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Headwinds piling up for Zimbabwe

by Staf reporter
18 Mar 2022 at 05:37hrs | Views
The United States Agency for International Development (USAid)'s food security arm, the Famine Early Warning Systems Network (Fewsnet) has warned of below average harvests this year and a shortlived improvement to food security outcomes.

Fewsnet blamed this on a poor start to the 2021-22 rain season and erratic rainfall, following a bumper harvest last year.

"The 2021-22 season has been characterised by erratic rainfall across the country. After widespread dryness and below normal rainfall during the first half of the season, more regular rainfall began by January 2022," Fewsnet said in its recent outlook.

"The passage of Storm Ana at the end of January helped to reduce rainfall deficits in some parts of the country, but these heavy rains also caused waterlogging and leaching and resulted in the loss of crops, livestock and property that include houses, roads, bridges, clinics and schools," it said.

Manicaland and Mashonaland Central provinces are reportedly the worst affected.

"Beginning in early February, soil moisture was significantly reduced across the country due to a widespread and extended dry spell. The poor start to the 2021/22 rainfall season also contributed to reduced cropped areas for main staple crops," Fewsnet said.

"Official national cropped area estimates are slightly below average, with 1,56 million hectares reportedly planted to maize as of the end of January.

"However, key informants report significantly below average cropped area in some areas, brought about by dry spells, very late planting, and poor to very poor germination."

Fewsnet said currently, crop stages for maize and small grains range from vegetative to reproductive stages.

"However, crop conditions in most areas are deteriorating rapidly. Most crops are showing signs of nitrogen deficiency due to waterlogging and leaching in some areas from heavy rains in January and due to recent shortages and access constraints due to above-average prices of top-dressing fertilizer," Fewsnet said.

Zimbabwe has a wheat demand of between 350 000 and 450 000 tonnes annually, yet only 336 000 tonnes are expected this year, according to the 2022 national budget.

Last year, 276 000 tonnes of wheat were produced. This means that there will be need for imported grain, considering that local wheat is not good for making bread.

Both Ukraine and Russia are the country's top wheat import sources.

In terms of maize, the country is estimated to have produced 2,7 million tonnes last year, more than double the five-year average.

The Food and Agriculture Organisation in a January 2022 update reported that the large outturn reflected an expansion in the sown area, estimated at a well above average level of 1,9 million hectares, and high yields.

Thus, the expected 1,56 million hectarage of maize due to the late start of the 2021-22 season confirms a lower output for the grain with the balance having to be covered by imports.

Zambia remains the biggest import market for maize.

What this means is Zimbabwe will have to rely on imported grains as farmers will be underwhelmed by their crop returns this current season.

These imported grains will be more expensive than in previous years owing to the recent invasion of Ukraine by Russia, that spiked food and energy prices worldwide.

"The main expected effect of the conflict on global food security comes through the impact on global grain and energy markets. International food and fuel prices have increased sharply since the onset of the conflict,"reads part of a new report by World Food Programme (WFP) titled Food Security Implications of the Ukraine Conflict.

"This will ultimately affect local food prices and, because of this, access to food. At the same time, grain and oil price hikes are increasing the cost of WFP's operations, reducing the ability to serve those in need just when it is most required."

War disruption
According to WFP, both Ukraine and Russia are critical players in global wheat and maize markets, being among the top five exporters globally for both commodities.

Together, the two countries supply 30% of wheat and 20% of maize to global markets.

"In addition, Russia and Ukraine are key exporters of sunflower and barley, accounting for more than three-quarters and one-third of supplies to international markets, respectively. The Russian military invasion has brought shipments from Ukraine to a halt and paused Russian grain deals, amid uncertainty around sanctions," the WFP report read.

"An estimated 13,5 million tonnes of wheat and 16 million tonnes of maize are frozen in the two countries — 23 and 43% of their expected exports in 2021-22.

Insurers demand high premiums for vessels entering the Black Sea, if willing to provide coverage in the first place.

Amid ships being hit by missiles, war risk premiums range in the hundreds of thousands of US dollars and have reached US$300 000 for some tankers."

"Movements in international grain prices reflect these disruptions with major export quotations for wheat up by 28% on average within two weeks… wheat increased by 52% between February 21 and March 7," WFP said.

So the high imported costs will add to inflationary pressures locally at a time when the depreciating local currency is resulting in inflationary pricing of basic commodities and services

 Inflation spiral

Financial services firm, Old Mutual Zimbabwe, has projected that the country's annual inflation will close the year at 105%.

The annual inflation rate for February was 66,1% from 60,6% in January, according to data published by the Zimbabwe National Statistics Agency.

"In December 2021, the government revised upwards producer prices for the 2022/23 marketing season. Prices were increased for maize grain, small grains, and soyabeans by 83%, 85% and 214%, respectively, to $58 553, $70 264 and $150 686 per metric tonne," Fewsnet added.

"Cereal availability on the open market, particularly that of maize grain, remains below normal levels for this time of the year, influenced mainly by government grain trade restrictions this marketing season. As demand for maize grain on the market is peaking at the height of the 2021-22 lean season, maize grain prices increased by 10-20 % across rural and urban areas in January, compared to December," Fewsnet said, adding that maize meal, cooking oil and bread prices went up by about 20% in January compared to December.

These price increases, and others, are resulting in wages being eroded monthly, leaving families more food insecure. As of January 2022, WFP reported that at least 49% of Zimbabwe's population lived in extreme poverty with an estimated 5,3 million people across rural and urban areas being food insecure.

This is why it came as a shock that on top of these challenges, the government decided to hike fuel prices to US$1,67 and US$1,68 per litre of petrol and diesel, respectively.

There were plans to further increase fuel costs before President Emmerson moved in and ordered a price increase freeze

"The Zimbabwe Energy Regulatory Authority (Zera) will continue to monitor the fuel prices on the market and provide regular updates. The fuel prices continued to increase during the past week. Pump prices were supposed to increase, but after consultations with the government and industry, it was agreed to maintain the current prices while monitoring market developments,"Zera said.

"The public and operators are advised that the blending ratio remains at E0. Operators may sell petroleum products below the prescribed prices depending on their trading advantages and should display prices in a prominent place as provided for by the fuel pricing regulations."

Following the fuel price increases, Zimbabwe became the only country with the most expensive fuel in the Sadc region.

Angola charges US$0,33 and US$28 US cents per litre of petrol and diesel, respectively, Mozambique (US$1,08 and US$0,96), Botswana (US$1,08 and US$1,06), Zambia (US$1,21 and US$1,19), South Africa (US$1,38 and US$1,39), Democratic Republic of Congo (US$1,04 and US$1,03), and eSwatini (US$1,06 and US$1,05). The price of petrol and diesel per litre was US$1,20 and US$1,22, respectively, in Lesotho, Mauritius (US$1,41 and US$1,04), Malawi (US$1,42 and US$1,39), Seychelles (US$1,54 and US$1,54), Tanzania (US$1,11 and US$1,07), and Madagascar (US$1,02 and US$0,85).

Namibia charges US$1,13 and US$1,14 per litre of petrol and diesel, respectively.

What this points to is that Zimbabwean fuel is not determined solely by international oil prices, as the Sadc average is US$1,14 and US$1,08 per litre of petrol and diesel, respectively.

Fearing consumer backlash, Mnangagwa ordered a halt in further fuel price increases .

However, Mnangagwa's intervention came at a time when international oil prices are stabilising. At the time of writing, the international price of brent crude oil was about US$100 per barrel from a record high of US$139 last week.

"High fuel and transport costs continue to contribute significantly to commodity and service price increases on the market  as diesel and petrol prices went up between January and February by about 10%, with US dollar prices for diesel and petrol increasing by 4% and 2%, respectively," Fewsnet said.

"Public bus fares increased by 60% from January to February. Electricity tariffs went up by 12,3% in January compared to December."

With the new fuel price increases, and more to come, inflationary pressures will continue given what happened from a small increase in February.

Already, some parallel foreign currency dealers are charging $270 for the US dollar.

Former Consumer Council of Zimbabwe chairperson Phillip Bvumbe said most consumers were living below the consumer family basket according to its cost-of-living calculation which was $75 000 as of January.

"Consumers are struggling and something needs to be urgently done to address some of the macroeconomic challenges,"he said.

Local economists have encouraged government to increase social spending while giving tax reprieve to citizens.

˜This article first appeared in the Weekly Digest, an AMH digital publication.

Source - NewsDay Zimbabwe