Maize sub­sidy will cost Zim dearly, cre­ate more debt

The Star Early Edition - - BUSINESS NEWS - MacDon­ald Dzirutwe and Joe Brock

ZIM­BABWE’S bud­get deficit will in­crease by nearly $120 mil­lion (R1.6 bil­lion) this year, due to a maize sub­sidy, cal­cu­la­tions show, in a scheme crit­ics of Pres­i­dent Robert Mu­gabe say will be open to abuse and sad­dle a trou­bled econ­omy with more debt.

Fac­ing an elec­tion in 2018, Mu­gabe says the sub­sidy will make Zim­babwe self-suf­fi­cient in the grain and help strug­gling farm­ers.

Mu­gabe’s gov­ern­ment an­nounced the scheme last year as part of a “Com­mand Agri­cul­ture” drive, say­ing it would pay farm­ers $390 a ton for maize this har­vest to en­cour­age farm­ers to plant. Nearly 70 per­cent of Zim­babwe’s pop­u­la­tion is ru­ral-based and sur­vives on agri­cul­ture.

Scheme

The gov­ern­ment has not said what it will do with the maize it has bought – essen­tially who it will sell it to and for how much. That in­for­ma­tion is needed to work out how much the scheme will cost the gov­ern­ment.

How­ever, the Grain Millers As­so­ci­a­tion of Zim­babwe, a group­ing of the 100 big­gest pri­vate millers, has agreed to buy 800 000 tons of maize from the state for $194m this sea­son, or $242.50 a ton, its chair­per­son, Tafadzwa Musarara, said.

At this price, the gov­ern­ment would lose $147.50 for ev­ery ton it buys from farm­ers and sells to these pri­vate millers, to­talling $118m, ac­cord­ing to cal­cu­la­tions. Fi­nance Min­is­ter Pa­trick Chi­na­masa did not re­spond to re­quests for com­ment.

The fi­nal cost could be much higher if the gov­ern­ment buys more grain, with the na­tion’d fore­cast to grow 2.1 mil­lion tons of maize this year, fi­nan­cial an­a­lysts said.

Zim­babwe is al­ready in ar­rears for $7bn of in­ter­na­tional debt – around 50 per­cent of gross do­mes­tic prod­uct – and its do­mes­tic debt bur­den is grow­ing rapidly as Mu­gabe’s ad­min­is­tra­tion runs ever larger bud­get deficits.

Do­mes­tic debt now stands at $4bn af­ter a 2016 deficit of $1.4bn – from an ini­tial fore­cast of just $150m. This year’s deficit fore­cast is $400m. The bud­get does not in­clude any “Com­mand Agri­cul­ture” spend­ing. Chi­na­masa is­sued a state­ment in the state-owned Her­ald news­pa­per on June 28 de­fend­ing the maize sub­si­dies:

“The com­mand agri­cul­ture pro­gramme was de­signed to (mo­bilise) sus­tain­able and af­ford­able fund­ing for our agri­cul­ture so as to en­sure food se­cu­rity, elim­i­nate im­ports of food, to in­crease ex­ports from this sec­tor and re­duce poverty.”

De­spite gov­ern­ment as­ser­tions that the sub­si­dies will help farm­ers and feed the na­tion, op­po­si­tion leader Mor­gan Ts­van­gi­rai said the scheme is typ­i­cal of the prac­tices that have taken root dur­ing Mu­gabe’s 37 years in power. He said it would ben­e­fit rul­ing Zanu-PF party mem­bers who ac­quired land af­ter the vi­o­lent evic­tion of 4 000 white com­mer­cial farm­ers from 2000 on­wards.

“Who is ben­e­fit­ing? The same Zanu-PF elites who took the land,” Ts­van­gi­rai said. “The Trea­sury has to fork that out and it’s not sus­tain­able. It’s a fis­cal night­mare.”

Chi­na­masa said in his state­ment that con­cerns about mis­man­age­ment had been dealt with and all ben­e­fi­cia­ries of the agri­cul­ture pro­gramme would be held in a data­base.

Mu­gabe, 93, and who has been in power since in­de­pen­dence from Bri­tain in 1980, has per­son­ally de­fended the maize sub­sidy, but the World Bank says pay­ing above the mar­ket rate is not the an­swer. “Gov­ern­ment in­ter­ven­tion is both ex­pen­sive and in­ef­fi­cient, es­pe­cially the use of price sup­port, as floor prices are set far higher than im­port-com­pet­ing prices,” it said in June.

An In­ter­na­tional Mon­e­tary Fund source, who de­clined to be named, said the sub­sidy would be dif­fi­cult to mon­i­tor, funds could be fun­nelled to po­lit­i­cal in­ter­ests and crops could be smug­gled across bor­ders. – Reuters

Zim­babwe is al­ready in ar­rears for $7bn of in­ter­na­tional debt – around 50% of gross do­mes­tic prod­uct.

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