Fertiliser sector requires more funding to keep afloat

THE fertiliser manufacturing sector says it has adequate stocks for this year’s cropping season but these can only be released into the market upon payment to input suppliers.

Chairperson of the Fertiliser Manufacturers Association, Mr Tapiwa Mashingaidze said in order to satisfy the farmers’ needs for this season, the industry requires between US$150 million and US$200 million dollars.

While acknowledging that a large consignment of stock was readily available, he said the fertiliser would not be released before payment as the sector needs funding to import critical raw materials. Sable Chemicals, one of the biggest ammonium nitrate producers, is still importing ammonia from South Africa.

“We, therefore, cannot say fertiliser is generally available but much of it is in what we call consignment stocks. Where until its paid for, it cannot be availed for general sales or sold to anybody on credit.

“The people from outside who supply raw material did so on trust that we will pay them. Till you pay them the fertiliser is kept under lock pending the payment.

“Say per year we need about 500 000 tons of fertiliser, that translates to US$300 million if we are working with US$300 per ton.

“But for the upcoming season we can say we need maybe US$150 million since some of it has been consumed during the course of the year,” said Mr Mashingaidze.

He, however, said the Government’s command agriculture, (now smart agriculture) programme, remains a vital cog in the fertiliser manufacturing industry as far as funding was concerned.

“Government schemes like command agriculture and the presidential input schemes remain a very important part of the market but the worry is where does the Government get money like that to buy large quantities,” said Mr Mashingaidze.

“Only a few individual players can afford to give that quantity of fertiliser away as credit as they themselves will run out of money to keep providing. This is why we have seen that in these couple of years, the major buyer has been the Government through their schemes.”

He said small players have been finding the going tough and have been relying on Government initiatives, making it even worse for the fertiliser market.

“A lot of farmers cannot afford to pay such huge amounts and have been relying on the Government. You have to appreciate that for the tonnage of fertiliser required, there is also very large working capital needed,” he said.

According to Mr Mashingaidze, an agreement has since been made that smaller players be given guarantees by the Government to enable them to buy forex on the market.

“The arrangement is that for those companies that have been contracted by the Government, they are given the nod to buy forex on the market. Those monies, though insignificant, are even inadequate to ensure that raw material for manufacturing is paid up,” he said.

Mr Mashingaidze said some companies have been using letters of credit to import critical raw material. The country requires about 500 000 tons of fertiliser in one season and this year projections indicate that normal to above rains are possible, which means more requirement for fertiliser.