With a rich history as an exporter of food products and tobacco, Zimbabwe is a country whose fortunes have been based on agriculture. But a weak economy, the struggles of the farm sector to adapt to ambitious land reforms and sheer bad luck with the weather have left it struggling to feed its people.
A report published in June following a United Nations Food and Agriculture Organization (FAO)/World Food Programme (WFP) crop and food supply assessment mission to Zimbabwe put the economic situation in stark terms. "Zimbabwe’s economic decline continues unabated. The country’s economy has been shrinking each year for about a decade now with the real gross domestic product (GDP) shrinking by about 42% between 1998 and 2006," it said. "Successive crop failures, severely constraining people’s coping mechanisms, have compounded people’s deprivation.
"Hyperinflation has surpassed the 3,700-percent mark and has drastically reduced the purchasing power of households, greatly limiting access to available supplies for low- and middle-income and vulnerable people," the report said. "In parallel, the ever-plummeting exchange rate of the local currency in parallel markets has caused shortages of foreign currency and reduced the country’s ability to import fuel, electricity and other capital goods."
The FAO/WFP mission estimated the 20 2006-07 maize harvest at 799,000 tonnes, down from 1.4485 million the year before. However, more recent estimates have put the 2006-07 figure at 1.2 million (Central Statistical Office) and 900 000 to 1.1 million (Global Monitoring for Food Security), according to Jacopo D’Amelio coordinati on and information officer at the FAO’s emergency unit in the Zimbabwean capital of Harare.
According to a paper supplied to World Grain by the Millers Association of Zimbabwe (MAZ), wheat production plummeted from 350,000 tonnes at peak production a few years ago to an average of 150,000 tonnes a year in the last two years against a national demand of 450,000 tonnes per annum. "Forex (foreign currency exchange market) constraints have resulted in less imports insufficient to bridge the deficit," the paper said. It put maize production over the last two years at around 700,000 tonnes, "far short of nearly 2 million tonnes required across all sectors utilizing maize nationally (including stockfeeds)."
The government has taken action to deal with the shortfall. "The country has entered into a contract with Malawi for importation of 400,000 tonnes," D’Amelio told World Grain. "Deliveries are quite on time, considering the huge logistics involved. Up to now (mid-December 2007), the country has imported over 260,000 tonnes.
"However, there is an issue of availability at household level. While the country is importing massive quantities, availability from the GMB (Grain Marketing Board) or shops is an issue of concern. People are then buying from the "open" market (black or parallel market, as it is called here) at much higher prices than those set by the government."
The market is controlled by the government’s GMB, which sets the buying price for farmers and the selling price for millers. "Maize is traded in small quantities by farmers and petty traders at open market prices, although those prices are guided by the GMB prices and supplies are highly irregular depending on the residual stocks after GMB procurement," the FAO/WFP report said.
The GMB’s procurement price has increased, although it has remained under the market, except for a short period when a new price was announced and the market had to adjust to it, the FAO/ WFP report said.
"Throughout much of 2006, the procurement price of maize was Z$52,000 per tonne (equivalent to about $5 per tonne depending on the parallel market exchange rate), which made application of fertilizer and other purchased inputs financially unprofitable," it said. "A new price of Z$3 million per tonne, with a possible bonus of an additional Z$1.2 million per tonne, was announced in April 2007.
"This new price of maize is very attractive for the time being and would result in significant windfall revenue for farmers with marketable surplus from the current harvest. But whether the terms of trade (for example, price of maize over price of fertilizer and other key inputs) remain in favor of farmers come next agricultural season, starting in October/November, remains to be seen under the runaway pace of inflation and ever-sliding Zimbabwe dollar with respect to the U.S. dollar," it said. "Thus, the impact of the current upward jump in producer price on productivity increase next year is uncertain."
According to the MAZ paper, although producer prices for grain have moved up significantly, they have lagged behind inflation. The paper also said the announcement of producer prices had come too late in the season to provide incentives for production.
The GMB sells maize to millers at a fixed price. The millers are then obliged to sell at its set prices for selling milled maize (mealie meal). The GMB also sells mealie meal in urban areas and maize grain in rural areas at set prices.
Actual prices vary according to location, because the transport costs are borne by those who buy from or sell to the GMB.
The MAZ paper said that the GMB’s activities are so widespread, including milling, that it is competing unfairly with its effectively captive customers. The association said it wants the GMB to concentrate on being a national granary. It wants the government to "revitalize agricultural production (grain) through deregulation of marketing controls and encouragement of stakeholders in crop pre-financing schemes," as well as removing price controls. The industry said it would not be averse to price monitoring instead.
It also wants the government to encourage wheat, rather than flour, imports in order to protect the local industry and preserve employment and improve capacity utilization in the milling industry by improving grain supplies.
According to the MAZ paper, the current level of capacity utilization averages 15% for maize and 25% for wheat, because of the shortage of grain.
"Any encouragement of importation of flour will negatively impact on plant investment/refurbishment plans as well as employment," it said. "This could well spell the demise of the local milling industry, which has spare capacity and needs support to increase utilization and employment generation. The industry therefore encourages importation of grain to cover the supply deficit as opposed to processed product."
Despite the shortages, Zimbabwe’s millers are still active in export markets. "Due to current grain supply shortages, millers are barred from exporting flour," the association paper said. "However, biscuit exports into the sub-region are significant. Maize meal and bread flour are controlled products. Concern is with legislated prices that bear no relation to input costs. Urgent price reviews are now critical to avert the imminent collapse of the milling industry."
Although the market is controlled, open market prices vary considerably, according to the FAO/WFP report.
"For example, the maize price in the second week of May 2007 was Z$40,000 per bucket (17.5 kilograms) in Masvingo (eastern part of the country with relatively good supply of maize at the moment), Z$50,000 in Harare and Z$80,000 in Bulawayo (city in the fooddeficit south)."
"In most rural areas, however, market prices are irrelevant when no maize or mealie meal supplies are coming onto the market," it said.
"Small and Medium Enterprise (SMEs) are also active, particularly on maize milling," it said. "Significant SMEs involved in wheat milling include Manyame in Marondera, Rize Milling in Banket and Pairnex, Walezim and Simboti Foods, based in Harare."
There has been considerable progress in including more indigenous people in the industry, a change known as indigenization.
"The sector has experienced progress towards indigenization, with significant participation of indigenous businesspersons in the three major milling entities as well in the SME’s," the MAZ paper said.
Chris Lyddon is World Grain’s European editor. He may be contacted email@example.com.