Food insecurity now a permanent threat
Zimbabwe is set to import 400,000 metric tons (MT) of maize from Zambia and Malawi, which will be delivered in June to alleviate a food crisis in the country. This will cost the country at least $120 million before transportation and other costs are factored in. Total grain imports are likely to reach 700,000 MT in 2022. According to the World Food Program (WFP), about 6 million people (about 40% of the population) are in need of food aid in the country, with an increasing number of city dwellers are now in a situation of food insecurity. . The government has forecast maize production for the 2021/22 season to be 1.56 million metric tonnes, down from the previous season’s multi-year record of 2.72 million metric tonnes. Zimbabwe needs 2.2 million tonnes a year for industrial, human and animal consumption. The government has encouraged private commercial actors to import grain to fill the gap, while subsidized farmers are required by law to supply the government.
Net importer of cereals
Harare has been a net grain importer since 2006, with an average maize production of less than 1.3 million tonnes per year over the past 10 years. Wheat production has averaged 110,000 MT over the past 10 years against a national demand of 450,000 MT per year. The yield per hectare of maize (the staple crop) remains very low with an average national yield of less than 0.7 tonnes per hectare (below the African average of 1.8 tonnes/ha). Yield is also lower than its southern African counterparts which are largely affected by the same climatic conditions, with Namibia, Malawi and Mozambique at 1.2 ton/ha, Tanzania at 1.3 ton/ha , Zambia at 2.5 tonnes/ha and South Africa at 5.3 tonnes. /Ha. Interestingly since the year 2000, Zambia has tripled its maize production to an average of 2.9 million tonnes per year in the last 10 years alone and is constantly exporting maize to its southern neighbour.
The picture above is not sustainable for the Zimbabwean economy as the country is endowed with 162,000 km2 of arable agricultural land, 2,200 dams and hundreds of renewable water sources such as rivers which are currently underutilized for agricultural production. Additionally, the government has invested billions in agriculture since 2016 through Command Agriculture, the Presidential Inputs Scheme, Pfumvudza, and other subsidy programs targeting farmers and virtually all types of crops. The main constraints to agricultural production in Zimbabwe are:
Raw material pricing
Zimbabwe lacks a functioning commodity trading market where strategic crops such as maize, wheat, soybeans and others are traded. This means that there is no open access to the market since the prices are set by the government. Current floor prices for maize and traditional cereals are ZW$75,000 per tonne. When matched to the pegged central bank or interbank exchange rate, producer prices are overvalued (above regional prices). However, when compared to exchange rates in the market, the price becomes 50% of regional prices. This means that the price element does not incentivize private sector production or financing. To solve this problem, prices for agricultural products should be agreed by producers and buyers through an open commodity exchange in tune with world prices and market dynamics of demand and supply. Similarly, the forex market should be market-driven and stable enough to support long-term planning.
It is now 42 years after independence and 22 years after the land reform program. However, most farmers in Zimbabwe have no bank title to their land, making it worthless in terms of assets and making it difficult to access credit from financial institutions or private lenders.
The government has selectively issued 99-year leases, but the paper is not legally transferable, thus not attractive to the banking sector in an environment where trust and policy coherence do not exist. The law specifies that the government can withdraw the lease and reallocate at its discretion. This means that all resettled low-resource farmers cannot expand their farms or seek finance because there is no collateral on ownership. Similarly, banks and the private sector avoid financing agriculture because the risk is too high. To address this, the law should make the 99-year lease transferable and allow financiers to hold the lease or any movable property as collateral for any credit advanced to farmers (especially A1 and A2 farmers). In addition to forcing farmers to repay their loans, this will unlock the economic value of land and mitigate the risk for financiers to support agricultural production.
Zimbabwe’s monetary, fiscal and agricultural marketing policies have not been favorable to farmers. This is the main reason why several smallholder farmers have abandoned large tracts of land for other income generating activities such as small scale mining. Constraints faced by farmers range from high levels of inflation caused by central bank money printing (increase in prices of inputs and services), inefficient foreign exchange markets, late payments by government agencies , export bans, excessive regulation and lack of access to independent markets. for remote farmers. A plethora of regulatory instruments and laws are instituted to protect the government monopoly on grain marketing to the detriment of farmers, businesses and the economy as a whole. The government should only participate in the purchase of cereals (using market prices) up to the level of strategic storage reserves or for emergency interventions in the distribution of food to households. As such, agricultural policy should aim to create access to independent markets, facilitate private sector financing, achieve low levels of inflation, encourage production and exports.
Low levels of mechanization
Large-scale agricultural production requires capital to increase yield per hectare, reduce production costs, improve efficiency and procure high-yielding seed varieties. Zimbabwe’s agriculture ranks at the bottom of mechanization as local farmers rely heavily on manual labor and other traditional farming methods which are not efficient. This is blamed on lack of investment in irrigation development and modernization. Zimbabwe needs more than 30,000 tractors, thousands of combine harvesters and other agricultural tools that are essential for improving yield per hectare. The banking sector and private donors could play a key role in financing irrigation and mechanization projects; however, the lack of title deeds reduces any appetite to lend to the sector. The use of existing water bodies such as lakes, dams and rivers, and groundwater bodies such as aquifers and the like through boreholes remains precariously low. It is possible to irrigate more than 2 million hectares of land. However, less than 206,000 hectares are currently irrigated.
There is also a greater need to increase funding for training services for smallholder farmers (especially cotton, wheat, soybeans and horticulture) on sustainable farming techniques, planting high yielding seed varieties , quality control, agricultural planning, pest control, pricing and other business activities. aspects is essential to speed up production.
Agriculture in Zimbabwe is now dominated by the state which plays the role of setting prices, regulating, providing grants and loans (financing), purchasing and disbursing funds, and setting policies which often change course at any time. The government mainly prefers to provide input subsidies to farmers, fix prices and centralize land tenure for political reasons. The scenario creates an environment of uncertainty and insecurity that allows for rent-seeking behavior by Politically Exposed Persons (PEPs) in the marketing of agricultural products. The reality on the ground is that most of the arable and fertile land in the country belongs to PEPs who have no passion or ability to produce. As such, most of the land sits idle while some is leased to third parties at exorbitant prices, with the government collecting a pittance in levies and taxes. Most of the tenants are former commercial farmers who have been evicted from the land and indigenous farmers on the government’s waiting list for land. However, the taxpayer will pay for land acquisition and improvements made by former commercial farmers as part of the US$3.5 billion global compensation agreement. Similarly, the government’s anchoring of prices to the domestic currency in an inflationary environment creates an opportunity for arbitrage where loopholes for hoarding and rent seeking arise. To combat rent-seeking behavior, the government must liberalize (partially or fully) its agricultural policies to improve production, allow private sector financing, and create conditions to ensure that revenues are reinvested in the country.
Low agricultural productivity in Zimbabwe has led to amplified poverty levels and limited employment opportunities, with the percentage of extremely poor citizens increasing every year. Food insecurity is closely linked to drought events due to over-reliance on rain-fed agriculture and limited irrigation capacity. The country spends nearly $1 billion a year to import corn, wheat, soybeans and other agricultural products that could be grown locally. Agriculture provides 57% of the raw materials used in manufacturing, which means the huge food import bill drives imported inflation and exposes the country to over-reliance on other countries for food. feed. Zimbabwe will remain food insecure if there is limited political will to address legacy land issues and various policies that create persistent sustainability constraints for farmers.
Victor Bhoroma is an economic analyst. He holds an MBA from the University of Zimbabwe (UZ). Comments: Email [email protected] or twitter @VictorBhoroma1.
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