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Reviving the rural economy in Zimbabwe

by Victor Bhoroma
17 Nov 2020 at 12:37hrs | Views
Zimbabwe's rural economy plays a significant role in national food production, in alleviating extreme poverty and in the attainment of Sustainable Development Goals (SDGs). The Zimbabwe National Statistical Agency (Zimstat) demographic survey from 2017 estimates that more than 68% of the Zimbabwean population lives in rural areas, which are classified into communal and resettlement areas. The percentage equates to more than 8 million people. Undoubtedly, rural-urban migration has greatly altered the population distribution with the young and economically active migrating to urban areas in search of better employment and income generating opportunities. This change in distribution has brought with it pressure on limited resources in urban areas, while depriving the rural areas of the skills to drive economic activities especially in agriculture. Furthermore, a number of constraints have also played a part in the decline of rural economy in the past 4 years. These include high levels of inflation (erosion of consumer buying power), climate change (recurring droughts), uncompetitive producer prices for crops, closure of rural mines, and waning infrastructure (roads, bridges, clinics, schools, dip tanks, dams and irrigation facilities)

The World Bank estimates that extreme poverty in Zimbabwe has risen over the past 3 years, from the 4.7 million people in 2018 to 6.6 million people in 2019. The number of the extremely poor is projected to increase to 7.6 million in 2020 due to the impact of drought, COVID-19 and high levels of inflation. In 2019, rural individual poverty prevalence was 90%, compared to 40% among the urban population. Extreme poverty was also much higher in rural areas with 45% of the rural population considered extremely poor compared to 7% percent in urban areas. This means that millions of people in communal and resettlement areas are living in poverty and there is an urgent need to revive rural economics as a way to uplift rural households.

The rural economy in Zimbabwe is modelled around growth points with key economic activities being agriculture, mining, trade in livestock and general merchandise.  This means that reviving the rural economy starts with the provision of critical infrastructure that connects growth points to urban markets such as good roads and bridges, electricity, accessible mobile network for internet and basic communication. With these provided, the government needs to craft the following policies to remodel rural economics:

Agriculture Viability
Small holder (communal) farms in rural areas are home to over 70% of farmers in Zimbabwe. Communal areas have accounted for about two-thirds of Zimbabwe's maize production since 2000, which means that cereal production is largely the preserve of communal farmers. In Tobacco, about 180 000 small scale farmers supply 80% of the golden leaf while supporting over 1.2 million family dependents. It is fair to say that there has been a significant shift from maize to tobacco and other cash crops (under contract farming) due price competitiveness and viability concerns. This year, the producer price for maize was fixed at ZW$12,330 (About US$110/ton using the parallel market rate from March to May 2020) yet the world market price was US$150/ton before shipping and transportation costs. After factoring in inflation and variable production costs, most farmers made losses on the maize they delivered to GMB and they will likely reduce hectrage in this 2020/21 season.

A fixed producer price discourages primary production, creates market shortages and creates arbitrage opportunities for importers or parallel market buyers who fleece desperate farmers.  The government does not save by paying farmers low producer prices or coercing farmers to sell directly to GMB. From January to June 2020, Zimbabwe imported maize worth US$229 million (At US$250/ton or more) from South Africa, Mexico and Ukraine. In a nutshell, the government is happy to import maize at prices 120% higher than what they pay local farmers. Similarly allowing cheap maize imports (duty free) to avert starvation squeezes out local farmers who would ordinarily benefit from price increases and increased demand provided the law allowed them to freely sell their produce. Therefore to revitalize maize production, rural economics and increase food security. The government needs to establish a commodities market where buyers (including the Grain Marketing Board) buy maize at market determined prices, not at fixed producer prices. GMB should compete with other buyers on contract farming and deduct any farming inputs availed to communal farmers by the government. Viability will gradually increase maize production by communal farmers.

Irrigation Farming
Zimbabwe's rainfall patterns have adversely changed due to climate change and over 60% of the country receives rainfall levels that are not adequate for crop cultivation. The government needs to rechannel funding from ordinary agricultural inputs to small scale irrigation pumps and pipes for communal farming areas close to water bodies.

Irrigation farming does not only guarantee food security for rural farmers but it allows all-year round production by small scale farmers who currently rely on rainfall and are being adversely affected by climate change.

Infrastructure Rehabilitation
Communal farmers require direct and easy access to markets for their produce. Rehabilitation of key infrastructure such as roads, bridges, dip tanks, dams, irrigation farms and boreholes forms the core mandate of the District Development Fund (DDF). Hence, to ensure maintenance of rural infrastructure and facilitate the revival of the rural economy, there is need to adequately retool and capacitate DDF to cover all rural districts in the country. The agency also offers civil engineering, tillage services, plant and equipment hire to communal farmers which are handy in boosting agricultural production.

Civil Service remuneration
Civil servants are important to the rural economy in terms of redistributing income from urban areas to rural communities through spending their wages in communal businesses. Rural teachers, nurses, municipal workers and other government employees are pivotal in supporting small scale farmers and buying livestock. Therefore paying competitive wages to the civil service improves spending on goods and services while also guaranteeing support for rural households through urban-rural remittances. Currently there is no incentive for civil servants to take up posts in rural areas and most prefer towns which offer better living conditions. The Public Service Commission (PSC) needs to look at strategies to incentivize civil servants who take up posts in rural areas.

Rural Electrification
To alleviate poverty in rural communities and facilitate equitable distribution of power, there is need to electrify all rural communities in the country under the Rural Electrification Agency (REA). REA gets its funding from treasury allocations and the 6% Levy charged on prepaid electricity tokens. Though priority will need to be given to growth points/business centres, schools, health centres, government offices and mines. The electrification projects need more funding from treasury and redirecting funds from the Afforestation Levy charged on Tobacco farmers. Rural electrification is key in reducing deforestation and meeting the country's Strategic Development Goal of providing affordable and clean energy.

Zimbabwe's rural areas fall short on economic output when compared to urban areas, however they are home to the over 80% of the country's population which is rapidly sinking into extreme poverty due to years of economic instability, climate change, high inflation and lack of access to basic amenities. The government needs to change its funding model for poor communal farmers (under the budgeted Presidential Inputs Scheme) and put more focus on irrigation farming. The attainment of SDGs also requires revitalizing the rural economy through implementing a commodities market to facilitate payment of viable prices to communal farmers under a market determined import parity pricing model. Viability in agriculture will play a pivotal role in import substituting maize and other strategic crops that form part of the US$700 million grain import bill Zimbabwe pays every year.

Victor Bhoroma is an economic analyst. He holds an MBA from the University of Zimbabwe (UZ). Feedback: Email or Twitter @VictorBhoroma1.

Source - Victor Bhoroma