2015 in retrospect

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In as much as, taking rear view approach to business can be retrogressive, some important lessons can be drawn from the past.

Zimbabwe Economics Society Column by Eve Gadzikwa

A World Bank September 2015 Report provides a sobering yet graphic summation of the past few years leading up to the end of the year under review. A number of public companies have also provided interesting bedtime reading and insights throughout the year.

Zimbabwe’s strong recovery from the hyperinflation and economic contraction during 2000-2008 periods has encouraged hopes for its return to the strong socio-economic performance and middle-income prospects, of the 1990s. However, growth has slowed sharply since 2012 as the economy’s vulnerability to climate change and terms of trade shocks resurfaced.

In 2013, Zimbabwe adopted a new constitution and prepared a new development plan, the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZIMASSET).

With a relatively well-educated workforce, abundant natural resources and developed infrastructure (albeit aging), the fundamentals for growth and poverty reduction are strong, provided the country can tackle its economic challenges and fragilities, and build a consensus around inclusive and competitive investment policies.

Diaspora remittances continue to soar high due to a growing young productive workforce which has found livelihood around the continent and beyond. Much can be said about the resilience of the Zimbabwe economy which has defied all odds in the health, education and other basic social services sectors.

A lengthy isolation from the international community, restricted aid flows and a build-up of arrears to multilateral and bilateral institutions has seen the economy battling to punch above its weight causing it to swim upstream for survival.

In 2009, the country embarked on a period of stabilisation and growth ushered in by a political settlement and the adoption of a multi-currency regime, in effect dollarising the economy.

During 2009-12, the economy rebounded, with growth rates averaging around 8,7%. Inflation stabilised; revenues and bank deposits recovered sharply.

The country also embarked on its first Staff Monitored Program with the International Monetary Fund (IMF) and began making token payments on arrears to multilateral institutions. Underpinning this is also a reduction in HIV prevalence to around 15%, down from over 40% in 1998.

Life expectancy recovered from a low of 43,1 in 2003 to 53,3 in 2012 (compared with a high of 61.6 years in 1986, before the full extent of the AIDS pandemic). The maternal mortality rate declined from 960 deaths per 100 000 live births in 2010-2011 to an estimated 614 deaths in 2014; under-five mortality fell from 94 per 1,000 in 2009 to 75 in 2014.

In 2015, Zimbabwe played host to over 5000 delegates from around the globe who attended the highly acclaimed and successful International Conference on AIDS & STIs which was held in Harare.

At the same meeting and under the Harare Declaration 2015, leaders made commitments for “no one to be left behind”.

Zimbabwe can be proud of this great achievement and draw hope from the tremendous advances in HIV science which have made possible a full and normal lifespan for a person living with HIV on fully effective antiretroviral therapy and the increased range of biomedical strategies joining with behavioural and structural efforts to prevent new HIV infections.

Despite this success story, Zimbabwe like many other developing nations around the world missed a significant number of the Millennium Development Goals. On September 25 2015, world leaders adopted the 2030 Agenda for Sustainable Development which includes a set of 17 Sustainable Development Goals (SDGs) to end poverty, fight inequality and injustice, and tackle climate change by 2030.

The new SDGs, and the broader sustainability agenda, go much further than the MDGs, addressing the root causes of poverty and the universal need for development that works for all people. The SDGs will now finish the job of the MDGs, and ensure that “no one is left behind.”

So what are the greatest threats to attainment of the 17 Sustainable Development Goals (SDGs) at a national and global level?
Lack of convergence of ideas between labour, business and government

Slow pace of reforms

Limited lines of credit

Poverty & inequality

Poor Governance

Climate change is placing higher burden on governments (especially developing countries)

Weak institutions

Poor infrastructure

2016: Year of transformation

A bird’s eye view of agriculture can give an indication of the future performance of the economy.

Taking a wind screen approach can also provide a clearer picture of the future. This approach requires some imagination, taking a look into the crystal ball to get a sense of what to expect from January 2016. Clearly, there is no silver bullet to the many challenges that lie ahead but, as Stephen Covey aptly put it, “The bottom line is, when people are crystal clear about the most important priorities of the organisation and team they work with and prioritised their work around those top priorities, not only are they many times more productive, they discover they have the time they need to have a whole life.”

Put differently by Ray Dalio, “He who will live by the crystal ball will eat shattered glass.”

Being rainy season now, everyone is celebrating the gift of rain and the promise it brings through the activity of agriculture.

The recent showers have reminded me of the important and inescapable role agriculture plays in bridging the poverty divide. For without food a nation is not able to sustain itself or create meaningful wealth for its citizens. “Agriculture is our wisest pursuit, because it will in the end contribute most to real wealth, good morals, and happiness.” …Thomas Jefferson

Some important questions come to mind in this debate;

What role do standards play in promoting safe & sustainable agriculture?

What is the perceived role of agriculture in 2016?

Who regulates primary products at source, production and at market level?

What challenges and opportunities are available in the agriculture sector?

What is the full potential of agriculture to the Zimbabwean economy beyond 2016?

What impact will global commodity prices have on agriculture?

What challenges must be overcome to promote viability of downstream industries?

What are some of the Environmental, Social and Governance risks?

Top of the mind are issues around

Affordable funding options

Collateral value of agricultural land

Adequate water and energy

Shared value systems among economic players

Equipment (most crops are rain-fed due to lack of irrigation)

Availability of skilled manpower

Agriculture policies & laws

Participation of investors (foreign and local)

Competitive export prices

Background

Agriculture is the backbone of Zimbabwe’s economy. It provides employment and income for 60-70% of the population, supplies 60% of the raw materials required by the industrial sector and contributes 40 % of total export earnings. Despite the high level of employment in the sector, it directly contributes only 15-19% to annual GDP, depending on the rainfall pattern (Government of Zimbabwe, 1995), and this is a statistic that understates the true importance and potential dominance of the agricultural industry. Although agriculture provides primary raw materials for manufacturing locally, a significant amount is still exported in raw form. Local cotton for instance, is competing with imported GMO cotton on price and quality.

Importance of Agriculture Sector

For a population of 13,5 million, Zimbabwe has a total land area of over 39 million hectares, of which 33,3 million hectares are used for agricultural purposes.

The remaining 6 million hectares have been reserved for national parks and wildlife, and for urban settlements.
Agriculture and Poverty Alleviation

There is a strong direct correlation between agriculture and poverty alleviation given that, small holder farmers are failing to meet local demand for food. “For many years, Zimbabwe has been threatened by growing poverty and famine. In order for their families to survive, the farmers had to trade their livestock and seed”… Alfred Obed Rankomise

The 2nd of the 17 proposed SDGs is “end hunger, achieve food security and improved nutrition, and promote sustainable agriculture”.

Consequences of climate change

Today, rain fed agriculture is threatening food security. Although the southern part of Africa generally receives below-normal rainfall during El Nino years. El Nino event could affect both agricultural and fuel prices as heating and cooling demand would change.

Crop and animal diseases have increased dramatically in 5 provinces of Zimbabwe, lack of adequate irrigation, farm inputs, chemicals and agricultural extension workers are also threatening the sector. Primary products such as livestock are prone to foot and mouth disease, bird flu & swine flu.

Peanuts are also affected by aflatoxin. This is the name for a group of toxins (carcinogenic compounds) that are produced by two fungi called Aspergillus flavus and Aspergillus parasiticus.

SAZ is at an advanced stage of developing capacity to test for Aflotoxin, vitamins, herbicides and pesticides in food stuffs through support of development partners.

Infrastructural Challenges for Small Holder Farmers.

Transport Facilities

There are very few transporters available in rural areas to be used by smallholder farmers. More trucks should be added to the fleet, to enable all smallholder producers to benefit from this facility.

Quality challenges

Most smallholder producers lose a lot of money due to the quality of their products. There is need to teach farmers on how to handle their crops from the time they mature to the time they go to the market.

Farmers should also be trained in grading agricultural produce and should know all the grades for the commodities they sell to avoid being cheated by buyers.

Attitudes and Behaviour

Farmers should change their behaviour from being sellers of surplus produce to being market-oriented. This will help in the decision taken by a farmer in selling his/her produce.

Marketing channels

Although there could be alternative marketing channels for the smallholder farmers, there are some technical constraints which need to be addressed before these farmers can fully benefit from any market outlet.

Storage

Smallholder producers should store some of their crops like maize in order to benefit from the present market opportunities.

In a liberalised market, prices are market based, that is, prices of commodities are determined by the supply and demand conditions of the market.

Road Infrastructure

Most roads in rural areas where smallholder producers live are in bad state. This results in charging exorbitant transport costs to producers, thus reducing the final margin. This situation forces producers to sell their commodities to private buyers who give them very little money. It is thus important to have these roads regularly maintained to reduce costs.

Information

Some of this information can be accessed through ICTs gadgets but it becomes more effective when other players can organize farmers for training programmes. This is where knowledge brokers, government departments and development organisations can work together to move farmers from social entrepreneurship to profit oriented business models.

Commodity prices

At the moment, price information is considered the most important information by farmers. Most Commodity Prices Expected to Continue Declining in 2015, have already decreased by -5,6% in the last 12 months.

Tobacco which contributes 28% of export earnings has gone down by US$100m in value, between years 2014-2015. It should not only be about price but factors that determine price, e.g. price trends, supply and demand trends, competing commodities, available markets, standards, etc. Farmers should invest in processes that influence price, for example, market-related production, procurement, quality management systems, financial reporting systems, benchmarking

Elements in agriculture value chain

Quality of the crop begins with the decision on genetic plant variety, performance of the crop, ecological suitability of the plant variety to where they are grown. If that is in order, the next step is to proceeds to look at the circumstances of the farmer.

In Zimbabwe, this can be the game changer as sub optimal farmer resources will ultimately result in sub- optimal yields. Lastly –has the farmer acquired sufficient quality inputs in good time in terms of seed crop protection, quality chemicals, quality fertilisers, sufficient good quality water (rain fed or supplementary irrigation)?

Production at farm level

Various pieces of legislation exist within the agricultural sector;

The Seed industry is regulated under the Seeds Act, Seed Certification Scheme exists and is administered under DRSS within Ministry of Agriculture, Plant Breeders Rights Act is extremely important for the seed industry as it provides for fair play in industry because it protects intellectual property rights under the common law.

These New Perspectives articles are co-ordinated by Lovemore Kadenge, President of the Zimbabwe Economics Society (ZES). Email kadenge.zes@gmail.com, cell +263 772 382 852

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