Tackling trade deficit, industry revival through agriculture

Confederation of Zimbabwe Industries (CZI) president and United Refineries Limited CEO, Busisa Moyo

AGRICULTURE and manufacturing have always played complementary roles in terms of contribution to the country’s economic development.

 

The viability of both sectors has over the years been proved to be closely linked to each other with corresponding expansion or decline if either of the side falters or rises.

The relationship between the two is such that there is no way industry could thrive without a sound, stable, vibrant and progressive agriculture sector. The subdued state of manufacturing industry in Zimbabwe is, therefore, symptomatic of the lack of this interdependence between these two sectors. Several Zimbabwean agro-processing firms today rely more on imported agriculture inputs as these are not available locally due to reduced crop yields.

Reports of a drastic drop to 35 percent in capacity utilisation in the cooking oil industry from about 90 percent, for instance, makes a sad reading in view of the overall positive growth recorded in the manufacturing sector in 2016. For the first time since 2011 the country registered a phenomenal 13 percent increase in manufacturing capacity utilisation to 47,4 percent from 34, 3 percent, according to the Confederation of Zimbabwe

Industries (CZI) 2016 survey.

“The manufacturing sector is actually an integral component of value addition and beneficiation between within Zim-Asset and also that manufacturing sector drives the industrialisation strategy,” said Dr Mike Bimha, the Minister of Industry and Commerce.

The positive change registered by the country’s industry in the just ended year, said the minister, has largely been attributed to measures put in place by the Government to protect local firms from cheap imports. Measures such as Statutory Instrument 64 of 2016, which removes several goods from the Open General Import Licence, have given many local firms a new lease of life and an unusual opportunity to tap into the local market, which had previously been dominated by imported products.

However, the latest development with regards to the cooking oil sub-sector points to a critical loophole that, unless addressed, threatens to reverse all the gains made so far in revitalising the country’s economy. That loophole is weak agriculture production. According to the Oil Expressers Association of Zimbabwe, the plunge in cooking oil industry capacity utilisation is largely due to failure to secure adequate foreign currency to import raw materials.

At present Zimbabwean cooking oil companies rely on importing soya bean and semi-processed crude oil for further processing as these are not available locally. This problem cannot be entirely solved through special foreign currency allocations by the Reserve Bank of Zimbabwe. The lasting solution lies in increased domestic agriculture output. It is a reality that Zimbabwe has a serious liquidity challenge, which experts have repeatedly blamed on low domestic production and the attendant trade deficit. Official statistics indicate that the country is battling an unsustainable annual trade deficit of about $3 billion of which agriculture imports are a major component.

As the main source of raw materials for industry, the agriculture sector holds the keys to reversing negative trade and the more investment towards increasing crop production the better. There is an urgent need, therefore, for the manufacturing industries to increase synergies with farmers in supporting outgrower schemes for raw material production. This is crucial if Zimbabwe is to champion a sustainable industrial revolution.

Like many African countries, Zimbabwe has relied on primary industries such as agriculture and extractive sector for too long. While these sectors remain relevant, shoring up the country’s industrial base and that of the continent through increased value addition and beneficiation is vital to economic transformation and job creation. Achieving this requires, among other things, modernising our agricultural production and inculcating a business sense in the farming community to produce more and feed into the manufacturing sector.CZI president and United Refineries Limited chief executive officer Mr Busisa Moyo says his organisation is alive to the significance of agriculture in revitalising the domestic industry. He also insisted that the long-term solution to revitalising the local oil expressers and other agro-processing firms lies in promoting extensive outgrower schemes for inputs countrywide.

“In the long-term, we need to get our agriculture up so that we improve production of oil seeds such as soya. As an industry, we are looking for land of about 100 000 hectares to utilise under soya farming so that we boost supply of the raw material. At present, the country is producing 40 000 tonnes of soya annually against a national demand of 350 000 tonnes,” said Mr Moyo.

He said other industries that rely on imported raw materials had also not been spared from the adverse effects of foreign currency shortage.

In view of the successful land reform programme that benefited more than 300 000 households since the turn of the millennium, the country needs to harness this land resource to champion an aggressive green revolution to raise agro-allied industrial production.

The Government has made it clear that protectionist measures such as SI 64 are temporary and went on to challenge local industry to take advantage of the import control window to retool and increase competitiveness efficiency in the global market.

Zimbabwe is a signatory to numerous bilateral and multi-lateral trade treaties that, in the context of regional and global economic integration forces of open markets, frown at protectionist measures such as SI 64 of 2016. Zimbabwe needs to look beyond these measures and invest more towards facilitating a successful agriculture revolution through a well coordinated and supported production model. The Command Agriculture scheme that is already underway fits well in this matrix and promises to impact positively.

A similar model has been credited for influencing a drastic rise in agriculture yields and processing industry output in East Asia since late 1960s.

Experts say the Green Revolution in the East resulted in regional food surpluses within 25 years in East Asia.

“Driven by the political will to make their countries self-sufficient in food, Asian countries doubled cereal production between 1970 and 1995, while the total land area cultivated increased by only four per cent. Furthermore, the Green Revolution mainly focused on irrigated wheat and rice together with improved crop varieties and expanded use of chemical fertilisers,” Nigerian Professor, Paul Amaza, said during the recent 2016 African Economic Conference.

Speaking on the Chinese experience at the same event, Xiaobo Zhang, a Professor at the China Centre for Economic Research at Pekin University, emphasized the benefits of cross-regional mechanisation of agriculture. He identified low production scale as a major constraint of smallholder farmers in developing countries, but identified smallholder farmers as the hope of agriculture in Africa.

“It is possible to make the smallholder farmers productive. This is the key point for inclusive growth because there are so many smallholder farmers in Africa. If we could figure out ways to make sure they are productive, that could be a sure way to reduce inequality, increase their income and reduce their poverty,” he said.

Already the agro-processing industry has taken the lead in bringing Zimbabwe back on track. This needs to be complemented with increased agriculture yields at home.

There is, therefore, no justification for the country to continue importing cotton products, soya, dairy products, cooking oil, and grains when these could be produced by local farmers. Instead, the country should produce more surpluses from its farms for local industry supplies and for the export market. This will go a long way towards reducing the trade deficit and saving scarce foreign exchange resources, which will then be used for importing capital goods and critical raw materials needed for industrialisation.

Experts say a rise in agricultural production and productivity above the subsistence requirement of a country would no doubt provide sinews of industrialisation, particularly in the rural sector. Such a development not only empowers the farming community, who constitute a majority, but also provides a stimulus to demand for manufactured goods including agriculture inputs like chemical fertilisers, pesticides, electric power, agricultural machinery and imple­ments.

A vibrant agriculture sector is also the backbone for survival of industrial consumer goods such as electric products, leather, clothing, information technology and automobiles. – Chronicle

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