Import duty relief for fertilizer firms

Source: Import duty relief for fertilizer firms | The Herald

Import duty relief for fertilizer firmsGovernment intends to scrap raw material import duty for fertiliser manufacturing companies Chemplex Corporation and Sable Chemical

Martin Kadzere Senior Business Reporter

Zimbabwe intends to remove import duties on fertilizer raw materials and give selected producers access to contracts to supply State assisted farming programmes as part of broader measures to boost local production and cut imports.

Local companies being targeted are Kwekwe based ammonium nitrate producer Sable Chemical and Chemplex Corporation, all partly owned by the Government.

A tobacco strategy document by the Ministry of Lands, Agriculture, Fisheries and Rural Resettlement, which was recently approved by the Cabinet noted the removal of import duties on raw materials would enhance the flow of raw materials into the country and boost production of fertiliser by local firms.

There are growing concerns over the huge import bill of agriculture inputs especially in the tobacco sector where they constitute about 60 percent of production costs.

“The availability of raw materials has been one of the major challenges affecting producers and an import duty relief leads to an improvement in the importation of raw materials,” said Carlos Tadya, a research analyst with a local economic think tank.

Sable requires ammonium gas used for ammonium nitrate production while Chemplex needs sulphuric acid for phosphates.

The Government will also ensure that Sable and Chemplex have access to foreign currency to import the raw materials, while providing sovereign guarantees to support medium to long term loans for capital expenditure, the strategy document said.

Last year, Zimbabwe launched a five-year road map aimed at reducing fertilizer imports through capacitating local firms. The country, whose economy is agro-based, has been importing significant quantities of fertilizer as local firms are struggling to meet demand largely due to foreign currency shortages and operational challenges.

While Zimbabwe spent nearly US$700 million on fertiliser imports in the past seven years, with Government, being the largest financier though State assisted farming programmes, such huge spending had a little impact on local fertilizer producers because they had no contracts to supply the commodity.

FSG has been the major supplier for fertilizer for the Presidential Inputs Scheme and Command Agriculture.

The strategy document seeks to give priority to Sable Chemicals and Chemplex to also support the Government programmes starting from the next cropping season.

Sable Chemicals, which recently secured a US$13 million loan facility from the Afreximbank said it will ramp up annual production to 240 000 tonnes in the next five years from the current installed capacity of 90 000 tonnes.

Chemplex will increase production to 100 000 tonnes over the same period, from the current capacity of 80 000 tonnes.

It is presently utilising 75 percent of its capacity.

There are 12 fertiliser companies in Zimbabwe. Out of these, three companies are involved in the primary production of raw materials.

These are Dorowa Minerals, which extracts phosphate used to produce fertilizer grade phosphates by ZimPhos.

Sable Chemicals in Kwekwe produces AN from ammonia while at the secondary level, Zimbabwe Fertiliser Company, Windmill and FSG produces granulated fertilizers.

FSG, Omnia, ETG and several other companies operate blending plants whereby granulated materials are physically mixed to make various grades of NPK compounds.