The Implications of another Regional Crop Failure

Every decade or so we have a regional drought – the last really serious one was in 1992 when I can remember temperatures in the mid 40’s and virtually no rain over vast swathes of the country.

Rivers dried up, the sugar cane in the lowveld died and what few Hippo were left in the South East lowveld were kept alive in swimming pools and farm dams. At that time we owned a few shares in an 84 000 acre ranch near Beitbridge and we had to destock the property completely, I do not think there was a blade of grass in 250 kilometers in all directions.

The maize crop failed in South Africa and the crop in all other SADC States was well below normal. What saved the country that year were two men – the one, the Chairman of the GMB Cephas Msipa and the General Manager Rensen Gapare. These two executives watched what was happening and before most were aware of the impending disaster, they took steps to secure over a million tonnes of maize from overseas traders and at the same time tied up shipping, port and railway capacity.

Although we all appreciated that we were in one of the most severe regional droughts in our history, we did not run out of our basic foods. In those days we had a railway system that could handle two million tonnes of bulk traffic a month, we had 700 000 tones of silo storage and all silos were in good working order.

Right now we have a looming crisis again, the South African crop planting season has almost completely failed – the rains are two months late and temperatures have been unusually high. Whatever happens now in South Africa, they will not be able to recover the ground lost and I would expect that the maize crop will be less than half what it has been this past season – already a short crop.

If this applies to the other SADC States – especially those normally self sufficient such as Malawi, Zambia and Mozambique, then we will be faced with the need to import very large quantities into the region. This past season with a short crop in all regional States, total import demand was about 6 million tonnes. If this season is worse, this figure could double.

What people do not appreciate are the logistics that are involved. In Zimbabwe we will have to import over 1,2 million tonnes of maize this year. Some will come in as grain, some as maize meal. But in all cases the imports to Zimbabwe will be across the borders – a phone call will secure a truck load of either product from Zambia or South Africa at about $220 a tonne. Delivery can be affected in 7 to 14 days and the cash turnaround is short – perhaps one month.

If Zambia has a significantly smaller crop and South Africa has to import more than half their national requirements, then it is possible that both States would suspend exports to preserve local stocks – especially if the new crop is not only smaller than anticipated, but late and stocks in country are running low. Both States hold less than three months supply in stock at any one point in time.

In Zimbabwe such a scenario would mean that we would be in the market for perhaps 2 million tonnes of maize – sufficient to supply the country for the next 15 to 18 months in anticipation of a very small local crop. In such a situation, if the region has had to import 6 million tonnes this year, the outlook for 2016/17 might be 12 million tonnes of grain.

The logistics would be as follows if all of this had to be supplied by either the USA or South America.

Total import demand                                            12 million tonnes

Shipping at 25 000 tonnes per vessel               480 vessels

Railway Wagons required at 40 t/w                 300 000 wagons/trucks

Southern African Ports are generally congested and have only limited capacity to handle products like bulk grain and such a substantial increase in tonnages and shipping would put pressure on all SADC Ports and railways. In fact today I doubt if such volumes could in fact be handled by regional infrastructure. Certainly the Zimbabwe railways could not cope – they do not have the wagons or the locomotive capacity and our rail network is in a poor state of repair with no train control communication systems.

The other problem would be where to store the product when it arrives from the coastal ports? Virtually all GMB silos are no longer in a state to store maize or any other bulk grain (we need 400 000 tonnes of wheat as well) and bagging and stacking capacity are all much reduced.

Then there are the financial implications. It costs $150 to $180 a tonne to grow maize in southern Africa. This is about the market price in the USA. To that price we have to add storage fees the country of origin, transport to the nearest Port, Port charges and fees, shipping costs, Port costs in the SADC and then inland transport by road or by rail. The net result is that imported maize from overseas is generally $100 a tonne more expensive than local maize.

Imports have to be paid for up front – this means that the importer has to pay for the product and almost all costs of transit, up front in one form or another. Then, instead of buying a 40 tonne load at a time, they have to buy in 25 000 tonne lots.

It will take anything up to 3 months to bring maize to the depot of consumption and thereafter you have to add at least another month to two months from a cash flow perspective – cash turnaround is 5 months instead of one month. This ties up hundreds of millions of dollars at any one point in time.

It was for this reason that Zimbabwe has had a strategic grain reserve policy since the 1992 drought. Under this policy the GMB is supposed to hold at least 500 000 tonnes of maize in stock at anyone point in time plus $100 million in cash to be able to order another 400 000 tonnes on an emergency basis when a crop failure like this one, looms. The GMB has failed totally to fulfill its obligations and we have virtually no stocks, what small stocks are held by the Board are being distributed as food aid in rural districts worst affected by the poor wet season last year.

In addition, the country is broke, we do not have any financial reserves to speak of and access to no international credit lines large enough to help us meet any emergency in food supplies. The last time we faced a basic food shortage of this magnitude was 2008 when the collapse of the agricultural industry, like the whole economy, was at an all time low driven onto the rocks by massive inflation. There was no money to import our basic needs and our shops were completely empty.

That year we were saved from a real calamity by the G20 Summit in 2007 where the President of South Africa persuaded the international community to support the process of political reform and change that he was instituting and which would lead to the Government of National Unity in February 2009. The USAID stepped up to the mark and imported sufficient maize to feed 7 million people right through the critical stage and to keep the country stable.

This year, we are on our own, aid agencies do not have the budget to help, our government does not have the capacity to step into the breach and the private sector is as broke as everyone else.

We better all go to Church this Sunday and pray for rain.

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