After a loud outcry from the public, the government of Zimbabwe has reinstated grain subsidies. Last month, government made a decision to remove grain subsidies which led to a 100% increase in the price of maize meal. A 10kg bag at the new price cost Z$100 while a 50kg bag cost Z$517. To put these figures into context, the average worker earns a monthly income of Z$500 to Z$2500.
The Grain Millers Association of Zimbabwe (GMAZ) met with government yesterday to discuss the negative impact this has had on vulnerable groups of society. Hence an agreement was made between the two parties that will see government procuring grain at market prices and selling it to grain millers at a subsidized price. The grain subsidy will see the retail price of mealie meal falling to Z$50 per 10kg bag with immediate effect.
Mealie meal is a staple commodity which must be readily available to all members of society at reasonable prices. The drop in grain price is expected to have a positive impact on other products on the market such as stock feed and bread. It is also expected to have a positive impact on the exchange rate. On the back drop of the removal of subsidies the Zimbabwe dollar had tumbled from Z$20/US$ to Z$23 in the informal market. Business for grain millers had also become subdued as consumers could not afford the new price tag.
Overall, the return of the grain subsidy is expected to bring back some sanity into the market.