AGRICULTURE is a key sector in the economy which is largely agro-based but it has faced several challenges in the past two decades. Of late the dairy sector has been hit hard by acute increase of inputs which have gone up over 30% in USD terms since 2020. The Zimbabwe Farmers Union (ZFU) executive director, Paul Zakaria recently spoke to our senior business reporter Melody Chikono (MC) on a wide range of issues during a calf distribution handover ceremony of 147 in-calf heifers given to 121 dairy farmers. Below are the excerpts from the interview:
MC: You have pointed to the exorbitant prices of inputs in United States dollars, which you say are unjustified. What is going on?
PZ: We are witnessing sharp rises of farming input prices not only in dairy but the agricultural sector. What is mind boggling is that we thought since we are using the US dollar, it would make prices more stable but that is not the case because if we look back about six months you will realise that the chemicals and veterinary medicines have increased by 30%. That has to be explained because there is no basis for price increases in US dollar terms. This makes operations expensive and non-competitive. Our products are produced at high prices which then makes them expensive on the shelf.
MC: If we talk about the high prices of inputs, what then is the situation in the agricultural sector in procuring new machinery to replace antiquated equipment?
PZ: That is another worrying issue. In terms of technology, we are lagging behind. Most of the work on the dairy farms is done manually particularly on the smallholder farmers. Emerging commercial farmers and large scale producers are also using antiquated machinery which require urgent replacement.
There is always talk about modernising operations and bringing them up to speed with what is happening elsewhere. But the cost of buying new equipment to improve efficiency and competitiveness is prohibitive.
We can’t rely on our financial services system; our banks do not have the right type of money for agriculture as interest rates are too high while the tenure of the facilities is short term. There is no way we can use funds borrowed from banks. It leaves us pondering how we can explore other options. So with this project, new equipment is being bought and of course there is this matching element where farmers bring in either 30% or 50% depending on the category. The project then brings in the rest. The dairy industry seriously needs to invest in new equipment but the situation is compounded by lack of conclusive dialogue regarding land ownership.
MC: How much is needed to replace antiquated machinery?
PZ: We can look at anything between US$800 to US$1 billion to replace obsolete equipment. Then the herd also has to be replaced. There is a lot that needs to be done.
MC: You spoke about the banking sector not having the right kind of money for agriculture. What is your view concerning the bankability of the 99-year leases?
PZ: We need all the key parties to speak about the security of tenure so that the instruments (leases) are bankable and are respected by the financial services sector. This can then enable farmers to borrow on the back of viability of their projects as well as the 99-year leases and title deeds. Hence, we need to bring normalcy in that regard so that we can transact. That is the only way we can attract fresh capital and unlock local investments.
Some people are not improving their facilities; they are not building new things, there is no new investment because the documents they are holding are not secure.
MC: Your comment on the land bank?
PZ: It’s a good move. We used to have the AFC (Agricultural Finance Corporation), which was financing all categories but more importantly the smallholder farmer.
When the AFC was closed, there was no commercial funding for smallholder communities. I believe we need to do much more in organising the finances for groups, cooperatives, companies and so on.
But we have to make sure that the land bank is sufficiently capitalised. Otherwise having a land bank that is not capitalised is as good as not having a land bank. We leave that to the Reserve Bank of Zimbabwe (RBZ) to make a comment on the capitalisation because they know the capitalisation thresholds.
MC: Your final word to the farming community?
PZ: Farmers need to be more organised. We need to strengthen our commodity associations, so that we speak with one voice otherwise the crowd funding that was being talked about will not materialise.
Further, the challenges such as producer price, input price increases, access to extension services have to be addressed. Thus, we need to be more prepared to ensure we access services as more organised people.