SEED CO Ltd says government’s agricultural support finance to the tune of ZW$2 billion could be the saving grace for its Zimbabwe business amid falling disposable incomes and a generally volatile environment.
Group CE Morgan Nzwere told shareholders at an annual shareholders meeting held in Harare yesterday the operating environment in the country is now increasingly unpredictable.
“In Zimbabwe, whilst as a business we are doing everything within our control to prepare for the main selling season, the operating environment is increasingly becoming unpredictable,” he said.
“On the positive, the recent Supplementary Budget confirmed government’s continued agricultural sector support, and in particular, maize and soybean cultivation this coming season.”
The local business unit has benefited from strong maize orders in the prior financial years under the government’s command agriculture scheme.
The government is targeting 210 000 hectares for maize and 30 000 hectares for soya bean under the Presidential Input Programme. A further 640 000 hectares are expected to be utilised for maize and small grains under support for the vulnerable groups.
Seed Co says it has sufficient maize seed stock to satisfy demand across markets in Africa.
“We have sizeable maize carryover stock (16 000mt) to augment current production (51 000mt) to satisfy rebound demand across markets on better rainfall prospects,” Nzwere said.
The group sees improved seed deliveries in the current financial year compared to the prior year.
A total 51 000mt of maize seed is expected from 49 000mt delivered in the prior year.
Management said 8 100mt of soya beans is expected compared to 7 000mt delivered in prior year. Of the 8 100mt, almost 80% has already been received for processing.
“Maize seed deliveries currently at about 50% in Zimbabwe and 40% in the region,” he said.
Nzwere said margins across the board remain stable in all other markets except in Zimbabwe.
On the working capital front, the group was able to collect ZW$24,6 million from debtors including ZW$7 million for the vegetable business, since last year-end.
“In the region, since year-end we have collected US$10,1 million from debtors and collection efforts are continuing,” he said.
Nzwere said local borrowings in Zimbabwe for seasonal requirements are at weighted-average cost of 23% per annum, adding liquidity challenges had affected the financial sector.
“Local borrowing costs have gone up in line with inflationary pressures albeit amidst a serious liquidity crunch. USD borrowings for regional operations are all now at an all-in cost of 6,1% pa,” he added.
Seed Co increased production from 600mt last year to 1 000mt this year in Nigeria. The group’s vegetable business is expected to continue growing notwithstanding forex challenges. A stable performance is expected from Quton Zimbabwe.
Regional operations are seen rebounding with adequate product and better rainfall forecasts.
“We expect continued market share growth in East Africa. Kenya is expected to rebound, having suffered product shortage as well as depressed demand last year due to drought and other supply chain related constraints. Adequate stocks are available, and the business is ready for the season. We have also increased our production capacity in Kenya to mitigate supply chain constraints,” Nzwere added.
Production in Tanzania increased despite having suffered from product shortage.
“The subsidy programme in Malawi is continuing, with the government slightly reducing targeted beneficiaries from 1 million to 900 000 families. The government input programme in Zambia is continuing with input distribution starting on 1 September, and we expect to get a decent share of the business,” Nzwere added.
Vegetable seed business units in Tanzania, Malawi, Zambia and Kenya and are expected to start contributing to the bottom line following their full rollout last financial year. — Staff Writer.