The South African Maize Milling Industry: Can Small and Medium-scale Maize Milling Enterprise Survive and Thrive?

Abstract This paper investigates the competitiveness of small and medium-scale maize milling enterprises in South Africa from estimates of a translog stochastic cost frontier model. Results suggest that small and medium-scale maize mills in South Africa are cost-inefficient, operating at 59 percent and 30 percent higher cost than the best practice respectively. This implies that, on average, about 59 percent and 30 percent of the costs incurred by small and medium-scale maize mills respectively can be avoided without a reduction in maize meal output. Given this empirical estimates, if small and medium-scale maize milling enterprises in South Africa are able to reduce cost by 59 percent and 30 percent on average respectively, these mills could become competitive all things being equal, thus creating the much needed competition in the maize milling industry. Furthermore, results show that some mill-specific characteristics such as education, mill size, age of mill and location could contribute significantly to mill-level efficiency.