Drought adds to Zimbabwe's economic woes

Food prices expected to rise and subsidies likely to be cut

13 January 2019 - 00:00 By RAY NDLOVU

A drought is expected to force food prices even higher, adding to the economic pressure piling up on President Emmerson Mnangagwa.
The warning from farmers and weather forecasters comes in the week that the Confederation of Zimbabwe Industries (CZI) warned that most companies would not be able to operate beyond this month because of currency shortages.
The government is battling to contain an economic meltdown that has increased the cost of basic commodities such as bread, mealie meal and cooking oil.
The last severe drought to hit Zimbabwe and surrounding countries was in 2015/ 2016. It was induced by El Niño, the same climatic phenomenon forecast to produce "normal to below normal rainfall" until March.
Commercial Farmers Union president Ben Gilpin told the Sunday Times on Friday that agriculture was expecting an "extremely difficult" season from a rainfall point of view. It was worsened, he said, by the challenging financial environment and shortages of fuel, fertiliser and crop chemicals.
"Not only will yields be down, but also planted hectares. This will inevitably cause price hikes, especially where costs have been impacted by limited availability of foreign currency," said Gilpin.
The government subsidises farmers and millers in an attempt to suppress the price of basic foods, but finance minister Mthuli Ncube said in his November budget that the subsidy programme would be curtailed as part of economic reforms.
Gilpin said this had already caused a shortage of soya beans because farmers were making more money from maize.
"Although prices have not officially changed, the result of shortages is to drive up the price of the final product, cooking oil."
The International Grains Council has forecast a 45% year-on-year decline in the staple maize crop this season, reducing it to 1.2Mt.
Wandile Sihlobo, head agricultural economist at the Agricultural Business Chamber in Pretoria, said maize would have to be imported from SA, the continent's largest producer.
He said 2019 would be a challenging year from an agriculture and food price inflation perspective.
"Zimbabwe could remain a net importer of maize in the 2019/2020 marketing year … the maize carryover stock from the 2018/2019 marketing year will not be sufficient to boost its maize supplies," Sihlobo said.
"Remember, Zimbabwe's annual maize consumption varies between 1.8Mt and 2Mt. Therefore, they will have to import roughly 800,000 tons to fill the domestic demand."
Maize could also come from Zambia. However, the Lusaka government banned maize exports at the height of the regional drought in 2016, and its maize crop this season is forecast to decline by 33% to 2.4Mt because of the drought.
"SA could still export maize to any price-attractive destination despite the expectations of a poor harvest. But Zimbabwe also has foreign currency problems, which could make matters worse," said Sihlobo.
More than 2.4-million rural people face acute food insecurity between now and March, according to a government vulnerability assessment last year.
The World Food Programme (WFP) said on Thursday that the number was likely to increase "with the anticipated late start to the rainy season and the imminent prospect of another El Niño, expected to bring higher than normal temperatures and a more prolonged dry spell".
The WFP said it had received $5m from the UK international development department to feed 116,000 people - 97,000 in the rural areas of Mutoko, Nyanga, Nkayi, Beitbridge and uMzingwane, and 19,000 in a Harare suburb.
The WFP said rural areas had not yet recovered from the 2015/2016 drought that left more than 4-million Zimbabweans hungry. "Most food-insecure families in such areas are heavily dependent on rain-fed agriculture," it said.
CZI president Sifelani Jabangwe told a media briefing on Thursday that many manufacturers needed to pay foreign suppliers for raw materials within 10 to 14 days, "so that they do not close".
He added: "If we start transacting after that time, closure will be inevitable because we need about two to three weeks at least for the goods to come in.
"Some time in February a number of companies will close."
Olivine Industries, which makes brands such as Buttercup margarine, Pure Drop cooking oil and Jade soap, said on Friday it would be unable to resume production this year owing to foreign currency shortages. It said workers had been sent on indefinite leave.
Speaking at a town hall meeting in Borrowdale on Friday, meant to rally support for his trip next week to the World Economic Forum in Switzerland, Ncube acknowledged the difficulties industry faced and indicated that currency reforms were on the way.
"Currency reforms started in October, but we didn't have fiscal discipline in place. We won't capitulate to the US dollar, but have currency reforms. We are less than 12 months away from currency reforms," said Ncube.

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