Global Trade Alert

On 6 December 2012, South African Trade and Industry Minister Rob Davies has officially opened a small-scale maize mill (Kuvusa Mills) in Riverhorse Valley in Durban, which is in large part funded by the Department of Trade and Industry (DTI). Up to four more such mills are planned to be set up in the Kwazulu-Natal province in the next two years. The Kuvusa Mills are part of the DTI's Small-scale Maize Milling Initiative, itself part of the Industrial Policy Action Plan. According to the DTI, this small-scale mill was commissioned in order to reduce the costs of maize-meal by eliminating transport costs - which amount to up to 37% of the consumer price, the DTI asserts - through producing the product near the place of consumption. The DTI explicitly stated that it will market the meal at below-market prices, and that '(i)n so doing Kuvusa and the DTI will be introducing competition into a highly concentrated sector which has an unfortunate history of uncompetitive practices which have directly impacted on poor consumers' ability to feed themselves and their families'.
 
However, the GTA assesses this measure as distortionary since a state-funded enterprise specifically aims for selling a product at below-market prices and will almost certainly lead to a loss of revenue for its trading partners in the maize meal sector.