via Govt debt cripples fertiliser firms – DailyNews Live 21 July 2014 by Ndakaziva Majaka
HARARE – Government’s failure to pay local fertiliser companies is leading to sector stagnation in an industry which had been steadily growing since 2009, a recent study revealed.
According to the latest report by the Zimbabwe Economic Policy Analysis and Research Unit (Zeparu), fertiliser projections for the 2013/14 season slumped significantly due to various factors, chief among them government debt.
“The projections have seen companies stagnating due to non-payment of consignments by government, lack of lines of credit, antiquated machinery, equipment breakdowns and incessant power cuts,” Zeparu said.
Zeparu also said the government debt had seen some of the fertiliser firms down-scaling due to lack of funds, and in some cases closing shop.
According to Finance minister Patrick Chinamasa, government owes $11,8 million to seed houses and fertiliser companies.
The debt was however, supposed to be cleared last year through a $161 million farming input scheme.
The total loan indebtedness of the Zimbabwean government is $9,9 billion, excluding amounts owing to civil servants for arrear salaries, and to suppliers for goods and services rendered.
Last year, government imported fertiliser to meet a national requirement of 200 000 tonnes of Compound D and 200 000 tonnes of ammonium nitrate.
The fertiliser industry in Zimbabwe is largely dominated by production of nitrogen, phosphate and potash fertilisers.
According to Zeparu, electricity and raw material costs have also been the major cost drivers of ammonium fertiliser production in Zimbabwe.
The report says through its input provision scheme, government has undercapitalised the fertiliser industry.
Now through its economic blueprint the Zimbabwe Agenda for Sustainable Socioeconomic Transformation (ZimAsset), government is targeting 300 000 tonnes annually of fertilisers for both compound D and ammonium nitrate.
Issis Mwale, an independent economic analyst told the Daily News government had to come up with a payment plan for the companies owed.
“We all know government is drowning in huge debt and the stress of a strenuous wage bill, however, they need to fix the situation with the companies owed.
“But looking at it practically, government will continue importing fertiliser at the expense of the ailing companies,” Mwale said.