POOR macro-economic conditions, a below-average 2020 harvest and cereal availability compounded by Covid-19 restriction measures, continue to impact household access to food and income, a new report shows.
According to USAid’s food security agency, Fewsnet, in its latest report titled Zimbabwe Food Security Outlook October 2020 to May 2021, poor macro-economic conditions, marked by a very high inflation rate, are expected to continue throughout the outlook period.
“Poor macro-economic conditions and the below-average 2020 harvest and cereal availability compounded by longer-term impacts of the recently removed Covid-19 restriction measures continue to impact household access to food and income in rural and urban areas,” part of the report reads.
“The situation is being worsened by critical water shortages across most parts of the country. Despite the annual inflation rate declining over the last two months, it remains the second highest in the world.”
This comes despite a decrease in the official annual inflation rate to 659% in September, from 761% in August and 836% in July. Month-on-month inflation fell to 3,83% in September from 8,4% in August and 35,5% in July.
“In September and October, relative stability has been observed in the official and parallel market exchange rates. The ZWL is trading on the official market at just over ZW$81/US$1. This is a 225% increase above the previous interbank rate and about 42% above the exchange rate when the first auction took place in late June,” part of the report reads.
“The relative stability in the parallel market rates is partially attributed to the implementation of the foreign exchange auction system. As foreign currency shortages persist, parallel market exchange rates remain about 25% higher than the official rates and are variable throughout the country, influencing pricing on some markets. To a large extent, the stabilisation of the exchange rates has reduced market price volatility; however, price increases continue for some goods and services.”
However, experts continue to question how sustainable the foreign currency auction system is, given that the central bank still remains the biggest funder of the platform.
Fewsnet reported that with ongoing local currency shortages, purchases through mobile money transfers incur premiums of up to 50% above ZWL cash prices.
“In some cases, mobile money and electronic payments are being rejected in preference for payments in US$, South African rand (ZAR), or ZWL cash. Despite the relative stability of the ZWL/US$ exchange rate on formal markets, most goods and services are increasingly priced in US$ and ZAR, the latter mainly for southern areas,” reads part of the report.
“Most wholesalers, retailers, and service providers are not following government regulations to display prices in both US$ and ZWL at official exchange rates. This is resulting in goods and services in ZWL being priced at or above parallel exchange rates. In mid-October, the government announced plans to introduce a ZW$50 note in addition to the ZW$2, ZW$5, ZW$10, and ZW$20 notes to improve public and business access to ZWL cash.
“Workers across most sectors are increasingly pushing to earn in US$ to cushion themselves from depreciation and price volatility in local currency.”
In addition to the poor macro-economic conditions, the below-average 2020 harvest is driving high import needs.
According to the report under review, the national cereal supply for the 2020/21 marketing year is significantly below average, with national self-sufficiency estimated at less than 50% compared to the five-year average of about 70%, not considering imports.
“Maize import needs are nearly 1 million MT for the 2020/21 consumption year, which started in April. Most markets have very low or no maize grain stocks, especially in deficit areas in the south and west. Demand for maize grain is atypically high for this time of year following the poor harvests,” part of the report reads.
“These factors are driving higher than normal maize grain prices. In addition, milling costs, primarily driven by the high fuel costs and electricity tariffs, are unaffordable for some poor households.”
Maize imports by both the government and private sector are not likely to close the 2020/21 national cereal gap, Fewsnet says.
“It is anticipated that informal maize meal imports will be constricted partly due to high transport costs. Maize meal prices will likely remain above average and out of reach of poor households whose alternative cereal sources will be very limited,” part of the report reads.
As a result, national maize meal shortages are expected to continue during the outlook period.
These challenges are contributing to the continued food security shortages, as maize remains Zimbabwe’s staple food.
“Furthermore, maize meal shortages also persist, with remote rural areas the worst impacted. Formal maize meal imports are negligible. Maize meal prices are also exorbitantly high beyond what most poor households can afford. Some commercial millers are producing refined maize meal brands which, besides being more expensive than unrefined brands, are not popular among low-income households,” reads part of the report.
“The government recently stopped the subsidised maize meal scheme where millers were supplied with cheap grain to produce and sell maize meal below market prices. Despite most non-maize food commodities being readily available on the markets, except in some remote areas, prices remain significantly above average and beyond most poor households’ reach.
“These include alternative or substitute foods such as rice, bread, wheat flour, and sweet potatoes. Some poor households are purchasing less preferred and cheap foods or small portions on the informal markets.”
Fewsnet said in the absence of maize grain, most households are expected to purchase maize meal, or alternative and less preferred foods. Based on these many challenges, Fewsnet says macro-economic conditions are expected to remain poor during the outlook period as key fundamentals remain poor.
However, Fewsnet expects the anticipated reopening of national land borders in the near- and medium-term in Zimbabwe will increase cross border trade, informal remittance flows, and labour flows, especially in southern areas.
But, these activities will be below normal levels partly due to costly Covid-19 certificate requirements at the borders.
Current international forecasts indicate cumulative rainfall for October to December 2020, and January to March 2021 is expected to be average. “Engagement in tobacco production, the main cash crop, will likely to be lower than in recent years if the number of registered farmers remains below last year and average,” part of the report reads.
Fewsnet also sounded the alarm on water availability and access across most parts of the country, including typical high rainfall areas and urban areas, as it is expected to be significantly below normal between October and November.
“The situation will be critical in typical low rainfall areas, impacting water for human consumption and seasonal livelihood activities. The situation is expected to improve in November/December as seasonal rainfall is established,” part of the report reads.