perform these functions.

The Need for Agricultural Marketing Policy
As a way of promoting information symmetry between producers and consumers of agricultural products, government is being urged to consider the establishment of agriculture marketing policy that would look into the logistics and procurement of food from farmers to city dwellers. This would help avoid fluctuations in supply and demand.

Formation of Farmer Based Organizations
The establishments of effective market oriented Farmer Based Organization (FBOs) will help strengthen farmer’s negotiation skills and help give members of the group collective bargaining power so as to get reasonable market prices for their product.


Establishment of National Laws, Regulations and Guidelines to Regulate the MQs industry
Steps should be taken to formulate laws and regulations that will regulate the activities of the traders. This will sanitize the industry and make it more formal to the benefit of all stakeholders. In making these laws and/or guideline attention should be given to the very critical issues relating to standardization (quality, grading and weighing) and pricing. There should be a law that should require uniformity in the standards of measuring across the whole country to address the current situation where there is complete lack of standard.

Competition Policy and Law to check market distortions
Due to the sheer size and networks enjoyed by the market queens, the tendency to abuse it through price fixing, cartelization and collusion to reduce the quantity to be sold in the market, government should consider the passage of competition policy and law to regulate the activities of market players in the country to avoid price distortions and market inefficiencies
. CUTS Ghana is a policy think tank which works in the areas of consumer protection and education, economic regulation, trade and development, regional integration, competition policy and law, etc. For more information about CUTS, and competition policy and law | Office: +233-30-224-5652 | Email: eda@cuts.org, or accra@cuts.org Website: http://www.cuts-international.org/ARC/accra