HomeBusiness DigestPoor grain output hurting Zim economy

Poor grain output hurting Zim economy

Zimbabwe has been a net importer of food for the past four decades and the country’s import bill has increasingly featured grain imports with maize imports averaging 1,1 million Metric Tonnes (MT) per year in the last 10 years, while wheat and soya beans account for 300 000MT and 150 000MT in import quantities respectively. National demand for maize stands at 2,1 million MT for industrial and domestic consumption.

Victor Bhoroma analyst

Imports for these three raw grain commodities cost the country at least US$600 million in 2020 alone, thereby surpassing fuel imports (at US$499 million in the same period). This is before processed cereals and other agricultural commodities are factored into the import equation.

Over the years, the country has been even importing millions worth of fresh commodities such as onions, potatoes, apples, pears, grapes and other vegetable products which should ordinarily be uncompetitive to transport into the country.

Yield per hectare for maize (the staple crop) remains very low with average national yield less than 0,7 tonnes per hectare (Lower than the African average of 1,8 tons/hactares). The yield is also lower than SADC peers who are largely affected by the same climatic conditions, with Namibia, Malawi and Mozambique at 1,2 tons/ha, Tanzania at 1,3 tons/ha, Zambia at 2,5 tons/ha and South Africa at 5,3 tons/ha. Consequently, Zimbabwe is now South Africa’s largest maize market, accounting for 30% of the official exports of 1 million MT in 2020. Interestingly since the year 2000, Zambia has tripled its maize production with an average of 2,9 million MT per year in the past 10 years alone and constantly exports maize to its southern neighbor.

The picture above is not sustainable for the economy considering the fact that the country is endowed with 162 000 square kilometers of arable agricultural land. Even though only 40% of the total arable land receives rainfall considered adequate for crop cultivation, the country boasts of over 2 200 dams and hundreds of renewable water sources such as rivers which are being underutilized for agricultural production. This is despite the fact that the government has invested billions in agriculture since 2016 under various subsidy programs.

Poverty and unemployment

Low agricultural productivity in Zimbabwe has amplified poverty levels in both rural and urban areas. In the last two years, the World Food Program (WFP) estimated that eight million Zimbabweans (60% of the population in each year) required food aid from the government and the donor community to avert starvation.

A large proportion of this number now live in extreme poverty. The sharp increase in poverty levels shifts household spending to basic foodstuffs and curbs spending on services such as insurance, housing, clothing, communications, traveling, entertainment and others. Additionally, low agriculture output leads to sharp decline in employment opportunities considering the fact that the sector still employs over 66% of the entire population directly (Communal to large scale commercial farmers) and indirectly in the value chain in transport, manufacturing, retail, exports, insurance, finance and other support services. The increase in rural to urban migration in the last 10 years and the stampede on illegal emigration to neighboring countries tells a hidden story about surging unemployment levels in the country.

Imported inflation

Critically, agriculture provides 57% of raw materials used in the manufacturing sector which means that the huge food import bill carries with it imported inflation and exposes the country to over reliance on other countries for food. This partially explains the high production costs incurred by local food manufacturers who now rely on imported soya bean oil, meal and seed, wheat and corn to satisfy local demand.

The haulage cost for these commodities through Beitbridge, Beira and Chirundu border posts is borne by the consumer.

In 2016, Zambia banned maize exports to Zimbabwe and other regional countries after a drop in its output. Zimbabwe had to resort to importing maize from as far as Tanzania, Mexico, Brazil and Ukraine in the last few years to avert starvation. The government had to also take drastic measures in permitting Genetically Modified (GM) corn to be imported from South African producers in order to avert hunger.

The country also faces persistent shortage of foreign currency due to limited confidence in the financial services sector and government’s foreign exchange regulations. This means that low agricultural productivity has directly led to unsustainable pressure on foreign currency and instability for the local currency since raw materials and food are a priority.

Therefore the country’s exchange rate stability is very much connected to grain import substitution to save the more than US$600 million used to import maize and other grains year in year out.

Why has production plummeted?

Undoubtedly, Zimbabwe’s fast tracked Land Reform Program left a huge trail of disaster on the country’s food security status, output, land tenure models, investment levels and value added exports from the sector. It also altered the country’s industrial model with a number of agro processors going out of business.

However it’s now 20 years after the land reform program and production still looks very fragile along rainfall pattern lines. It is worth noting that most of the resettled farmers have no bankable title to their land which makes it worthless in asset terms and difficult to access credit from financial institutions considering that commercial agriculture is capital intensive. The issued (to some farmers) 99 year leases are not transferable, hence not appealing to the banking sector in an environment where confidence, respect for rule of law, sanctity of contracts and policy consistency are in short supply.

However government policy missteps have also had a fair share of poison to the cake, with farming viability consistently threatened by sub-economic producer prices set by the government before each selling season.

Delays in paying for delivered produce, coupled with inflation for the domestic currency means that farming as a business has become a loss making venture and very unpredictable. In the end, the government has to consistently provide unsustainable subsidies to the majority of the farmers for economic and political reasons.

The government has also used command policies and legislation such as Statutory Instrument 145 of 2019 (SI 145/19) to cement its control on grain marketing, thereby crowding out private sector investment and hurting market oriented price discovery. Systematic corruption in the distribution of inputs and funding have also been blamed by authorities.

The government has also dragged its feet on implementing free market policies such as an implementing an independent commodities exchange to address the issue of payment delays, pricing and rent seeking behavior.

Zimbabwe’s rainfall patterns have adversely changed in the last few years due to climate change. There is a greater need to direct agric policies towards small scale irrigation and allow the private sector to invest in production with absolute control on grain marketing. Successful irrigation schemes do not only guarantee food security but allow all year round production by farmers who are relying on rain fed agriculture and are being adversely affected by climate change.

Years of government funding to farmers have created a vicious circle of relying on government for free inputs that burden the tax payer, while nurturing a toxic dependency on grain imports to feed the country. Farming is a business and the role of government is to incentivize import substitution for grains through urgently addressing land tenure, pricing and viability concerns that are hindering optimum production.

Bhoroma is an economic analyst and holds an MBA from the University of Zimbabwe. — vbhoroma@gmail.com or Twitter: @VictorBhoroma1.

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