The Republic of Zimbabwe has a rich history in agriculture, especially in crop production and animal husbandry. The country was once regarded as the breadbasket of Africa and since the election of President Mnangagwa and his “open for business” policies, it has started the journey to regaining that status.
The sector currently contributes 12% of national GDP; At its peak, agriculture contributed a third of Zimbabwe’s gross domestic product.
Tobacco has traditionally been a major contributor to the economy and is the highest agricultural earner of foreign currency, however farmers have begun to look for options to diversify away from the crop. New high value plantations are being established on farms with embedded infrastructure in crops such as blueberries, pecans, avocados, cut flowers and peas all of which are export focused.
Such potential together with clean land and water availability, well established road and electricity infrastructure, and its friendly, well educated, young and motivated workforce, creates favorable conditions for renewed agricultural investment in Zimbabwe.
At a time when commercial pressure on land is increasing in many parts of the world, Zimbabwe could not be better positioned. The agro-based country has a land size of 39.6 million hectares of which 33.9 million hectares is arable.
The agricultural land that was formerly controlled by 4,500 large-scale commercial farmers is now populated by + 145,000 small-scale farmers, and + 23,000 medium-scale farmers through a multi tenure lease system. Much of this land is lying fallow due to under investment and lack of clarity around land tenure; the Government of Zimbabwe is anxious to put this national asset back into full production and is reaching out to technical and financial partners to work with resettled farmers to put the land back to work.
Besides having vast amount of affordable land, Zimbabwe offers one of the best agricultural climates in the region, and has 86% of all the region’s small water bodies. For every 1000ha of arable land available only approximately 174ha is under irrigation, creating a massive opportunity to increase irrigated agricultural output.
• The sector contributes circa 11% to annual GDP and supplies 60% of the raw materials required by the industrial sector.
• Cognisant of the drought and the need to revive the sector, government has extended support towards the sector whilst encouraging the private sector to play a more pivotal role. In the 2019 Mid-Term Budget Review $1.7bn was set aside for support of strategic crops of grain, soyabean and cotton under their respective programmes., resulting in a total budget allocation of $4.4bn for 2019 for the sector.
• Government is targeting 2.3mn hectares for the 2019/20 summer cropping season, while at least 1.6mn households will benefit from the free Presidential Inputs Scheme. Banks supporting Command Agriculture programme will no longer require collateral from farmers who intend to access loans, as the verification, vetting and contracting for production would be done by the Ministry of Lands, Agriculture, Water, Climate and Rural Resettlement.
• The Ministry of Finance has stated that it will provide fiscal incentives to investors who participate in key and strategic areas of the agricultural sector. The incentives will be accessed by investors involved in production of cash crops, strategic crops, farm mechanisation, horticulture, upgrading of agricultural equipment, livestock and agro-processing, irrigation as well as contract farming.
• Tobacco volumes surpassed government expectation and last year’s record of 252mn kgs, resulting in total production of 258mn kgs during 2018/19. Contrastingly, average prices dipped 46.0% to US$2.92/kg, the worst price in four years, resulting in total sales declining to US$524mn from US$737mn in the prior season.
• Forecasts for this year’s maize harvest is 57.6% lower at 777k tonnes compared to 1.8mn tonnes achieved in 2018 and below national grain requirements of 1.8mn tonnes. Circa 800k tonnes of maize will need to be imported to ease famine, with Tanzania agreeing to supply 100k tonnes worth of maize to cover the deficit. In the 2019 Mid-Year Budget, government has set aside $624mn for maize requirements up to the end of 2019.
• Wheat production is anticipated to decline 32.3% to 109k tonnes from 161k tonnes in the prior year. Consequently, wheat will need to be imported to meet the national demand of circa 400k tonnes.
• Beef slaughters for 1Q19 declined 13% to 57.6k attributed to uncertainty and volatility regarding prices, as well as increased cost of animal protein. Buying prices have been characterised by prices quoted in USD and paid via ZWL$ at the prevailing rate, a situation that has caused rising prices in ZWL$ terms.
• Milk production for 1Q19 increased 14% to 19.4mn litres, against an annual demand of 120mn litres. To boost production government has partnered with the private sector to attempt to grow the dairy herd to 30k by 2022, as it has fallen below 25k in recent years.
Source: IH Securities Research