Government of Zimbabwe needs to urgently invest heavily in production of key agriculture inputs such as fertilisers and cushion farmers from impending high costs of doing business emanating from shocks caused by armed conflict pitting Russia and Ukraine.
The conflict between the two countries has seen some sanctions and restrictions of movement of critical goods and services from Russian and it comes as many countries including Zimbabwe are grappling with the effects of yet another world disaster, Covid-19.
Failure to come up with measures to insulate the local economy from such shocks by investing heavily in homegrown solutions and import substitutions, captains of industry warned, will dent economic prospects going forward.
Agriculture oils the Zimbabwean economy and it accounts for nearly two thirds of raw materials requirements for the manufacturing industry while employing over half of the country’s employable population.
The conflict between Russia and Ukraine created economic impacts to be felt across the whole world and has high potential to derail the economic outlook for Zimbabwe among many other countries that heavily depend on imports.
In January this year, fertilisers constituted 11,8 percent or US$74,57 million of the country’s import bill of US$632 million.
Now experts have acknowledged the challenge the conflict poses on Zimbabwe with regards to agriculture, grain supplies, energy as well as trade and called on Government to swiftly intervene to cushion consumers from further shocks.
Zimbabwe Farmers Union (ZFU) executive director, Paul Zakariya, said shortages of ammonia fertilisers for instance, were inevitable and implored Government to start working on local production.
Russia is the second largest producer of ammonia after China, while Ukraine is ranked 18th based on production statistics for 2020 and the war is going to contract supply of ammonia and hence cause a spike in its prices.
On the other hand, Zimbabwe is a net importer of ammonia, especially since the closure of the electrolysis plant at Sable Chemicals in Kwekwe. Other fertiliser dealers in Zimbabwe import finished fertilisers from different parts of the world and the conflict has disrupted the commodity’s value chains.
“In the short term, Zimbabwe needs to stock up for both the winter and summer seasons. Clearly, there will be acute shortages of the product in the region. The summer season may seriously be affected if we do not act now,” said Zakariya responding to questions from this publication.
“In the medium to long term, Zimbabwe must work on generating capacity to produce the product locally. While some raw materials may still need to be imported, control over other production processes will give an added advantage,” he said.
The Confederation of Zimbabwe Industries (CZI), has agreed there is a nexus between the Russia/Ukraine conflict and cost of production, which may dent the 2022/23 agriculture season and going forward, therefore affecting the entire economic prospects.
“The high prices of ammonia are imminent, which will be translated into high prices of fertiliser, with a huge bearing on the production costs for the 2022/23 agriculture season,” said CZI in their Annual Economic and Business Outlook for 2022.
The impact of the conflict will not only affect the fertiliser sector but will adversely impact on global supply of wheat. Zakariya said it would be crucial for Zimbabwe to channel resources towards increased production of grains such as wheat.
“It is not only the fertilisers we should worry about. It will be very important for Zimbabwe to ramp up wheat production in order to exceed its own requirements,” said Zakariya.
Russia is the third largest producer of wheat while Ukraine is ranked 9th in the world and both countries account for about 15 percent of the global wheat production.
As such, the war will disrupt supply chains and affect wheat delivery into countries such as Zimbabwe in addition subsequent price increases driven by high demand for the commodity.
Zimbabwe imports wheat, thus its price affects the price of bread and other flour based products and already bread prices have been spiking.
Confederation of Zimbabwe Retailers (CZR) president, Denford Mutashu, concurred that Government needs to channel more resources towards increasing local production of grains to cushion consumers from the inevitable rising costs caused by supply chain disruptions. Prices of goods have already gone up since the war started in February.
He said: “Government should draw up a stimulus package targeted at mitigating the impact of the Russia – Ukraine war as supply disruptions have caused global prices escalation.
“The package can include reducing taxes, capacitation of domestic production and sourcing of raw materials. Resources should be pulled towards maize and wheat production.”
According to the CZI report, since August 2020, wheat prices have been increasing and the price of about US$332 per metric tonne recorded in January 2022 is a five-year record highest.
This could be worsened by the conflict, further affecting the Zimbabwe economy.
The conflict will also affect the mining sector, which is one of the sectors that anchors the Zimbabwe economy. With Russia slapped with sanctions, its investments in Zimbabwe such as VI Holdings and Alrosa will also feel the heat.
“The (conflict) will make it difficult for the mining firms to complete the planned investments into their Zimbabwe projects, with the potential to slow down economic activity. –
