S P E C I A L R E P O R T

FAO/WFP CROP AND FOOD SUPPLY ASSESSMENT MISSION

TO ZIMBABWE

5 June 2007

• Mission Highlights
• 1. OVERVIEW
• 2. SOCIO-ECONOMIC SETTING1
• 3. Food production in 2007
• 4. FOOD PRICES AND MARKET ANALYSIS
• 5. CEREAL SUPPLY/DEMAND BALANCE, 2007/08
• 6. HOUSEHOLD FOOD SECURITY
• Appendix I
• Appendix II

Mission Highlights

1. OVERVIEW

Zimbabwe experienced severe dry spells and generally unfavourable rainfall during the 2006/07 cropping season, compounding devastating effects of the unprecedented decade-long economic decline. Half-way through the season the Government had declared 2007 as a drought year. Against this backdrop an FAO/WFP Crop and Food Supply Assessment Mission was invited by the Government to visit the country from 25 April to 18 May 2007 to estimate the 2007 production of the main cereals and pulse crops, assess the food security situation in the country and determine the food import requirement, including food assistance needs, for the current marketing year 2007/08 (April/March).

In Harare, the Mission held meetings with the Ministry of Agriculture and Rural Development (MoA), UNDP Resident Coordinator, FAO sub-Regional Representative and other FAO officials, WFP Representative and Country Director and other WFP officials, World Bank, FEWSNet, Zimbabwe Meteorological Department, Central Statistics Office, Commercial Farmers Union (CFU), Zimbabwe Commercial Farmers Union (ZCFU), Zimbabwe Farmers Union (ZFU), Selected Millers, fertilizer and agricultural input supply companies, and some of the international and national NGOs.

During field visits the Mission was accompanied by observers from SADC and FEWSNet. It was assisted and guided by senior specialists from the Department of Agricultural Research and Extension (AREX) and other staff of MoA, the Grain Marketing Board (GMB), Department of Meteorology and Ministry of Planning and Social Welfare along with four FAO staff members from the country and two staff members from WFP country office. The Mission, divided into four groups, travelled for about 10 days to all eight provinces covering 32 out of the country’s 58 rural districts. The districts to be visited were carefully selected using a range of criteria including agro-ecological, marketing and vulnerability considerations. In each province and district, the teams met with administrative authorities (the Governor of the Province, and the AREX officials). After these meetings, the sub-teams travelled to 3 to 6 selected wards covering poor, average and good production potential and livelihood means. Brief observations on urban and peri-urban plots of crops were made in Harare and Bulawayo. Careful attention was paid to selected farms in all six sectors of farming covering the communal, resettled, and commercial farming areas as much as possible. The Mission also visited markets and interviewed some petty traders. The Mission also relied heavily on the remote sensing analysis and data on rainfall, vegetation indices and various interim assessment reports.

The Mission had access to the AREX’s own pre-harvest crop assessment carried out in mid-March. This information was the used as the basis for verification. Livestock conditions were observed and investigated en route and in the districts visited. Field assessments were made regarding household food security, vulnerability, coping mechanisms and social welfare programmes. The crop production and vulnerability situation obtaining this year was compared with previous years to get a relative historical perspective. Data and information received from secondary sources were reviewed against data, information and insights obtained during field visits in arriving at the estimates made by the Mission.

The Mission used national, provincial and district production data and combined this with information obtained from household and focus-group discussions. Potential income from cash crop and livestock production/sales was used to draw conclusions about status of food security and the corresponding impacts of the production failure.

The 2006/07 agricultural season was characterized by a late start of effective planting rains, frequent dry spells and generally below-normal soil moisture conditions gradually getting worse from the north of the country to the south. Farmers often had to replant on many occasions as previous plantings were largely destroyed due to lack of moisture. In many areas in the southern half of the country there was a total crop failure. Rains in northern provinces were favourable. Mashonalland Central and Mashonaland West, the two northern provinces, received normal to above-normal rainfall which was nevertheless below last year’s good rainfall. Rather heavy rainfall received in most parts of the country in late March-early April was helpful in saving some late-planted crops from failure, and in improving grazing conditions and water availability for livestock.

The area planted to various grains, including maize, in 2006/07 main season was down by about 6 percent but aggregate cereal yield was down by almost 40 percent resulting in total cereal production drop from last year’s Government estimate by about 44 percent. Overall, the area planted in the communal areas to maize, the predominant crop in this sector, declined by over 8 percent. There was some increase in the area planted to crops in the large-scale and small-scale commercial sectors in 2006/07 as seed availability was relatively better for this category of farmers. However, the long-term decline in the large-scale commercial sector has been dramatic, mainly due to land reform activities. It is also striking to note that land utilization (i.e. cultivated land as a percent of total arable land) of the resettlement farms (old and new) is only about 30 to 55 percent. There are severe input, infrastructure and economic constraints that prevent new farmers from realizing the full potential of the basic land resource.

The Mission estimates the 2007 main cropping season harvest at 799 000 tonnes of maize and 126 000 tonnes of small grains. Maize output this year is estimated to be 46 percent lower than last year and 13 percent lower than the year before. Winter wheat is now being planted and is forecast to be slightly down to 128 000 tonnes compared to last year’s 144 000 tonnes. However, the mission learned that the winter wheat planting was behind schedule and if the Government’s plans to provide key inputs such as electricity and fuel for irrigation do not materialize the wheat harvest later this year could be severely compromised. Thus total cereal production (i.e., maize, small grains, wheat and a small quantity of rice) of 1.06 million tonnes is about 60 percent of last year’s production. The reasons for the decline include reduction in both yield and area planted due to poor rainfall performance, lack of availability of key inputs such as fertilizer, fuel, tractor or oxen power for tillage, and most importantly, financially unprofitable prices for most of the controlled farm products including most cereals.

Based on the estimated main season cereal output, projected wheat production and an opening stock of 182 000 tonnes of all cereals, the total cereal import requirement in 2007/08 (April/March) is estimated at 1.052 million tonnes, of which maize constitutes 813 000 tonnes.

In view of low export earnings from tobacco (mainly due to lower production) and cotton, and considering the competing claims on the extremely limited foreign exchange by the critically needed imports of fuel and electricity as well as the servicing of the external debt, the Government’s ability to import maize in 2007/08 is apparently very limited, and the sources of foreign exchange are severely stressed. It is understood that the Government has made a contractual agreement with Malawi to acquire 400 000 tonnes of maize. Given the priority accorded to food imports it is assumed that the Government will make every effort to import total requirements of wheat and rice. An additional 61 000 tonnes of maize imports are assumed, mostly as a residual item, by informal cross-border trade and some through remittances in kind. Thus the total commercial imports are assumed at 700 000 tonnes of cereals (comprising 639 000 tonnes of formal GoZ imports and residual 61 000 tonnes of informal cross-border imports) leaving an uncovered gap of 352 000 tonnes. The Mission recommends this amount as an emergency cereal aid, which reconciles with the estimated cereal assistance requirements of the vulnerable households. An additional 90 000 tonnes of non-cereal emergency food aid is recommended to reach the recommended 2 100 kcal per person per day. The calculated relief needs are based on vulnerability criteria, on the assumption that markets will function “normally” and households will use other resources to meet their own food needs. Consistent with food security and vulnerability analysis, relief beneficiaries will vary by season, starting at 2.1 million in July and reaching up to 4.1 million people at the height of the hunger season in January-March 2008.

2. SOCIO-ECONOMIC SETTING¹

2.1 The general setting

Economy: Zimbabwe’s economic decline continues unabated. The country’s economy has been shrinking each year for about a decade now with the real gross domestic product (GDP) shrinking by about 42 percent between 1998 and 2006. The key economic indicators since 2000 are presented in Table 1. Unemployment and under-employment are rampant, with urban unemployment especially becoming critical in recent years. Even before the 2002 crop failure, 75 percent of the country’s population was classified as poor and about 42 percent as very poor. Poverty has become worse in view of the consecutive depressed harvests and a phenomenal rise in the cost of living relative to the Zimbabwe dollar. The poor include the rural population of small farmers, most of the informal sector workers, former farm workers, and the urban unemployed or under-employed. Successive crop failures, severely constraining people’s coping mechanisms, have compounded people’s deprivation. According to the policy statement by the Governor of Reserve Bank of Zimbabwe made on 26 April 2007 “the lack of balance of payment support, lack of investment flows and subdued tourism inflows” have had significant negative impact on the economy.

Inflation figures are shocking every time they are announced as they reach a new high every month. In January 2006 the consumer price inflation was measured at 613 percent; by April 2007, it had reached a new record of 3714 percent. The rise in monthly salaries, however, lags way behind the inflation consequently reducing purchasing power of incomes almost daily. The monthly salary of a teacher for example is about Z$ 300 000 (about US$ 10) when transport cost to work alone can be a significant part of that. The minimum wage rate for farm workers was Z$32 000/month before 1^st of May 2007; it has now changed to Z$96 000. The wage rate offered by farmers to workers, however, is often not enough to cover the worker’s minimum consumption needs. These workers are in some cases allowed to seek additional casual work elsewhere or perform overtime on the same farm.

The exchange rate story mirrors that of inflation. The Zimbabwe dollar was redenominated in August 2006 when the currency was devalued by 60 percent, three zeros were removed from the currency and the new official exchange rate with US$ was set at 250:1. This official rate is still in effect, although different intermediate rates are allowed for certain purposes. The parallel market exchange rate has gone up from 1 500 in August 2006 to its current (mid-May 2007) rate of about 30 000. This anomaly has exacerbated the hard-currency shortages in the official system as much of the incoming foreign exchange finds its way into the parallel market.

Table 1: Zimbabwe - Key economic indicators, 2000–2007

External trade and food import potential: Zimbabwe is currently in the grip of worsening crises due to shortages of fuel, electricity, and water. Production of tobacco, the country’s main agricultural export commodity, reached an all-time low in 2006. Prospects for 2007 are somewhat improved with expected recovery in production. The sugar sector, on the other hand, is expected to perform poorly in 2007. The country’s official foreign exchange reserve position is precarious. According to an unofficial estimate, the foreign currency reserves with the Reserve Bank of Zimbabwe are extremely limited, perhaps to the tune of merely US$ 10 million with a possible import cover of about 12 days. It is clear that the foreign exchange crisis will persist during 2007/08 as the import demand will continue to be high in view of the need to import large quantities of fuel, electricity, and other essential capital and intermediate goods in addition to food and having to make payments on the mounting debt. Sluggishness in tourism and manufacturing sectors continues but the outlook for gross export revenues during 2007/08 is somewhat better, given the expectations of higher tobacco, platinum, gold and diamond sales. One source of foreign currency, remittances from abroad, seems to be favourable. Remittances are substantial; some estimates put them at about US$100 million per month. The Mission assumes, therefore, that the Government should be able to commercially import some of the needed food grains, essentially maize, wheat and rice, in 2007/08.

1. Agriculture in the national economy

Agriculture is the mainstay of the national economy. The majority of the country’s population is engaged in agriculture that accounts for between 15 and 20 percent of the gross domestic product (GDP). It generates a large proportion of foreign exchange earnings, although the share of agricultural exports in country’s total exports has come down from 39 percent in 2000 to 21 percent in 2006 (see Table 1).

Zimbabwe’s land is divided into five natural zones on the basis of soil type and climatic factors. Natural regions 1, 2 and 3 are suitable for intensive crop cultivation and livestock raising, while regions 4 and 5 offer limited scope for crop agriculture but are suitable for livestock raising on a large scale. The bulk of Mashonaland (West, East and Central), Midlands and Manicaland Provinces are under regions 1, 2 and 3, while Matebeleland (North and South) and Masvingo Provinces are under natural regions 4 and 5. The three Mashonaland Provinces constitute the bread-basket of the country. Zimbabwe’s farming sector can produce, and has produced in the past, exportable surpluses of maize and certain other food crops. But, as described earlier, severe constraints on prime land utilization have resulted in less than full capacity utilization of its natural resources.

Agricultural Policy: Current agricultural policy has adversely affected production of maize and wheat due to unintended market distortions. There seems little incentive for farmers to produce beyond their subsistence needs, given the lack of alternative marketing channel and price controls with static procurement prices in an environment of hyperinflation resulting. The Grain Marketing Board (GMB), a Government monopoly agency, buys and sells major cereals at controlled prices. The maize purchase price during 2006/07 marketing season at Z$52 000/tonne (equivalent to about US$ 5 per tonne at the parallel market exchange rate at the time) was below the prices in the parallel markets. Purchase prices are announced at or after harvest, not at planting time. There are often delays in receiving payment. The current price of Z$3 million per tonne with a possible bonus of additional Z$1.2 million (equivalent to US$140/t at parallel market exchange rate of 30 000), announced on 26 April 2007, is lucrative for now. However, the hyperinflation, over 3 700 percent in April 2007, will quickly erode the value of maize sold to GMB and again farmers may not have enough capital or incentive to invest in applying fertilizer and other improvements come next season. Maize is also sold at subsidised prices in various locations but the GMB supplies are widely reported to be irregular and inadequate; consequently food prices vary widely from one part of the country to another.

It is almost impossible to set all prices at all times in a controlled way that is fair to producers and consumers even with good intentions by the authorities. Hence liberalization of the marketing systems is the preferred solution. To this end a monetary policy statement made by the Governor of the Reserve Bank of Zimbabwe on 26 April 2007 – “As Monetary Authorities, we wish to re-assure the financial and other sectors of the economy that, as stated before, we remain committed to the nurturing, propagation and speeded gravitation towards a market-based economy as the guiding ideology of our landscape” - is a welcome one. Whether this leads to real liberalization of agricultural product markets, however, remains to be seen.

2.3 The Land Reform Programme

At the time of Independence in 1980, land distribution was as shown in Table 2.

Table 2. Land ownership pattern in Zimbabwe at Independence in 1980

Land distribution in Zimbabwe since independence in 1980 has remained highly skewed. A land reform programme was initiated following independence to increase the access of the indigenous people to land. The first phase covered the period 1980 to 1998; during which 3.5 million hectares of large-scale commercial farm land were acquired and 71 000 indigenous families were resettled on those lands. The second phase was initiated in 1998, but only a small area of 0.17 million hectares was acquired and 4 697 families were resettled. According to the Commercial Farmers Union data for 1995, the average size of large-scale commercial farms (4 700 in total) was 3 000 ha as opposed to less than 30 ha for the communal and resettled area farms (862 000 in total). However, large-scale commercial farms being highly capital intensive and dependent on relatively low wage labour force (on average 40 workers per farm) contributed 80 percent of the national agricultural output. In July 2000, the “Fast Track” resettlement phase was launched to speed up land acquisition and resettlement. A law was enacted for the purpose, with compulsory acquisition and resettlement being the key focus. With the ongoing land reform programme, only about 500 or so large-scale commercial farms remain now. The large-scale farms are converted into smaller A.1 model farms (small subsistence farmers) and A.2 model farms (commercial medium and large farmers). These activities and processes have severely disrupted farming activities as many resettled farmers lack access to capital and other inputs or need time to settle down, contributing to severe under-utilization of land resource (see Table 3) and low production. They have also contributed to the significant decline in the national dairy and export beef herds.

Table 3. Agricultural land utilization, 2006/07 according to GoZ