Opinion / Columnist
Food insecurity now a perennial threat
08 Jun 2022 at 02:12hrs | Views
Zimbabwe is set to import 400 000 metric tonnes (MT) of Maize from Zambia and Malawi to be delivered this June to alleviate a food crisis in the country. This will cost the country at least US$120 million before haulage and other costs are considered. Total grain imports will likely total 700 000MT in 2022. According to the World Food Programme (WFP), an estimated 6 million people (roughly 40% of the population) need food aid in the country with an increasing number of urban dwellers now food insecure. The government has forecast maize production for the 2021/22 season to be 1.56 million MT, down from the previous season's multi-year record of 2.72 million MT. Zimbabwe requires 2.2 million MT annually for industrial, human and livestock consumption. The government has encouraged private business players to import grain to plug the deficit, while subsidized farmers are obligated by law to supply the government.
Grain Net Importer
Harare has been a net importer of cereals since 2006 with maize production averaging less than 1.3 million MT per year in the last 10 years. Wheat production has averaged 110 000MT for the past 10 years against a national demand of 450 000MT per year. Yield per hectare for maize (the staple crop) remains very low with average national yield less than 0.7 tons per hectare (Lower than the African average of 1.8 tons/ha). The yield is also lower than Southern African peers who are largely affected by the same climatic conditions, with Namibia, Malawi and Mozambique at 1.2 tons/ha, Tanzania at 1.3 tons/ha, Zambia at 2.5 tons/ha and South Africa at 5.3 tons/ha. Interestingly since the year 2000, Zambia has tripled its maize production with an average of 2.9 million MT per year in the past 10 years alone and constantly exporting maize to its southern neighbor.
The picture above is not sustainable for the Zimbabwean economy since the country is endowed with 162 000km2 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 under the Command Agriculture, Presidential Inputs Scheme, Pfumvudza and other subsidy programs targeting farmers and virtually all types of crops. The key constraints in agricultural production in Zimbabwe are as follows:
Commodity pricing
Zimbabwe does not have a functioning commodity exchange market where strategic crops such as maize, wheat, soya and others are traded. This means there is no open access to market since prices are set by the government. The current floor prices for maize and traditional grains are ZW$75,000 per MT. When paired against the pegged central bank or interbank exchange rate, the producer prices are overvalued (above regional prices). However, when paired against foreign exchange rates on the market the price becomes 50% of regional prices. This means that the pricing element does not incentivize production or private sector financing. To address this, pricing of agricultural commodities should be agreed upon by producers and buyers through an open commodities exchange in sync with global prices and market dynamics of demand and supply. Similarly, the foreign exchange market must be market determined and stable enough to foster long term planning
Land Tenure
It is now 42 years after independence and 22 years after the Land Reform Programme. However, most Zimbabwe's farmers have no bankable title to their land which makes it worthless in asset terms and difficult to access credit from financial institutions or private funders.
The government has selectively issued 99-year leases, but the paper is not legally transferable, hence not appealing to the banking sector in an environment where confidence and policy consistency do not exist. The law spells out that the government can withdraw the lease and reallocate at its own discretion. This means that all the lowly resourced resettled farmers cannot develop their farms or seek funding as there is no guarantee to the property. Similarly, banks and the private sector shun financing agriculture as 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 & A2 farmers). Apart from compelling the farmers to service their loans, it will unlock the economic value of land and mitigate risk for the financiers to support agricultural production.
Govt policies
Zimbabwe's monetary, fiscal, and agricultural policies on marketing have not been friendly to farmers. This is the major reason why several small holder farmers have given up large tracts of land for other income generating activities such 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, delays in payments by government agencies, export bans, overregulation, and lack of access to independent markets for remote farmers. A plethora of statutory instruments and laws are instituted to protect government monopoly on grain marketing to the detriment of farmers, businesses and the economy at large. The government should only partake in buying grains (using market prices) up to the level of stocking strategic reserves or for emergency interventions in distributing food to households. As such, agriculture policy must be geared towards creating access to independent markets, facilitating private sector funding, achieving low levels of inflation, incentivizing production, and exports.
Low levels of mechanization
Large scale production in agriculture requires capital in order to increase yield per hectare, reduce production cost, improve efficiency and procure high yielding seed varieties. Zimbabwe's agriculture ranks low on mechanization as local farmers rely heavily on manual labour and other traditional methods of farming that are not efficient. This is blamed on lack of investment in irrigation development and modernization. Zimbabwe needs over 30,000 tractors, thousands of combine harvesters and other farm implements that are key to improving yield per hectare. The banking sector and private financiers could play a key role in funding irrigation and mechanization schemes; however, the lack of title deeds reduces any appetite to lend to the sector. The utilization of existing water bodies such as lakes, dams and rivers, and underground water bodies such as aquifers and others through boreholes remains precariously low. There is potential to irrigate more than 2 million hectares of land. However, less than 206,000 hectares are currently under irrigation.
There is also a greater need to increase funding towards training services for small holder farmers (especially cotton, wheat, soya and horticulture) on sustainable farming techniques, planting high yielding seed varieties, quality control, agriculture planning, pest control, pricing and other commercial aspects is key to ramping up production.
Rent Seeking Behaviour
Agriculture in Zimbabwe is now dominated by the state which plays the role of price setting, regulating, provision subsidies and loans (financing), purchasing, and disbursing funds, and setting policies that often change course anytime. The government predominantly prefers giving inputs subsidies to farmers, pegging prices and centralizing land tenure for political reasons. The scenario creates an environment of uncertainty and insecurity which allows rent seeking behaviour by politically exposed persons (PEPs) in agriculture commodities marketing. The reality on the ground is that most of the arable and fertile land in the country is owned by PEPs who have no passion or capacity to produce. As such, most of the land is lying idle while some is leased to third parties at exorbitant prices with the government is getting a paltry in levies and taxes. Most of the tenants are former commercial farmers who were disposed off the land and indigenous farmers on the government waiting list to get land. However, the taxpayer will pay for the acquisition of the land and improvements done on it by former commercial farmers through the US$3.5 billion Global Compensation Agreement. Similarly, the pegging of prices by government in the domestic currency in an inflationary environment creates an arbitrage opportunity where hoarding and rent seeking loopholes manifest. To address rent seeking behaviour, the government needs to liberalize (partially or wholly) its agriculture policies to improve production, allow private sector funding and create conditions that ensure proceeds are re-invested 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 in each year. Food insecurity is closely tied to drought occurrences due to overreliance on rain fed agriculture and limited irrigation capacity. The country spends close to US$1 billion annually to import Maize, Wheat, Soya and other agriculture commodities that could be grown locally. Agriculture provides 57% of raw materials used in the manufacturing sector which means that the huge food import bill carries with it imported inflation and exposes the country to over reliance on other countries for food. Zimbabwe will remain food insecure if there is limited political will to address legacy land tenure issues and various policies that create persistent viability constraints for farmers.
Victor Bhoroma is an economic analyst. He holds an MBA from the University of Zimbabwe (UZ). Feedback: Email vbhoroma@gmail.com or twitter @VictorBhoroma1.
Grain Net Importer
Harare has been a net importer of cereals since 2006 with maize production averaging less than 1.3 million MT per year in the last 10 years. Wheat production has averaged 110 000MT for the past 10 years against a national demand of 450 000MT per year. Yield per hectare for maize (the staple crop) remains very low with average national yield less than 0.7 tons per hectare (Lower than the African average of 1.8 tons/ha). The yield is also lower than Southern African peers who are largely affected by the same climatic conditions, with Namibia, Malawi and Mozambique at 1.2 tons/ha, Tanzania at 1.3 tons/ha, Zambia at 2.5 tons/ha and South Africa at 5.3 tons/ha. Interestingly since the year 2000, Zambia has tripled its maize production with an average of 2.9 million MT per year in the past 10 years alone and constantly exporting maize to its southern neighbor.
The picture above is not sustainable for the Zimbabwean economy since the country is endowed with 162 000km2 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 under the Command Agriculture, Presidential Inputs Scheme, Pfumvudza and other subsidy programs targeting farmers and virtually all types of crops. The key constraints in agricultural production in Zimbabwe are as follows:
Commodity pricing
Zimbabwe does not have a functioning commodity exchange market where strategic crops such as maize, wheat, soya and others are traded. This means there is no open access to market since prices are set by the government. The current floor prices for maize and traditional grains are ZW$75,000 per MT. When paired against the pegged central bank or interbank exchange rate, the producer prices are overvalued (above regional prices). However, when paired against foreign exchange rates on the market the price becomes 50% of regional prices. This means that the pricing element does not incentivize production or private sector financing. To address this, pricing of agricultural commodities should be agreed upon by producers and buyers through an open commodities exchange in sync with global prices and market dynamics of demand and supply. Similarly, the foreign exchange market must be market determined and stable enough to foster long term planning
Land Tenure
It is now 42 years after independence and 22 years after the Land Reform Programme. However, most Zimbabwe's farmers have no bankable title to their land which makes it worthless in asset terms and difficult to access credit from financial institutions or private funders.
The government has selectively issued 99-year leases, but the paper is not legally transferable, hence not appealing to the banking sector in an environment where confidence and policy consistency do not exist. The law spells out that the government can withdraw the lease and reallocate at its own discretion. This means that all the lowly resourced resettled farmers cannot develop their farms or seek funding as there is no guarantee to the property. Similarly, banks and the private sector shun financing agriculture as 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 & A2 farmers). Apart from compelling the farmers to service their loans, it will unlock the economic value of land and mitigate risk for the financiers to support agricultural production.
Govt policies
Zimbabwe's monetary, fiscal, and agricultural policies on marketing have not been friendly to farmers. This is the major reason why several small holder farmers have given up large tracts of land for other income generating activities such 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, delays in payments by government agencies, export bans, overregulation, and lack of access to independent markets for remote farmers. A plethora of statutory instruments and laws are instituted to protect government monopoly on grain marketing to the detriment of farmers, businesses and the economy at large. The government should only partake in buying grains (using market prices) up to the level of stocking strategic reserves or for emergency interventions in distributing food to households. As such, agriculture policy must be geared towards creating access to independent markets, facilitating private sector funding, achieving low levels of inflation, incentivizing production, and exports.
Low levels of mechanization
Large scale production in agriculture requires capital in order to increase yield per hectare, reduce production cost, improve efficiency and procure high yielding seed varieties. Zimbabwe's agriculture ranks low on mechanization as local farmers rely heavily on manual labour and other traditional methods of farming that are not efficient. This is blamed on lack of investment in irrigation development and modernization. Zimbabwe needs over 30,000 tractors, thousands of combine harvesters and other farm implements that are key to improving yield per hectare. The banking sector and private financiers could play a key role in funding irrigation and mechanization schemes; however, the lack of title deeds reduces any appetite to lend to the sector. The utilization of existing water bodies such as lakes, dams and rivers, and underground water bodies such as aquifers and others through boreholes remains precariously low. There is potential to irrigate more than 2 million hectares of land. However, less than 206,000 hectares are currently under irrigation.
There is also a greater need to increase funding towards training services for small holder farmers (especially cotton, wheat, soya and horticulture) on sustainable farming techniques, planting high yielding seed varieties, quality control, agriculture planning, pest control, pricing and other commercial aspects is key to ramping up production.
Rent Seeking Behaviour
Agriculture in Zimbabwe is now dominated by the state which plays the role of price setting, regulating, provision subsidies and loans (financing), purchasing, and disbursing funds, and setting policies that often change course anytime. The government predominantly prefers giving inputs subsidies to farmers, pegging prices and centralizing land tenure for political reasons. The scenario creates an environment of uncertainty and insecurity which allows rent seeking behaviour by politically exposed persons (PEPs) in agriculture commodities marketing. The reality on the ground is that most of the arable and fertile land in the country is owned by PEPs who have no passion or capacity to produce. As such, most of the land is lying idle while some is leased to third parties at exorbitant prices with the government is getting a paltry in levies and taxes. Most of the tenants are former commercial farmers who were disposed off the land and indigenous farmers on the government waiting list to get land. However, the taxpayer will pay for the acquisition of the land and improvements done on it by former commercial farmers through the US$3.5 billion Global Compensation Agreement. Similarly, the pegging of prices by government in the domestic currency in an inflationary environment creates an arbitrage opportunity where hoarding and rent seeking loopholes manifest. To address rent seeking behaviour, the government needs to liberalize (partially or wholly) its agriculture policies to improve production, allow private sector funding and create conditions that ensure proceeds are re-invested 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 in each year. Food insecurity is closely tied to drought occurrences due to overreliance on rain fed agriculture and limited irrigation capacity. The country spends close to US$1 billion annually to import Maize, Wheat, Soya and other agriculture commodities that could be grown locally. Agriculture provides 57% of raw materials used in the manufacturing sector which means that the huge food import bill carries with it imported inflation and exposes the country to over reliance on other countries for food. Zimbabwe will remain food insecure if there is limited political will to address legacy land tenure issues and various policies that create persistent viability constraints for farmers.
Victor Bhoroma is an economic analyst. He holds an MBA from the University of Zimbabwe (UZ). Feedback: Email vbhoroma@gmail.com or twitter @VictorBhoroma1.
Source - Victor Bhoroma
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