Source: Govt, business in bid to save forex | The Sunday Mail January 6, 2019
GOVERNMENT and some sections of the private sector, especially cooking oil expressers and grain millers, have laid out ambitious plans to arrest the country’s ballooning import bill.
The country’s appetite for foreign currency has increasingly become insatiable as new companies start operations while old ones ramp up production.
This has seen intense competition for the scarce foreign currency, largely generated by the mining and agriculture sectors, and Delta Corporation stunned the market by announcing plans to charge in forex so as to sustain operations.
Delta later rescinded the proposal after Government intervention.
Figures from the Zimbabwe National Statistics Agency (ZimStat) show that the country recorded a trade deficit of US$1,978 billion between February and October 2018, representing a 34 percent jump from the comparative period.
Imports rose 27 percent, gobbling US$5,189 billion compared to exports of US$3,211 billion.
But market watchers say the country can trim its import bill, particularly on agricultural produce such as wheat and soya bean, if Government worked closely with beneficiaries of the land reform to increase output for the two critical crops.
Wheat is needed in bread making while soyabean is used in cooking oil manufacturing.
Zimbabwe requires up to 500 000 tonnes of wheat to have uninterrupted supplies of bread and other confectioneries per year, but low output in recent years, has seen millers turning to Canada, Ukraine, and Russia for imports.
About US$85 million is spent on wheat imports per annum.
Similarly, about US$20 million is required to import crude edible oils and other cooking oil raw materials per month, stretching the country’s ability to sustain the foreign currency demands.
Zimbabwe used to be the leading producer of soya bean, with yields averaging 100 000 tonnes per annum.
But yields slumped to 20 000t in 2010 when annual national requirement for soya bean is 350 000t.
Oil makers in giant progress
Last week, Oil Expressers Association of Zimbabwe chairman Mr Busisa Moyo, told The Sunday Mail Business that their members are now involved in “contract growing and soyabean promotion activities”, aimed at reducing the import bill.
“This includes Pure Oil Industries, Surface Wilmar, United Refineries Limited (URL) and Willowton. Harvest will be in March/April where there is commercial drying and May for the balance. We estimate the soya output to be higher than the 60 000 tonnes (15 percent of capacity last year).
“Of this 60 000t oil expressers only received 30 000t through Grain Marketing Board. We (are) not doing this as an association as we are also competitors and want to avoid a ‘cartelised’ industry. Some members have also applied for virgin land for (the) coming season to develop into irrigated schemes,” said Mr Moyo, who is also URL chief executive officer.
Pure Oil, which makes Zimgold cooking oil, has invested US$9 million towards soya bean production.
Surface Wilmar, makers of pure drop cooking oil, and United Refineries Limited (URL) which makes roil, have proposed investing US$30 million each into soya bean contract farming.
URL was targeting to put about 7 500 hectares under the Soya Bean Out-grower Alliance (SOBOA) initiative, which is supported by financial institutions.
Oil makers wants to reach 240 000t in the next three seasons and ensure self-sufficiency for soya meal for the poultry and pork industry, creating jobs upstream and downstream.
Mr Moyo expects the interventions to reach 1 000 000 t by 2030.
Grain millers’ view on contract farming
Grain Millers Association of Zimbabwe (GMAZ) national chairman Mr Tafadzwa Musarara, said members are meeting at the end of February to explore ways of deepening wheat contract farming.
“We are having an AGM (annual general meeting) at the end of February and the wheat contract farming is going to be on top of the agenda,” said Mr Musarara.
Millers have been supporting wheat contract farming for some time now, and of the 22 000 hectares that was under wheat in the past season, 16 000ha was funded by GMAZ members.
GMAZ has also prepaid for all the crop grown under command agriculture to the tune of US$220 million dollars in the past seasons, as a way of creating bankability to the programme and ensuring that farmers are paid on time.
But Mr Musarara said there is a shortage of land in the country to grow wheat.
“We should understand that there is a serious mismatch between the ever-growing demand for wheat and rice, especially for wheat due to generational dietary changes and the country’s capacity to grow wheat.
“Given the quantum of hacterage that we have and the irrigation system and the requisite skill, we can say that the maximum we can grow at the moment is 200 000ha.
“Wheat, unlike maize, is not a matter of clearing land and increasing hacterage, there are other factors like dam rehabilitation provision of electricity and irrigation equipment. So that is an infrastructural issue, I don’t think you expect millers to build dams,” said Mr Musarara.
Govt plans to deal with forex leakages
The 2019 Budget acknowledges that local exports are largely uncompetitive due to high cost and inefficient production.
Further, the country’s over reliance on primary commodity exports means less value compared to high value processed goods.
Finance and Economic Development Minister Professor Mthuli Ncube, says the import bill has been dominated by a range of imports, some of which are not critical such as tooth picks. Going forward, Prof Ncube said Government will support export oriented production which includes horticulture; and strategically managing available foreign currency by prioritising import substitution production such as retooling and raw materials. ZimTrade CEO Mr Allan Majuru, has said local farmers can benefit from the US$90 billion global horticulture sector if they grow to standard, most of the demanded crops such as tomatoes and onions. Currently, the horticulture sector is fetching a measly US$90 million per annum. Government also wants to take decisive action on revival of Zisco, Cold Storage Commission and the local drug manufacturing, to boost exports while limiting on import demand.
Further, value addition and beneficiation in mining and agriculture will be expedited, and the import duty dispensation for some projects and programmes, such as those with National Project Status, would be reviewed.