The Effects of Market Reform on Maize Marketing Margins in South Africa: An Empirical Study

This paper determines the effect of market reform and price decontrol on the size of maize milling/retail margins in South Africa. Regression models of monthly milling/retail margins are run over the period May 1976 to September 2003. To assess the robustness of our findings, we estimate several different model specifications for representing structural change, vary the sample period to examine the sensitivity of findings to unusual weather and market conditions in the region during the 2001-2003 period, and use different estimation techniques, OLS with Newey-West robust estimators and Feasible General Least Squares. In virtually all models, the results indicate that real maize milling/retailing margins in South Africa have increased since the market deregulation in 1997. Controlling for disturbances in weather, wages, exchange rate levels and volatility, inflation-adjusted margins accruing to millers and retailers have risen 29 to 42 percent between 1997 and 2003. Unlike experiences elsewhere in the region, maize market reform in South Africa has not benefited consumers.