By Tafara Mtutu
The 25th Annual Southern Africa Regional Climate Outlook Forum (SARCOF-25) was held virtually last month to deliberate on a consensus outlook for the 2021/22 rainfall season in the Southern African Development Community (Sadc) region, which was mostly positive between October 2021 and March 2022.
SARCOF largely comprises climate scientists from the Sadc National Meteorological and Hydrological Services (NMHS) and the Sadc Climate Services Centre who incorporate input from additional sources that include the African Centre for Meteorological Application for Development (ACMAD), the European Centre for Medium Range Weather Forecast (ECMWF), South African Weather Service (SAWS), National Oceanic and Atmospheric Administration (NOAA), Beijing Climate Centre (BCC), Météo-France, Australian Bureau of Meteorology (BoM), UK Met Office, Japan Meteorological Agency (JMA) and Korea Meteorological Agency (KMA) in coming up with climate forecasts.
Consensus outlook formulation from the forum was based on statistical analysis, climate prediction models as well as expert interpretation. The outlook is very important to agrarian economies like Zimbabwe and Zambia whose agriculture seasons are typically in high gear between October and March.
Guidance about the climate before the start of the agriculture season also enables farmers to make more informed choices with regards to planting time and seed varieties to plant, among other considerations. The overall sentiment from the forum is that the Sadc region will record yet another good season on account of normal to above-normal rainfall for the better part of the 2021/22 agriculture season.
Zimbabwe is forecast to receive normal to above-normal rainfall between October and December 2021, above-normal rainfall between November 2021 and January 2022, normal to above-normal rainfall between December 2021 and February 2022, and normal to above-normal rainfall between January and March 2022.
These expectations hold positive implications for Zimbabwe’s agriculture sector and general economy. A good rainfall pattern often drives the agriculture sector which, in turn, underpins strong economic growth in the following year. This is because the sector employs 67% of the country’s total working population and a good season directly leads to improved disposable incomes.
On a macro-economic level, the increased local supply of produce such as maize, soya beans and wheat eases grain-related foreign currency demand in the economy and, to some extent, fosters inflation and currency stability.
We also note the increased support to the agriculture sector from both the government and financial services sector that has complemented the conducive climate conditions in Zimbabwe.
About 31% of Zimbabwe’s banking sector loan book is invested in the agriculture sector, and 16% of the government’s budget votes were allocated to the Ministry of Agriculture, Water, Fisheries, Climate and Rural Settlement in the latest budget statement by Finance minister Mthuli Ncube.
In addition, the bulk of the country’s electricity supply comes from the Kariba Power Station vis-a-vis the aging equipment that has constrained thermal power generation capacity in Hwange to levels below 40% for well over a decade.
Hydroelectricity from Kariba is largely dependent on the water levels of the Kariba Dam. The dam’s capacity fell to alarming levels of 25% in August 2019 and resulted in 18-hour power cuts between 2019 and 2020. However, water levels at the country’s largest dam improved to 41% in 2020 and marked an end to the crippling power shortages.
The dam’s capacity has improved to 48% this year and is likely to continue on a positive trend beyond 2022. This subsequently warrants positive expectations on capacity utilisation in energy-intensive industrial sectors as well as output from agricultural land under irrigation.
Local investors can tap into the promising outlook through food and agriculture stocks on the Zimbabwe Stock Exchange (ZSE) and Victoria Falls Stock Exchange.
ZSE-listed Seed Co Limited, Hippo Valley Estates, and Meikles’ Tanganda subsidiary recently flighted trading updates that were largely positive following the good 2020/21 season. In its Q1 2022 trading update, Seed Co Limited alluded to a 25% increase in wheat seed sales on the back of increased government support and improved irrigation capacity.
We also expect that Seed Co’s maize seed sales in the second quarter will be higher than last year on the back of the same factors that have driven wheat sales volumes. The company also leverages from its VFEX-listed associate company, SeedCo International, which has an extensive footprint in the Sadc region.
Seed Co International currently serves markets in Botswana, Mozambique, Zambia, DRC, Malawi, and Tanzania in Sadc. In the four months to July 2021, Seed Co International recorded a 99% growth in winter cereals in Zambia compared to prior year but encountered climate-related challenges with maize seed sales in Nigeria and Kenya.
Hippo Valley Estates expressed that the rains in the previous seasons provided the company with three seasons’ worth of irrigation capacity. The sugarcane producer, which operates mostly in Chiredzi, engaged other private players to extend the country’s sugarcane hectarage under Project Kilimanjaro.
The irrigation capacity for the current and additional hectarage will also be complemented by water supply from the Tugwi-Mukosi Dam, which was at 98% capacity in August 2021 compared to 40% in the previous year.
Soon-to-be-unbundled Tanganda Tea Estates also reported upbeat performance in its latest quarterly trading update on the back of the good rains. The segment’s harvest for macadamia nuts and avocados were 65% and 27% above the prior quarter, respectively, and the improved production output will likely be sustained by the above-normal rains in the coming season. — Morgan & Co Research.
- Mtutu is a research analyst at Morgan & Co Research. — email@example.com or +263 774 795 854.