An agro-economic analysis…a prognosis of guerilla economics

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THE operating environment in Zimbabwe, particularly for agriculture, since the first half of 2019, was characterised by a number of significant macro-economic changes that re-defined the operating environment for the agro-sector.  

These included the introduction of a local currency denoted as ZWL dollar or Bond as the sole functional currency in place of the multi-currency regime that had subsisted prior to June 2019.  

The  US dollar has been the functional and reporting currency for Zimbabwe since 2009. 

It refused to relinquish its hold, and continues to be the currency of choice, notwithstanding various monetary policies.  

The change in currency affected the agro-economic retail channel, including the smaller retailers of agro-products.

The liberalisation of the foreign exchange markets, through the introduction of the inter-bank market and auction system, while providing a viable means for payments to foreign suppliers of agro-inputs, congruently fueled inflation and contracted the intended value of the newly-introduced Zimbabwean dollar denomination.

As a consequence, the rapid escalation of the exchange rate has significantly impacted the performance of agro-businesses in terms of cost structure, machinery maintenance, replacement costs, harvest profits and revenue.  

The economic financial mechanism failed to yield adequate foreign exchange for the agro-related industries as the foreign currency availability, through formal channels, continued to be irrational and untenable.  

This resulted in major agro-supplies being unaffordable for the average Zimbabwean farmer and, in turn, the consumer; in direct hindrance to the ideals, efforts and aspirations of the much-vaunted Command Agriculture Programme or the current Pfumbvudza Programme.

As a consequence of the persistent US dollar benchmark pricing, consumer buying power has continued to be eroded significantly as incomes and salaries have effectively remained stagnant since 2009 — and way below the poverty datum line. 

The low disposable incomes, especially of the farmer who is the primary producer of the nation’s food supplies, have greatly affected rural livestock and crop producers who represent over 85 percent of the population.  

Additionally, the general consumer has not been spared from the irreconcilable, incongruent economic dispensation that continues to prevail in Zimbabwe.

Output from maize and tobacco declined due to successive droughts, while rural livestock production steadily declined due to a recurring cocktail of livestock diseases owing to costly veterinary supplies, lack of an effective, accessible and affordable fail-safe, national rural veterinary disease control programme. 

Consequently, the contraction of the economy has affected the weakened agro-sector. The contraction reflected markedly in the slowing down in sales volumes of beef.

The tight liquidity across the financial market also drastically affected farmers who face funding challenges, exacerbated by the high lending rate of an iniquitous 60 percent, ongoing upward reviews of the minimum lending rates, sundry charges in the banking system and transaction taxes. 

Ultimately, the ordinary citizen, worker and agro-produce consumer bears the brunt of these high costs.

In August 2018, the Southern Africa Regional Climate Outlook Forum (SARCOF) projected that most countries in the Southern African region would receive normal to below normal rainfall due to the El Niño weather phenomenon.   

Indeed, the forecast came to pass for Zimbabwe and neighbouring countries that experienced the second El Niño event to hit the Southern African region in three years. 

Following on the heels of the 2015/2016 drought, reported as ‘the worst in more than three decades’, when the bulk of Zimbabwe’s crop was written off, leaving three million people in the country (representing a quarter of the population) facing hunger, was the adverse 2018-2019 agricultural season which resulted in the country harvesting less maize than the annual national amount required for consumption, and left four million people hungry with 20 000 head of cattle dead.  

The recent perilous periods of the COVID-19 pandemic and protracted lockdown in 2020-early 2021, which coincided with the peak period for tick-borne diseases in Zimbabwe, did not auger well for most livestock producers, especially for rural farmers who yearly continue to lose cattle from vector-borne diseases such as theileriosis, babesiosis and botulism; underscoring the importance of uninterrupted, affordable provision of veterinary services.

For Zimbabwe to draw an informed opinion on the agro-economic gridlock, a commission of enquiry should investigate, interrogate and leverage the economic conundrum being experienced by consumers as commercial retailers have shown resistance to reduce prices and heed Government calls to maintain economic stability. 

As a result, pricing and value disparities abound in all fields of commerce in Zimbabwe. 

The recusancy of retailers and the non-co-operation of business entities, SMEs and Indo-Asian traders who blatantly demand US -dollar cash payments for goods is economically unjustifiable since most citizens are paid through the RTGS system. 

This applies equally to markets at Mbare Musika and, prior to the protracted COVID-19 lockdown, to street, vegetable, sadza and vendors in general. Zimbabwe is the only country where most citizens are paid through the RTGS system but demanded payments for goods and services in US dollars!

Pricing structures of consumer goods must be consistent, equitable and tenable, commensurate with wages and the general socio-economic milieu of Zimbabwe, especially the marginalised people living way below the poverty datum line. 

State-skewed guerilla economic policies do not augur well in a democratic society where free trade and free competition is touted as the norm.  

Economic and social vulnerability of the ordinary man will increase unless we have Government subsidies on basic food, health care, transport, education, clothing, school uniforms and other economic activities. 

Until such a time that the economy stabilises in Zimbabwe and ordinary citizens can function normally and prosper in their country, price controls on strategic staple foods – not just maize meal, but also bread, milk, eggs, oil and meat (not soya chunks), among others, should unquestionably mandatory and should be re-introduced as a matter of expediency. 

Zimbabwe’s extraordinary economic situation is unprecedented in history — it is the only country where its citizens are forced to buy their own currency – it is not only unprecedented, it is economic suicide for national development! 

A topical and pertinent issue affecting the agricultural sector — farmers, wholesalers, retailers and consumers of agro-produce — is the speculative pricing that has taken root in our society.  

The chronic cycle of local currency instability and fiscal indiscipline in business across the board continues  but must be reined-in by the relevant authorities.

What lay-economists term ‘market forces’ in Zimbabwe are, in many instances, a result of speculative behaviour and practices, sheer immoral profiteering on behalf of business entities, lack of price control on retail goods and the lack of public confidence in our currency.

Despite fiscal and monetary policy reforms and other financial structural policies, untethered, speculative overpricing of goods blights the farmers’ prospects for recovery and retards the efforts of any agricultural programmes and projections to ensure national food security while thwarting all Government’s goals.

While it may not be “…the intention of government to interfere with the operations of the business community, but to promote leadership, empathy and patriotism while economic recovery takes root …,” Government should, however, take immediate action to curtail the rampant over-pricing endemic in our business circles and rationalise pricing and value parities.

As a result of Zimbabwe’s low industrial and agricultural productivity and limited exports, Zimbabwe suffers the impact of import dependency that has not only resulted in a budget deficit, but higher costs for goods as they pass from ‘importer-to-middlemen-to-wholesaler-to-retailer-on-to-the-consumer’. 

Over 56 percent of everyday groceries are imported.

Dr Tony Monda holds a PhD and a DBA in Post-Colonial Heritage Studies. He is a writer, lecturer and specialist Post-Colonial Scholar, Zimbabwean Socio-Economic analyst and researcher. E-mail: tonym.MONDA@gmail.com

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