Prosper Ndlovu, Business Editor
PRIVATE livestock buyers and abattoirs have been accused of distorting the price of livestock on the domestic market thereby disadvantaging famers who do not derive full value for their produce.
Findings by the parliamentary portfolio committee on lands, agriculture, mechanisation and irrigation development indicate four dominant private players (names withheld) “behave as a cartel where they manipulate the price of livestock on the domestic market”.
A cartel is a monopolistic business model in which manufacturers or suppliers strategically work together with the purpose of maintaining prices at a high level and restricting competition.
The committee’s report, which was presented before Parliament last week shows that these private players do not bid against each other as a way of pushing the Cold Storage Company (CSC) out of market.
“This is further compounded by the fact that the local market is more interested in the cost of the product rather than quality, due to lack of disposable income among the general populace,” reads the report.
“The most disadvantaged group are the farmers who do not get full value for their livestock.”
Through written submissions from interested stakeholders, the committee was informed that the industry should introduce a pricing model that takes into account the grade and weight of the livestock. It suggested that cattle should also be traded through an auction system like in South Africa and Namibia to ensure there was price fairness on the market.
Donald Khumalo, a farmer and Zimbabwe Commercial Farmers’ Union past president, said the report findings were valid.
“We’ve always voiced this problem that buyers decide the price for livestock and the farmer is just a desperate bystander.
“Our farmers are vulnerable and are being exploited,” he said.
“If this isn’t curtailed by the authorities it’ll continue to frustrate growth of the sector and that in itself is a recipe for disaster. The government must intervene because the survival of farmers is of interest to it. This needs a government resolution that is binding.”
Reports abound of some cases private buyers who took advantage of the drought sittuation to buy cattle for as litle as $100, which they go on to sell at high prices and make astronomical profits.
There is a severe competition between private abattoirs and CSC since the liberalisation of the beef industry in 1992.
It is estimated that there are over 600 registered and unregistered abattoirs and slaughter poles.
Prior to liberalisation CSC dominated 50 percent of the market share and by 2002 this had declined to six percent especially after the suspension of exports to the European Union (EU).
While CSC has huge infrastructure the firm incurs large overheads costs in the form of electricity and water, which makes it uncompetitive against the small private abattoirs.
On average, the electricity bill for CSC per month is $35,000 irrespective of the volumes traded whilst that of a private is about $5,000.
The report also shows that most private abattoirs are unable to unable to fully observe veterinary regulations in the movement of cattle, which poses a challenge in the containment of the deadly food and mouth (FMD) diseases.
Hundreds of cattle succumbed to FMD mainly in southern region last year forcing some beef industry operators to suspend business.
The development also saw the veterinary services department suspending cattle sales at the Zimbabwe International Trade Fair (ZITF).
The situation was compounded by drought and lack of pastures, which also reduced the national head.
The report says private abattoirs were not willing to work with CSC noting there seems to be an acrimonious relationship between the two institutions.
In the 2015 mid-year fiscal review statement Treasury highlighted that approximately $1.7 billion was required to finance crop and livestock farming.
Of this amount about $1.3 billion was to be dedicated for crop production with the balance of $400 million directed towards re-building the national herd.
CSC is a strategic institution to spearhead the re-building of the national herd of cattle, which currently stands at 5.4 million.