Idai still to exact toll in food, jobs, transport

Regional economies will take a knock from deadly cyclone

31 March 2019 - 07:48 By WANDILE SIHLOBO and SIFISO SKENJANA

Tropical Cyclone Idai, which hit the coastline of Mozambique on March 14, caused heavy loss of life and affected more than 600,000 people - a number that could rise after on-ground assessments. Amid continuing efforts to find survivors, two key concerns have come to the fore: the impact on food security, and the broader impact on the Mozambican economy.

The UN estimates that more than 500,000ha of crops were destroyed by the cyclone, just before harvest season. Mozambique is a net importer of major grains such as maize, wheat and rice. In a normal season, the country imports about 100,000t of maize, 700,000t of rice and 680,000t of wheat to fulfil its domestic needs.

Maize imports are largely transported by land as these are mainly from SA and Zambia. Wheat and rice imports originate from Europe and Asia through Beira's port, the area affected by the cyclone. In the case of rice, the key suppliers are typically Thailand, Pakistan, Vietnam, and China.

Vietnam and China are expecting an uptick in 2018/2019 rice production, which means there will be fairly large supplies on the global market.

In terms of wheat, Russia, Germany, Canada, Lithuania and Poland are generally the leading suppliers to Mozambique. Some of these countries could experience a decline in the wheat harvest in the 2018/2019 production season, but there will still be sufficient supplies in the global market.

Given that Mozambique's production of rice and wheat is relatively negligible, and the country predominantly depends on imports, the devastation from the cyclone will not lead to significant changes in import requirements for these two commodities. However, there could be logistical challenges due to the damage to port infrastructure.

In the case of maize, Mozambique's imports could more than double to more than 200,000t in the 2018/2019 season due to lower domestic production. At this juncture, we do not have the exact figures. We will have a better sense as soon as we are aware of the scale of crop damage.

This means that there will be increased pressure on Southern African maize supplies this year.

After all, even the key maize-producing countries in the region - SA and Zambia - are expecting double-digit declines in the harvest in the 2018/2019 season.

This does not mean there will not be room for maize exports to Mozambique from the region, but prices will be higher, which will contribute to increased food insecurity in Mozambique.

Beyond food security, agriculture contributes about 22% of GDP in Mozambique, with cotton, cassava, sugarcane and tobacco being its main export crops. The sector accounts for almost 80% of the labour force.

Needless to say, a substantial portion of national output as well as jobs will be affected by the cyclone.

Shattered homes in Beira appear to float like boats in the floodwaters from Cyclone Idai which devastated the city and towns in northern Mozambique two weeks ago. Picture: AFP
Shattered homes in Beira appear to float like boats in the floodwaters from Cyclone Idai which devastated the city and towns in northern Mozambique two weeks ago. Picture: AFP

Real GDP growth for 2018 was recorded at 3.5%, against an average of 7% between 2004 and 2015, according to data from the African Development Bank Group. This deceleration was largely due to a decrease in public investment, coupled with a 23% decrease in foreign direct investment.

The ports and logistics corridors in Mozambique have become a key feature in aiding economic activity in the country.

Mozambique borders Malawi, Swaziland, Tanzania, SA, Zambia and Zimbabwe by land and the Comoros and Madagascar by sea, and accounted for 70% of goods in transit in the Southern African Development Community (Sadc) region.

The UN estimates an approximate $1bn (R14.6bn) worth of infrastructure to have been damaged by the cyclone.

Beira is the fourth-largest city in Mozambique by population and the second-largest by GDP after Maputo.

Economic activity in Beira has picked up over time on the back of significant investment in its roads, rail and ports. Before the cyclone, Beira port handled 60% of the country's imports and 40% of its exports. It is home to the country's longest railway system.

The other Sadc countries are also most certainly going to feel the effects of the cyclone on their economies.

SA, which imports about 1,000MW of electricity from the Cahora Bassa hydroelectric system in Mozambique, faced severe electricity shortages at the peak of the cyclone and found itself plunged into darkness for hours on end.

Goldman Sachs estimates that the electricity outages in SA will reduce first-quarter GDP by 0.3 of a percentage point. That is significant, given that SA grew at only 0.8% for the full year of 2018.

The cyclone also moved on into Zimbabwe and Malawi, and those economies are expected to experience some contraction as a result, though the scale is unclear at this stage.

When one takes into account all the economic activity taking place in Beira, the effects of the cyclone will most certainly leave great disarray, both economically and in the livelihoods of the Mozambican citizens who now find their food security at even more risk.

Jobs in the highly labour-absorptive agricultural industry will be at risk as the sector tries to rebuild, and household consumption will also feel the pinch on the back of an expected uptick in food-price inflation and lower disposable household incomes.

Pray for Mozambique, Zimbabwe and Malawi.

Sihlobo is chief economist of the Agricultural Business Chamber of SA. Skenjana is a financial economist and founder of Afra Consultants