It is necessary to explore the causes of problems, be they economic or not. Barriers to entry in processing, however, are frequently a direct result of government licensing and trade policy. Monopoly profits are often earned where such policies exist, and substantial improvements in economic efficiency and income distribution could result from a policy that promotes more vigorous competition.
Competitive markets ensure that no price distortions are caused by monopoly profits or manipulations, which frees policymakers to worry about other potential sources of market failure and the consequences of competitive markets for income distribution. Both tasks are easier if significant resources are not being drained from the economy by high-cost, protected producers who are free from competitive pressures and if the ghost of monopolistic middlemen can be exorcised by actively promoting a competitive and low-cost agricultural marketing system.
The most important first step, however, in instituting a policy regime supportive for small enterprise growth is to eliminate the existing policy biases against the small private producer. This might be expressed in terms of the need to "level the playing field" so that policies are at least size "neutral".
Unfortunately for small-scale maize millers, large-scale industrial maize millers firms (which previously had a virtual monopoly on the urban market) again have a competitive advantage, as the South African government requires maize flour to be fortified with vitamins if it is to be sold at a retail level. The additional inputs, including machinery, are expensive and access to the needed materials can be difficult to obtain, therefore creating a new barrier to entry.
Such a policy favors large maize miller’s creating a situation in which large maize millers could return to their oligopoly marketing practices (Jayne 2008). Imperfections and inefficiencies in the agricultural sectors of developing countries, are really just symptoms of the marketing problem in developing countries. The cause of those symptoms goes much deeper, and it is the cause that must be attacked.
Efforts to treat the symptoms have done little to improve the marketing system. In such a context competition law is a luxury that developing countries cannot afford. BIBLIOGRAPHY Jayne, T.S. (2008). Maize Marketing Margins in South Africa. Presented for 2008 Brown Bag Series of Agriculture Economics Graduate Students, East Lansing, U.S.