Beleaguered parastatals warn of impending food crisis
Rhodes | 10.05.2005 06:59
Zimbabwe's key production and distribution
parastatals have warned of major food shortages in the near future unless government provides immediate funding to restore viability to these businesses.
parastatals have warned of major food shortages in the near future unless government provides immediate funding to restore viability to these businesses.
Their concerns surfaced amid reports that the Reserve Bank of Zimbabwe (RBZ) has so far failed to make available the Zim $10 trillion (US $1.6 billion) recapitalisation package for rescuing 16 ailing but crucial state-owned companies, as pledged in January this year.
Under the Parastatals and Local Authorities Re-orientation Programme, the RBZ promised financial support to revive production in the parastatals, and revitalise declining standards of service provision in local government
councils.
Five months later, the central bank has failed to disburse the money, citing a scarcity of foreign currency. In the face of worsening nationwide shortages, the bank said it had been forced to limit its foreign currency allocations to importing food and fuel, ahead of other capital expenditure commitments.
The Zimbabwe Electricity Supply Authority (ZESA), the nation's sole power supplier, warned of an impending power crisis, just as government said it had pinned its hopes for a successful winter wheat farming season on the
country's few electrified irrigation schemes.
Addressing business delegates at the Zimbabwe International Trade fair last week, ZESA's chief executive officer, Sydney Gata, said the company might "sound alarmist", but it was true that the country would face serious power supply problems as long as the foreign currency crisis persisted.
"We might sound alarmist but, yes, there is a serious, nationwide power supply problem looming," said Gata, noting that ZESA needed at least US $2 billion to avert a major power supply crisis between this year and 2010.
ZESA relies heavily on imports from South Africa, Zambia, Mozambique and the Democratic Republic of the Congo to satisfy the national demand, but Gata said the company was currently operating at well below normal capacity, and
production would continue declining as more equipment broke down.
The country has been facing worsening power cuts for the last three months, and it is feared that the electric irrigation schemes set aside for the winter wheat farming programme could fail to deliver a decent harvest due to
power shortages.
National Foods Holdings (NFH) is the sole producer and distributor of all basic food commodities in Zimbabwe, and also mills maize and wheat purchased from the state-controlled broker, the Grain marketing Board (GMB).
In its annual statement, submitted to the Zimbabwe Stock Exchange last week, NFH said future food availability in the country was under threat because of cash flow problems.
It noted that over the years the company had been forced to import up to 70 percent of the annual national food requirement at high costs, and forex shortages now hampered its ability to acquire external supplies.
A senior company executive told IRIN that government-imposed price controls on basic food products had the net effect of destroying profitability, and ultimately the future availability of food in the country.
"The company faces serious viability problems in trying to maintain the balance of optimising service provision, and at the same time increasing profits. The price control regime (which applies to all NFH products) is
unsustainable, as it compels the company to produce or import at market rates, but sell at well below market value," the executive explained.
NFH also called on the government to take restorative measures to increase its production capacity, and warned that the net effect of its collapse would "seriously impact on the availability of basic commodities in the
domestic market".
Only two of its five milling sites, Bulawayo and Harare, were still operating, but at only five percent of their monthly production capacity as a result of the crippling shortage of foreign currency. Its remaining 2,000
workers were facing retrenchment.
The Cold Storage Commission (CSC) is in charge of the livestock and beef industry - previously a key contributor to foreign currency earnings - and also provided a pool of draught power to thousands of communal farmers.
It had hoped to get enough financial support to control a four-year epidemic of foot-and-mouth disease and resume its lucrative exports to the European Union, but said efforts to restock the depleted herds on its ranches had
fallen by the wayside because of a shortage of funding.
"We are facing serious difficulties, as the funding has not been availed. We applied for funds for a short- and long-term livestock rearing programme, as part of the national restocking exercise, but we still have to wait," the CEO of the Cold Storage Commission, Ngoni Chinogaramombe, told the official Sunday Mail.
Besides ZESA, NFH and the CSC, the 16 loss-making parastatals targeted by the RBZ's ambitious recapitalisation programme include national coal
supplier Wankie Colliery Company, the Zimbabwe Iron and Steel Company, national milk supplier Dairibord, National Railways of Zimbabwe and the GMB.
Economists Erich Bloch and Eddie Cross said the country was indeed facing a serious round of shortages if production in the key parastatals was not
restored.
"The RBZ has no choice but to prioritise food and fuel, as it is the only national institution that can do that. Major job losses are looming in all the national parastatals because of lack of capital funding, and detrimental command economy policies like price controls," Cross commented.
The government has only recently admitted that there was a need to import at least 1.2 million mt of maize and 200,000 mt of wheat to cover the country's cereal deficit. State-subsidised parastatals play a dominant role in all the strategic sectors of the Zimbabwean economy.
Under the Parastatals and Local Authorities Re-orientation Programme, the RBZ promised financial support to revive production in the parastatals, and revitalise declining standards of service provision in local government
councils.
Five months later, the central bank has failed to disburse the money, citing a scarcity of foreign currency. In the face of worsening nationwide shortages, the bank said it had been forced to limit its foreign currency allocations to importing food and fuel, ahead of other capital expenditure commitments.
The Zimbabwe Electricity Supply Authority (ZESA), the nation's sole power supplier, warned of an impending power crisis, just as government said it had pinned its hopes for a successful winter wheat farming season on the
country's few electrified irrigation schemes.
Addressing business delegates at the Zimbabwe International Trade fair last week, ZESA's chief executive officer, Sydney Gata, said the company might "sound alarmist", but it was true that the country would face serious power supply problems as long as the foreign currency crisis persisted.
"We might sound alarmist but, yes, there is a serious, nationwide power supply problem looming," said Gata, noting that ZESA needed at least US $2 billion to avert a major power supply crisis between this year and 2010.
ZESA relies heavily on imports from South Africa, Zambia, Mozambique and the Democratic Republic of the Congo to satisfy the national demand, but Gata said the company was currently operating at well below normal capacity, and
production would continue declining as more equipment broke down.
The country has been facing worsening power cuts for the last three months, and it is feared that the electric irrigation schemes set aside for the winter wheat farming programme could fail to deliver a decent harvest due to
power shortages.
National Foods Holdings (NFH) is the sole producer and distributor of all basic food commodities in Zimbabwe, and also mills maize and wheat purchased from the state-controlled broker, the Grain marketing Board (GMB).
In its annual statement, submitted to the Zimbabwe Stock Exchange last week, NFH said future food availability in the country was under threat because of cash flow problems.
It noted that over the years the company had been forced to import up to 70 percent of the annual national food requirement at high costs, and forex shortages now hampered its ability to acquire external supplies.
A senior company executive told IRIN that government-imposed price controls on basic food products had the net effect of destroying profitability, and ultimately the future availability of food in the country.
"The company faces serious viability problems in trying to maintain the balance of optimising service provision, and at the same time increasing profits. The price control regime (which applies to all NFH products) is
unsustainable, as it compels the company to produce or import at market rates, but sell at well below market value," the executive explained.
NFH also called on the government to take restorative measures to increase its production capacity, and warned that the net effect of its collapse would "seriously impact on the availability of basic commodities in the
domestic market".
Only two of its five milling sites, Bulawayo and Harare, were still operating, but at only five percent of their monthly production capacity as a result of the crippling shortage of foreign currency. Its remaining 2,000
workers were facing retrenchment.
The Cold Storage Commission (CSC) is in charge of the livestock and beef industry - previously a key contributor to foreign currency earnings - and also provided a pool of draught power to thousands of communal farmers.
It had hoped to get enough financial support to control a four-year epidemic of foot-and-mouth disease and resume its lucrative exports to the European Union, but said efforts to restock the depleted herds on its ranches had
fallen by the wayside because of a shortage of funding.
"We are facing serious difficulties, as the funding has not been availed. We applied for funds for a short- and long-term livestock rearing programme, as part of the national restocking exercise, but we still have to wait," the CEO of the Cold Storage Commission, Ngoni Chinogaramombe, told the official Sunday Mail.
Besides ZESA, NFH and the CSC, the 16 loss-making parastatals targeted by the RBZ's ambitious recapitalisation programme include national coal
supplier Wankie Colliery Company, the Zimbabwe Iron and Steel Company, national milk supplier Dairibord, National Railways of Zimbabwe and the GMB.
Economists Erich Bloch and Eddie Cross said the country was indeed facing a serious round of shortages if production in the key parastatals was not
restored.
"The RBZ has no choice but to prioritise food and fuel, as it is the only national institution that can do that. Major job losses are looming in all the national parastatals because of lack of capital funding, and detrimental command economy policies like price controls," Cross commented.
The government has only recently admitted that there was a need to import at least 1.2 million mt of maize and 200,000 mt of wheat to cover the country's cereal deficit. State-subsidised parastatals play a dominant role in all the strategic sectors of the Zimbabwean economy.
Rhodes