Forex shortages gnaws fertilizer industry

BY MTHANDAZO NYONI

ZIMBABWE’S fertilizer industry says it is constrained by forex shortages, but it still has the capacity to produce enough to meet the country’s demand this year and export excess production.

Zimbabwe Fertilizer Manufacturers’ Association chairman Tapuwa Mashingaidze told NewsDay that this year, the industry would produce in excess of 600 000 tonnes.

“We plan to produce enough to meet all the expected local demand of 600 000 tonnes for the year plus provide for some exports into the region. There are high stocks carried over from the 2018/19 season due to the drought and so it is estimated that only an additional 400 000 to 450 000 tonnes will be needed to meet this year’s demand,” he said.

“We estimate that during the calendar year 2018, about 460 000 tonnes of fertilizer were supplied and used in Zimbabwe, representing a decrease of 22% from the 590 000 tonnes estimated to have been used in 2017.”

Mashingaidze said fertilizer usage decreased due to lower demand associated with the El Nino-induced drought, coupled with low purchasing capacity among farmers amid rising prices by year end.

“Supplies of some fertilizers were also generally constrained by the persistent shortages of forex such that farmers did not get what they wanted timeously. Many farmers also relied on support from the government-sponsored programmes such as command agriculture and the Presidential Input Support Scheme, but these were also negatively affected by the prevailing supply constraints,” he said.

“Fuel shortages at year end also took their toll during the peak of the agricultural season, as this negatively affected planted areas as well as fertilizer logistics and distribution supply chains.”

Mashingaidze said the supply of fertilizers, as with most other commodities with a significant imported content, continued to be severely affected by forex shortages and the pattern of allocation or usage of the forex available.

“Capacity utilisation for primary production (that is production of basic fertilizer raw materials by ZimPhos and Sables) remained very low at between 20% to 30%, and an increased proportion of fertilizer raw materials and finished fertilizers such as AN and urea were imported”.

In 2018, out of the US$109 million used on fertilizer imports, according to ZimStat figures, US$77 million was used to import ammonium nitrate and urea, while Sable Chemicals secured only

US$3 million to import ammonia for local AN production against their requirement of $24 million, which would have maximised local production for the year.

Mashingaidze said basal fertilizers, such as compound D, were currently readily available, while all fertilizer companies were facing challenges with top dressing fertilizers such as AN, which is physically available in the companies’ warehouses in bond/CMA and requiring foreign currency payments to be made to respective foreign suppliers before the product may be accessed.

“The fertilizer industry made arrangements to bring the top-dressing fertilizers into the country before payment to avoid logistical bottlenecks.
Unfortunately, letter of credit arrangements are currently not being readily accepted by foreign banks and this has slowed down the rate of release of product in CMA stocks,” he said.