The effects of trade Liberalisation on the wheat-flour-bread value chain in Lesotho

The paper examined the impact of trade liberalization and deregulation on the wheat-flour-bread value chain and specifically the impact on the industry and poverty via three channels namely: price transmission; enterprises (employment and profits); and the government’s fiscal position. The industry is very sensitive to exchange rates and international prices given that Lesotho is a net importer of wheat. The impact has been negative for local producers (commercial and emerging). While substantial employment losses occurred in the primary wheat producing areas, gains were experienced elsewhere in the value chain. Prices for both white and brown bread have been increasing despite decreases in wheat prices in real terms. This is significant as bread forms an increasingly important component in the poor consumers’ basket. Price transmission has generally been inefficient and consumers have not benefited from the liberalization process in the current environment of subsidized world prices. The bakers and retailers have benefited most from the policy change. Mechanisms that curb disproportionately high prices by some players should be devised and put in place but if they already exist their enforcement and efficiency as well as compliance in the value chain should be considered.