eBusiness Weekly
BusinessWeekly Last Word
With rains soon to fall and soils wet enough for planting in about a month’s time, it is essential that Zimbabwean farmers are ready to get their crops in early, especially as seasonal forecasts suggest the first half of the season will be normal with a bias to above normal while the second half will be normal with a bias to below normal. Late planting could well be wasted.
Inputs are generally available. Seed is now on sale. Fertiliser companies have laid in stocks, although there are complex financial arrangements that mean that the external supplier of some raw materials has to be paid before the products using these raw materials can be sold. But presumably as fertiliser is sold, the money is used to buy foreign currency to pay the external supplier and the next batch is released. It sounds like cash flow management rather than anything serious.
The biggest single problem is going to be how farmers buy these inputs, the prices of which have risen sharply over the last year, and even sharply since those farmers who did manage to produce a saleable crop were paid after the last harvest. A farmer now needs a lot of RTGS dollars to buy inputs, or needs a fairy godparent with deep pockets to offer a contract.
The drought in the last season means quite a few farmers had reduced yields or even lost their crop. These farmers certainly have no money to finance a new crop. The inflation means that those who did make profitable sales have far less than they need for anything approaching self-financing. So almost all farmers, regardless of the scale of their operations, are going to need credit, contracts or loans.
The tobacco industry, as usual, is probably the best organised. Almost all contracted farmers last year managed to deliver a reasonable crop, although the total suggests that there were modest drought losses. The 40 000 plus farmers on contract to the 23 tobacco merchants all have good track records of both competence and honesty, so they have the skills to grow the crop and the ethics to deliver it to the company that contracted them. Normal financing arrangements used in the last few seasons will be generally fine.
The fact that this crop is almost all exported, local consumption taking up only a small fraction, means that the inflation led by exchange rate changes will have zero effect although more RTGS dollars will need to be committed by both the contracting companies and the farmers they sign up. But there is still some liquidity in the local currency, despite the rather successful efforts of the fiscal and monetary authorities to avoid printing any more, thus keeping money supply stable. The only cloud on the horizon will be those merchants who need to borrow heavily to finance their farmers, and so face rising interest rates.
Other commodities have partial contract schemes. There are horticultural concerns who have their farmers who supply supermarkets and others, although markets are frequently supplied with vegetables by self-financing farmers near cities who take advantage of the fast growing times of their products; there is Delta Corporation with its contract grain producers; there are the cotton companies; and there are some modest soya bean schemes operated by some, although regrettably not all, the seed oil expressers.
And then there are the really big Government schemes, the Presidential Inputs and the Command Agriculture.
As frequently noted, the major milling companies and oil seed processors really need to become seriously involved in their value chains. This might go against modern global management practices of concentrating on core businesses and leaving supply chains to others but in the Zimbabwean context the firms who own and manage their own supply chains are the ones who are more likely to flourish.
The cotton industry has been plagued in the past by poaching, companies who provide zero inputs but who are quite willing to accept cotton bales from farmers with no questions asked.
The tobacco industry obviously must enforce a no-poaching rule, because there have been no reports of this sort of dishonesty, and while the cotton industry is now a lot better it, and every other sector, needs to follow that best practice. Side-marketing needs dishonest buyers as well as dishonest farmers.
The Government schemes, which in theory should be expanding as the credit is recycled each year, have been bedevilled by management problems and downright dishonesty. While anecdotal tales of dishonesty and refusal to pay back the cost of inputs on harvest are not evidence, and are quite possibly exaggerated, everyone is fairly sure that these schemes could be far more beneficial if those who get credit and do not deliver, without a very good reason such as a natural disaster, were crossed off the lists.
The Government has made it clear that this year far higher standards of management and contract enforcement will be applied. Farmers being helped will be expected to grow the crops they have been sponsored for, and will be expected to deliver their harvests to the depots of the assigned buyers when they have done this.
However, new entrants from the private sector into contract farming need to realise this, there are tens of thousands of efficient, skilled and honest Zimbabwean farmers who can be supported to mutual advantage and profit. The trick is to link good farmers with good contractors. One fairly obvious way would be for those willing to invest to insist on track records. A farmer who has been growing tobacco for several years under contract is obviously skilled and honest and can easily grow other crops; in fact, that farmer should have good crop rotations and so needs to diversify in any case.
The Command Agriculture scheme has produced a large number of farmers over the last two years who must have good track records of converting inputs into a delivered harvest. Both the Government schemes, and newcomers from the private sector, can with very little risk, look at the paperwork presented by these farmers and sign them up.
This might well see the better small-scale growers expanding their output at the expense of their less-skilled or lazier neighbours, but that is life. To him who has shall more be given. This sort of clear-headedness will also encourage those who are not in the top drawer to stop expecting handouts and start creating those track records which so impress those desperately seeking farmers who can and do deliver. Farming is a business just like any other.
Besides all this, the Government will probably, as before after bad droughts, have to provide basic survival inputs to a lot of semi-subsistence farmers. This is cheaper than providing food aid. Those who complain need to realise that people cannot be left to starve and either are given food or are given the basic inputs to grow their own. But even those on emergency programmes should keep records. If they make the most of their chances then next season they can start joining the lists kept by financiers of farmers.
Zimbabwean agriculture can produce far more than it does. The financial irresponsibility of the previous dispensation destroyed a lot of the sound structures that had been built up since independence, structures that, like the tobacco industry, either were geared towards small-scale growers or which could adapt to the situation after land reform. It is not difficult to rebuild, and rebuild better. All that is required is the will and the totality of the agricultural industry can soon be self-financing again instead of a near bottomless pit.
