Sunday, 18 November 2012

Review of the National Budget

The 2013 National Budget
Focus on Agriculture
Analysis by Agri-access (Pvt) Ltd
Date of budget presentation                        15 November 2012

It is of commendable effort that The Minister of Finance, Tendai Biti, has prioritised Agriculture and Food Security in the national budget because of its major contribution in the GDP of 17.6% and contribution of 16% of exports. 
Major sector contribution to GDP

Source: Dealing with export commodity price shocks : The Zimbabwean Experience – W. L. Munungo
Agriculture has recorded a dip in the annual growth from 5.1% in 2011 to 4.6% in 2012.  This has been mainly as a result of the drought conditions experienced in the country.  Another major contribution to this is the lack of knowledge or lack of access to information pertaining to agricultural trends, markets and warnings.  This has led to farmers making irrational decisions in the course of their farming  ventures.  However, a growth of 6.1 is expected during the 2013 season in the Agricultural sector.  Despite this poor performance, agriculture still remains a major contributor in the Country’s GDP, which means that the cause of this performance can also be attributed to the poor infrastructure in the country such as load shedding, a decline in Foreign Direct Investment (FDI), low adoption of technology and a use of obsolete equipment and machinery, which has equally all other sectors of the economy.
In His Budget Minister Biti has allocated $159.4 million  towards agriculture.  With the state of our Agricultural infrastructure, for full recovery, Agriculture would  require an estimated budget of $2 Billion, with funds coming from the Government, banks and other stakeholders including the farmers.  In our $3.8 billion budget, it would mean more than half of the Total Budget would be allocated to Agriculture . 

A comparison has been compiled below to outline the role of agriculture in Zimbabwe against other Countries in the region.
A comparison of Other Economies in the region
Budget allocation to agriculture
Agriculture’s contribution to GDP
Agriculture’s contribution to exports
National employment
Major farming activities              
Poultry, cattle, maize and wheat.
Tea, coffee, floriculture and horticulture
Tobacco and horticulture

The Minister of Finance rolled out a 3 Year financing strategy whilst presenting the 2012 National Budget, which was aimed at addressing timeous allocation of resources to farmers, but it has not been effected in 2012/13 season.  Up to now, many farmers are still not sure how they are going to farm, yet the season has already begun. 
Addressing the implementation the issuance of the “99 year lease” is also welcome.  A bankable “99 year lease” will enable farmers to access finance much better than where there is no secure land tenure.  However, this can only be possible after the land has been surveyed by The Surveyor General and this requires $4000 per farm unit.  The Government has proposed to place $2 million for the surveying and is expecting the private sector and farmers to contribute the remaining $3 million required for surveying 1260 Farm units during 2013. 
Irrigation rehabilitation and development programmes have been allocated $9 790 000 a figure $5 210 000 less than that allocated on the 2012 National budget of $15 million, of which only $3 million was actually directed towards this programme.  With the persistent droughts and on-going climatic shifts, it is of great importance that Irrigation development be prioritised in order for the country to produce enough food to feed the nation and the region.  This sector has been on the cards for a long time and we feel the implementation should begin with seriousness.  In the Lowveld areas, where there is a dense network of rivers,  should be given priority to this development so that food can be produced optimally in these sections.
Tobacco, a major exporter performed quite well because of the firmer prices experienced over the previous season.  These prices are expected to remain firm for a while due to the high demand of Zimbabwean style by the world over and the Chinese apetite for our “lemon leaf”.  Both Tobacco and  Cotton yields increased to 144.5 million kgs and 350 million kg from 133 million kgs and 250 million kgs, respectively, as a result of the firmer prices. Cotton production is expected to decline to 283 million kgs as a result of the poor prices experienced during the 2012 selling season.  The prices of cotton declined from $0.85 to $0.45 as a result of the high reserves of cotton in India and China.   Though a controversial subject in the country, it could be high time Zimbabwe adopts GMO cotton so that it can be able to compete with international cotton produces and remain viable in production.
The commodity exchange markets has been on the cards for long and is way overdue. This has been one of the mandate of the Agricultural Marketing Authority – “To regulate the participation in production, buying and processing of Agricultural products in Zimbabwe.”  The implementation of the Commodity exchange Market will be beneficial to farmers since a fair price will be paid on produce as buyers would be competing on an open market system.
Initially projections where that Agriculture would decline by 5.8%, but that  has this has been revised to a growth of 4.6%.  This is so because of the firmer prices realised in tobacco and also to a lesser extent a financial support base of about $814 million.  2013 projections indicate a growth of 6.4%, but we have noticed a decline in the amount that will be channelled towards agriculture compared to the previous season, a figure of approximately $ 700 million. This is quite worrying especially when projection are of a growth of 6.4% but with lessor funding. 
Though it is commendable to have the stakeholders pledging their support in financing Agricultural activities, how much of this fund will actually be available to farmers?   Last season AMA floated some Agro-bills amounting to $50 million to raise funding for soya bean farmers.  These only raised $17.7 million a figure that was not substantial in supporting the registered farmers in soya beans.  Despite these 360 Tenor bills having  special features including tax exemption; they was low consumption from the market due the present economic environment where the demand of money outstrips supply – the liquidity crunch.   This season, AMA is floating $25 million bills, that we hope will receive a good market uptake and will see the funds being directed towards production; in the same way, we would like to encourage the government to prioritise irrigation development as mentioned above.

The review of the chicken importation duty to $1.50 per kg or 40% (whichever is higher) is quite commendable to rescue our local chicken producers.  This will result in an increased production of the birds by local farmers as farmers are immune to external competition in the production of the birds. 

The deferment of the VAT on capital goods is also welcome in recapitalising the agricultural sector which has high cost of production due to the use of obsolete equipment.

In conclusion we would like to commend the Ministry of Finance for the effort in drafting this budget, however, Agriculture unlike many other sectors of production is unique and dependent on many other factors of production, among them time and season.  This means that resources should be allocated to this sector timeously for farmers to be able to be productive.


Compiled By
Tapiwa J Mugabe
Farm Advisor
Agri-access (Pvt) Ltd
Skype: tapiwa.mugabe1
twitter: Agriaccess
Phone +263 774 157 581

No comments:

Post a Comment