Cash squeeze to worsen

via Cash squeeze to worsen | The Financial Gazette by Maggie Mzumara 12 Sep 2013

THE importation of maize to avert starvation in the face of looming hunger will have huge financial implications on the country which, among other things, may drain the fiscus and result in increased cost of borrowing on an already liquidity challenged domestic market, analysts have said.

“Any significant food imports will exacerbate the situation and consequently, credit conditions in the market will remain tight and corporates will find borrowing not only difficult, but a bit more costly,” economist, Brains Muchemwa told The Financial Gazette this week.

Yet the country has no choice but to import.

According to estimates by a recently-published Zimbabwe Vulnerability Assessment Committee (ZimVAC) Rural Livelihoods report, some 2,2 million people — one in four of the rural population — will need food assistance during the pre-harvest period of January — March 2014.

The Commercial Farmers Union (CFU) agrees that there is no option but to import.

CFU statistics show that while national consumption is two million tonnes, maize production for this year was 650,000 tonnes, which is less than half the total needed.

“We are in an absolute mess. Where is the difference going to come from?” asked CFU president, Charles Taffs.

Last year’s figures stood at 750 000 tonnes, showing a repeated pattern of underproduction.

The country has experienced intermittent food shortages since 2000.

From 2009 to 2011, maize imports amounted to over 1,8 million tonnes. The trend continued into 2012 when over one million tonnes were required to make up for the shortfall.

So far only plans emanating from an agreement between President Robert Mugabe and President Michael Sata of Zambia where Zimbabwe would import 150 000 tonnes of maize from that country have been made public.

While the Ministry of Agriculture was not readily available to confirm the figures, it appears more maize imports would be needed to augment the consignment from Zambia.

Grappling as it is with liquidity challenges on the market due to shrunken fiscal space, Zimbabwe can ill afford the imports it needs for its people.

“The failure to have food security has huge financial implications not only on the fiscus, but equally on the market liquidity position as food imports drain significant amounts of cash resources from the domestic financial markets,” Muchemwa said.

Once again, the United Nations and civil society will come to the aid of the country.

The UN World Food Programme (WFP) has already announced it is working with government and partners to respond to the looming food crisis and will start food and cash distributions to the most vulnerable next month.

But Zimbabwe does not have to be in this situation, says the Zimbabwe Farmers Union (ZFU).

“It does not make sense for Zimbabwe to import maize or to need any other food assistance for that matter. We have a comparative advantage when compared to our neighbours. We have the best climate, the best soil and the best hydrological factors,” said Berean Mukwende, vice president of the ZFU.

It is not that famers cannot produce, Mukwende said, but that due to a poor pricing system for maize, farmers are prioritising other crops.

“The controlled price for maize is too low to be viable for farmers. And farmers, because of the nature of their industry do not go on strike; all they will do is not produce and switch to more profitable crops like tobacco,” Mukwende said. “The damage will only be seen when the farmers have shifted to another crop and not produced adequate maize stocks.”

Areas mostly affected by food insecurity are in the southern part of the country.  These include areas such as Masvingo, Matabeleland and parts of Midlands. Areas such as Manicaland South, Kariba, Rushinga and Mudzi among a few others are also food insecure, according to the ZFU.

The UN WFP and civic society partners are planning on assisting 1,8 million food insecure people in 43 of the worst affected districts.

“WFP monitoring has found many people reducing their number of daily meals,” WFP country director, Sory Ouane, said last week. “We are working closely with the government and international community and partners to respond to this dire situation.”

Between September 2012 and March 2013, 1,4 million people were assisted through WFP’s Seasonal Targeted Assistance Programme; 250 000 of them received cash transfers to purchase their cereals from local markets.

COMMENTS

WORDPRESS: 3
  • comment-avatar
    MikeH 7 years ago

    Don’t bank on mugabe&co importing food, they have other self interest priorities.

  • comment-avatar
    Shame 7 years ago

    Sister Maggie, you are a novice in economics, finance and accounting. How does importing maize create a cash squeeze? ‘Cash’ and ‘funding’ are two different philosophies , please don’t mix them up. You can fung a project without paying a single cent in cash, ‘cash’is just one of the various methods of payment. Once you say ‘ cash squeeze’ you imply the country is faced with liquidity problems and banks do not have hard cash, or near-cash instruments (cash equivalence) to meet client needs. But your article alludes to funding constrains, which is way off the liquidity crisis mark. Purizi VaMegi,kindly confine yourself to social commentaries about women infidelity for which you a famous in the Fingaz comments column. Munoti konifiyuza kuno uku.

  • comment-avatar
    Greyhora 7 years ago

    Shame, if you read the article closely, u will see that Maggie has simply reported on views by (named) economic analysts and other specialists. “Funding” requires some cash transaction at some point, so you can never divorce the two! Recently some of our neighbours have started demanding cash upfront for grain purchases because we are too busy politicking to produce. Who is going to cough up that cash? From where do they get that cash? And at what price? In the end, the consumer and local business gets hit very hard, through higher prices and higher costs of borrowing, all adding up to a cash squeeze. remember the days of Gono, when there was no money in the economy because it was diverted to agricultural imports?