Pfumvudza key to price, forex stability

Source: Pfumvudza key to price, forex stability – The Zimbabwe Independent

The Brett Chulu Column

INTWASA or Pfumvudza — the disruptive innovation farming model developed in the 1980s by two Zimbabwean white farmers — has been adopted by government and launched nationally as a result of the direct influence of this column. Specifically, the adoption by government was as a direct result of the lobbying of this writer to President Emmerson Mnangagwa at the Zimbabwe National Chamber of Commerce (ZNCC) congress in June 2019.

Mnangagwa did not have to think twice after listening to this writer’s submission — he gave his word that Pfumvudza would be considered for adoption under the Presidential Inputs Scheme. The president acted on his word — Pfumvudza is being rolled out nationally. Let me state upfront that I did this at no charge to government and I did not receive anything in exchange — it was my patriotic duty to assist our nation.

Two weeks ago, a well-known South African agricultural economist wrote an opinion piece commenting on the ambitious maize production targets set by Zimbabwe’s agriculture ministry for the 2020-2021 farming season. Government has set a target of 1,5 million hectares under maize; with a target yield of 2,4 tonnes per hectare. He was impressed that Zimbabwe would move from a five-year average maize yield of 0,7 tonnes per hectare to 2,4 tonnes per hectare.

He wondered how Zimbabwe would make an almost four-fold jump in maize productivity. The answer is Pfumvudza. Pfumvudza is a disruptive innovation in the original sense as defined and later refined by the discoverer of disruptive innovation, the late Harvard Business School professor, Clayton Magleby Christensen.

A disruptive innovation is a product or service that brings into consumption masses of people who were historically denied consumption because the existing offering was unaffordable or was too complicated for them to use. To fully express an important thought, allow me to create a new word: disruptive innovation de-elitisises consumption and production.

Disruptive innovations are also referred to as empowering innovations or market-creating innovations. Disruption turns non-consumption into consumption through simplifying both the cost structure and operational requirements.

This writer was the first published researcher to extend Christensen’s concept to production. In Christensen’s conception, the masses suffering deprivation experienced it (the deprivation) in the context of consumption. This writer discovered that masses of non-producers could also be brought into production by simplifying the cost structure of production and the production process itself.

Pfumvudza is a perfect example of a production-biased disruptive innovation. For less than US$50, a farmer can produce on one-sixteenth of a hectare at a top rate of 12,8-16 tonnes per hectare using non-mechanised farming methods.

On April 5, 2020, in this column, in an article titled Pfumvudza innovation can revive the economy, this writer tabled the idea that Pfumvudza could potentially contribute towards self-sufficiency in maize and soya bean through production by Zimbabwe’s ordinary rural households.

On maize, the article stated: “According to the 2017 Inter-censal Demographic Survey (ICDS), produced by Zimstat, there are three million households in Zimbabwe, with about 1,8 million of these households being rural. If each rural household, at the minimum, produces on one Pfumvudza plot, Zimbabwe will be assured of 1,44-1,80 million tonnes of maize from rural farmers, producing an excess of 475 000-600 000 tonnes per year, based on the fact that according to the ICDS, a household is an average of four members.”

On soya, this writer projected: “There is more: turning every rural farmer into a soya bean producer will be a massive development, never before experienced in this country. Rural farmers could produce 360 000-720 000 tonnes of soya beans annually from their own capital. Zimbabwe’s annual soya bean requirement is only 220 000 tonnes. Our rural farmers, on a mere 39 metres x 16 metres of (a) well-managed Pfumvudza soya bean plot, can produce a combined 120 000 tonnes in excess of our annual soya bean requirement with zero financial assistance from both the public and private sectors.”

This was two months before this writer presented the idea of Pfumvudza to His Excellency in June of 2019 at the ZNCC congress. Government chose to assist rural households with training and inputs for Pfumvudza. The production targets government has set for maize and soya for the 2020-2021 rain-fed farming is almost a carbon copy of the proposal this writer tabled on April 5, 2019 in this column. Government has set a target of 1,8 million Pfumvudza plots, corresponding to the total rural households in Zimbabwe, with each rural household producing one tonne of maize from the one-sixteenth of a hectare Pfumvudza plot.

For soya, government is targeting each rural household to produce 200kg of soyabean/oil-seeds on a Pfumvudza plot.

We turn to the price stability (inflation and forex rates) issue. The Reserve Bank of Zimbabwe (RBZ) governor, John Mangudya, revealed a few days before presenting his Mid-term Monetary Policy Review that Zimbabwe was importing 30 000 tonnes of soya bean a month at a cost of US$12 million.

This translates to US$144 million of imports of soya bean in a year. On maize, the RBZ chief revealed that we are importing 100 000 tonnes of maize every month at a cost of US$28 million.

If Zimbabwe were to become self-sufficient in maize and soya, a total of US$480 million would be saved through import substitution. This amount is very significant; on its own, it can contribute towards significantly strengthening the supply of forex on the forex auction market.

Maize and soya bean imports constitute close to 50% of current forex auction demand. In theory, local production of maize and soya bean to achieve self-sufficiency will significantly remove pressure on the forex auction, fostering and sustaining the stability of forex rates.

Stable forex rates will largely remove the urge to forward-price. Forward pricing is raising prices with the aim of restocking, taking into account anticipated future higher inflation levels. This causes a self-feeding upward inflation spiral.

There are more positive spin-offs from attaining self-sufficiency in maize and soya bean. Locally produced maize and soya bean will provide raw materials for secondary industries, helping to further depress demand for forex to import a number of raw materials.

Pfumvudza has the potential of producing in excess of national requirements, creating an opportunity for exports, not raw soya and raw maize, but value-added products.

In a country where people tend to be labelled in either-or terms, this writer may be taken to be a member and beneficiary of the ruling party. Let me state categorically that I am not a member of the ruling party and that I have not benefitted in any way from the ruling party. Equally, I am not a member of any opposition political party or am I a supporter of any opposition political party.

We will share more thoughts on Pfumvudza in next week’s instalment.

Chulu is a management consultant and a classic grounded theory researcher who has published research in an academic peer-reviewed international journal. —