Zimbabwe_Food_Grain_Economy_First_Draft__Dec_2013.pdf

First!Draft!

Zimbabwe’s!Food!Grain!Economy!

6!December!2013!

i"

Contents" 1.0" Introduction:!study!questions,!context!and!study!approach!......................................................!1"

1.1" Opening!remarks!.................................................................................................................!1"

1.2" Problem!Statement:!Zimbabwe’s!changing!agricultural!and!food!grain!economy!.................!2"

1.3" The!regional!and!international!context!................................................................................!4"

1.4" Purpose!of!the!study,!research!questions!and!study!approach!.............................................!6"

1.5" Outline!of!the!study!.............................................................................................................!7"

2.0!The!Changing!Food!Grain!Policy!Regime!since!2000!........................................................................!8"

2.1" Changing!conceptualizations!of!food!security!......................................................................!8"

2.2" Interventionist!food!grain!policies:!2001T2008!...................................................................!11"

2.3" ReTliberalisation!of!Agriculture!and!Food!Grain!Policy:!2009T2013!.....................................!12"

2.4" The!emerging!food!security!and!nutrition!strategy!............................................................!16"

2.5" Concluding!remarks!...........................................................................................................!18"

3.0" Maize!and!wheat!production!and!markets!..............................................................................!18"

3.1" Introduction!......................................................................................................................!18"

3.2" Domestic!supply!and!the!availability!of!maize!and!wheat!..................................................!21"

3.3" Grain!production!input!markets!and!public!interventions!..................................................!35"

3.4" Maize!and!wheat!market!structures,!trade!and!prices!.......................................................!45"

3.5" Financing!grain!production!................................................................................................!65"

3.6" Conclusion!and!recommended!actions!...............................................................................!72"

4.0" Demand,!Consumption!and!Food!and!Nutrition!Social!Transfers!.............................................!73"

4.1" Introduction!......................................................................................................................!73"

4.2" Demand!and!Supply!of!food!grains!in!Zimbabwe!...............................................................!74"

4.3" Household!Food!Access!and!Food!Security!Outcomes!........................................................!78"

4.4" Zimbabwe’s!Food!Grain!Related!Social!transfers!................................................................!82"

4.5" Main!Conclusions!and!Recommendations!..........................................................................!93"

5.0" SubTRegional!Cereal!Economy!.................................................................................................!94"

5.1" Regional!cereal!production!and!consumption!trends!.........................................................!94"

5.2" Cereal!and!fertilizer!price!trends!........................................................................................!98"

5.3" Prevailing!smallholder!farm!structures!in!the!region:!implications!for!market!Position!....!101"

5.4" Regional!cereal!grain!productivity!and!input!intensity!.....................................................!105"

5.5" Improving!access!and!use!of!farm!inputs:!lessons!from!the!region!...................................!106"

5.6" Regional!approaches!to!output!market!development!......................................................!112"

5.7" Potential!strategies!for!improving!output!market!performance!through!marketTbased!

approaches!..................................................................................................................................!117" ii"

5.8" Conclusions:!lessons!learnt!..............................................................................................!120"

6.0" Modelling!the!Options!for!Reform!........................................................................................!122"

6.1" Developing!a!Baseline!Outlook!........................................................................................!122"

6.2" !The!simulation!of!alternative!scenarios!...........................................................................!132"

6.3" !Conclusion!and!recommended!actions!............................................................................!135"

7.0" The!Way!Forward:!A!Middle!Ground!Strategy!for!Improving!Zimbabwe’s!Cereal!Markets!.....!136"

7.1." Review!of!Key!Findings!....................................................................................................!137"

7.2." Specific!Recommendations!..............................................................................................!139"

7.3" Fiscal!Implications!of!the!proposed!grain!subTsector!reforms!...........................................!142"

8.0" References!............................................................................................................................!146" iii"

List!of!tables!

Table7.1:"Summary"of"estimated"investments"required"over"5"years"....................................................."xviii" Table"3.3.1:"Sources"of"inputs"for"family"farmers,"2011/12"season".........................................................."40" Table"3.3.2:"Donor"input"subsidies:"2005/6"to"2010/11"............................................................................"42" Table"3.3.4:"Regional"variations"in"average"Input"Prices"(Oct"2011"&"Oct"2012)"......................................"44" Table"3.5.1:"Government"Public"Expenditure"in"Agriculture"since"2009"(US$)".........................................."70" Table"4.2:"Human"Maize,"Sorghum"and"Millets"Estimated"National"Demand"..........................................."75" Table"4.3:"Estimated"Requirement"of"Maize,"Sorghum,"Millets"and"Wheat"(2013/14"consumption"year"76" Table"4.4:"Cereal"imports"Trend"in"Relation"to"National"Requirements"...................................................."77" Table"4.5:"Percent"Rural"Food"Insecure"Households"by"Province".............................................................."79" Table"4.6:"WFP"Food"Assistance"Programmes"2007"–"2010"......................................................................"84" Table"4.8:"PRIZE"Food"Distributions:"2010^2012"........................................................................................"86" Table"5.1:"Zambia"^"Household"Shares"of"Components"in"Total"Crop"Sales"Income"by"Landholding" Quintiles,"National,"2008"........................................................................................................................."102" Table"5.2:"Returns"in"Agricultural"Growth"and"Poverty"Reduction"to"Investments"and"Subsidies,"India," 1960^2000"................................................................................................................................................"109" Table"5.3:"Unconditional"Coefficient"of"Variation"by"Country"and"Market,"1994^2008".........................."116" Table"6.1:"Macro^economic"and"world"price"assumptions,"2013^2022"..................................................."123" Table"6.2"Maize"Baseline"........................................................................................................................."126" Table"6.3"Wheat"Baseline"........................................................................................................................"126" Table7.1:"Summary"of"estimated"investments"required"over"5"years"....................................................."143" iv"

List!of!Figures!

Fig"3.2.1:"Maize"output,"area"planted"and"yield"trends"............................................................................."22" Figure"3.2.2:"Wheat"output,"area"planted"and"yield"trends"......................................................................"23" Figure"3.2.3:"Trends"in"maize"imports,"exports"and"food"aid"...................................................................."24" Figure"3.2.4:"Wheat"production"and"import"trends"..................................................................................."25" Figure"3.2.5:"Estimated"Fertilizer"application"rates"(t/ha)"by"crops,"1999^2004"......................................."28" Fig"3.2.6:"Trends"in"Maize"and"small"grain"production"in"relation"to"rainfall"patterns".............................."29" Figure"3.2.7:"Sub^sectoral"maize"Production"Trends"(1980"–"2009)"in"Zimbabwe"....................................."31" Figure"3.3.1:"National"Fertilizer"Supply"(1999"–"2012)"..............................................................................."38" Figure"3.3.2:"Fertilizer"Consumption"(Tons)"Trends"..................................................................................."39" Figure"3.3.3:"Maize"seed"supply,"2003"–"2013"..........................................................................................."40" Figure"3.3.4:"Domestic"price"trends"of"fertiliser"and"maize"seed".............................................................."43" Figure"3.3.5:"Prices"of"fertiliser"imports,"2008"^"2012"................................................................................"44" Chart"3.4.1_:"Actors"in"the"Grain"Trade"....................................................................................................."46" Table"3.4.1:"Spatial"distribution"of"medium"to"large"scale"maize"millers"in"Zimbabwe,"2010*"................."47" Figure"3.4.1:"GMB"domestic"maize"purchases"versus"total"production"....................................................."50" Figure"3.4.2:"GMB"domestic"wheat"purchases"versus"total"production"...................................................."51" Figure"3.4.3:"Strategic"grain"reserve"maize"closing"stocks"as"at"31"March"................................................"52" Figure"3.4.4:"Volumes"and"values"of"food"grain"imports,"2008"–"2012"....................................................."55" Figure"3.4.5:"Imports"prices"of"food"grains,"2008"^"2011"..........................................................................."55" Figure:"3.4.6"Maize"prices"GMB"vs."private"buyers"CIF"Harare".................................................................."57" Figure"3.4.7:"Wheat"producers"prices"GMB"vs."private"buyers"CIF"Harare"................................................"57" Figure"3.4.8:"GMB"maize"producer"prices"versus"selling"prices"................................................................."58" Figure"3.4.9:"wheat"producer"prices"versus"selling"prices"........................................................................."59" Fig"3.4.11:"Mbare"maize"grain"consumer"prices,"2004"^"2011"..................................................................."61" Fig"3.4.12:"Mbare"maize"flour"consumer"prices,"2004"–"2011"..................................................................."61" Fig"3.4.13"Mbare"Bread"Prices"..................................................................................................................."62" Figure"3.4.14"Maize"domestic"prices"vs."international"prices"(FOB)".........................................................."63" Figure"3.4.15:"Wheat"domestic"prices"vs."international"prices"(FOB)"........................................................"63" Fig"3.5.1:"Government"Expenditure"in"Agriculture"(US$"2009"to"2012)"...................................................."71" Figure"4.1:"Trends"in"the"Proportion"of"Food"Insecure"households"in"Rural"Zimbabwe"............................"78" Figure"4.2:"Trends"in"Prevalence"of"Poverty"in"Zimbabwe"........................................................................."80" Figure"4.3:"Household"Dietary"Diversity"...................................................................................................."80" Figure"4.4:"Comparison"of"Child"Nutrition"in"Zimbabwe"to"Some"Selected"SADC"Countries"....................."81" Figure"5.1:"Maize"Trends"in"SADC"Region"1993/94^2011/12"....................................................................."95" Figure"5.2:"Maize"Production"Trends"by"Country"1993/94^2011/12"........................................................."96" Figure"5.3:"Wheat"Production"Trends"1993/94^2011/12"..........................................................................."97" Figure"5.4:"Wheat"Demand"SADC"Region"1961^2009"(tonnes"and"kg/capita)"..........................................."97" Figure"5.5:"Nominal"Actual"(1980^2012)"and"Projected"(2013^25)"Food"Prices:"Maize"and"Wheat".........."99" Figure"5.6:"Fertilizer"Price"Trends"(current"prices)"1967^2012"................................................................"100" Figure"5.7:"Global"Fertilizer"Price"Projections"(Nominal"US$)".................................................................."100" Figure"5.8:"Current"and"Projected"Global"Maize/DAP"fertilizer"Price"Ratio"............................................."101" Figure"5.9:"Maize"Yield"trends"by"Country"(1995^2011)".........................................................................."105" Figure"6.1:"Outlook"of"world"and"SAFEX"prices"for"maize"and"wheat"......................................................"125" Figure"6.2:"Zimbabwean"white"maize"area"planted"and"production"......................................................."127" Figure"6.3:"Zimbabwean"white"maize"domestic"consumption"and"imports"............................................"128" Figure"6.4:"Zimbabwean"wheat"domestic"consumption"and"imports"....................................................."129" Figure"6.5:"Zimbabwean"maize"price"outlook".........................................................................................."130" v"

Figure"6.6:"Zimbabwean"wheat"price"outlook"........................................................................................."130" Figure"6.7:"Regional"maize"markets"........................................................................................................."131" Figure"6.8:"Integration"of"wheat"markets"................................................................................................"132" Figure"6.9:"Stochastic"baseline"of"Zimbabwean"maize"production".........................................................."133" Figure"6.10:"Alternative"scenario"for"Zimbabwean"maize"prices"............................................................."135" vi"

ACRONYMS!

AIDS" " " Acquired"Immune"Deficiency"Syndrome" AMA" " " Agricultural"Marketing"Authority" BACOSSI" " Basic"Commodities"Supply"Side"Intervention" BAZ" " " Bankers"Association"of"Zimbabwe" BEAM" " " Basic"Education"Assistance"Module" BOP" " " Balance"of"Payment" CAADP"" " Comprehensive"African"Agricultural"Development"Programme" CABS" " " Central"African"Building"Society" CBZ" " " Commercial"Bank"of"Zimbabwe" CFA"" " " Comprehensive"Framework"for"Action" CFC" " " Crop"Forecasting"Committees" CFSAM"" " Crop"and"Food"Supply"Assessment"Missions" CIF" " " Cost"Insurance"and"Freight" COMEZ"" " Commodity"Exchange"in"Zimbabwe" CPF" " " Child"Protection"Fund" CRS" " " Catholic"Relief"Services" CSAFE" " " Consortium"for"Southern"Africa"Food"Security"Emergency" CTDT" " " Community"Technology"Development"Trust" DSS" " " Department"of"Social"Services" ESAP" " " Economic"Structural"Adjustment"Programme" EU" " " European"Union" FAO" " " Food"and"Agriculture"Organisation" FEWSNET" " Famine"Early"Warning"System"Network" FFA" " " Food"for"Assets" FISP" " " Farmer"Input"Support"Programme" FNC" " " Food"and"Nutrition"Council" FNSP" " " Food"and"Nutrition"Security"Policy" FPL" " " Food"Poverty"Line" FRA" " " Food"Reserve"Agency" FTLRP" " " Fast"Track"Land"Reform"Programme" GDIP"" " " Grain"Development"and"Investment"Programme" GDP" " " Gross"Domestic"Product" GLS" " " Grain"Loan"Scheme" GMB" " " Grain"Marketing"Board" GMO" " " Genetically"Modified"Organisms" GNU" " " Government"of"National"Unity" GoZ" " " Government"of"Zimbabwe" HLTF" " " High"Level"Task"Force" vii"

HSCTP" " " Harmonised"Social"Cash"Transfer"Programme" IFPRI" " " International"Food"Policy"Research"Institute" LSCFs" " " Large"Scale"Commercial"Farms" MAMID" " Ministry"of"Agriculture"Mechanisation"and"Irrigation"Development" MBIAM"" " "Market^Based"Input"Assistance"Mechanisms"" MFN" " " Most"Favoured"Nations" MHCW"" " Ministry"of"Health"and"Child"Welfare" MIMS" " " Multiple"Indicator"Monitoring"Survey" MoF" " " Ministry"of"Finance" MoIC" " " Ministry"of"Industry"and"Commerce" MoLSS" " " Ministry"of"Labour"and"Social"Services" MTC" " " Management"Technical"Committees" NAP" " " National"Action"Plan" NEPAD"" " New"Partnership"for"Africa’s"Development" NEWU" " " National"Early"Warning"Unit" ORAP" " " Organisation"of"Rural"Associations"for"Progress" PAAP" " " Poverty"Alleviation"Action"Plan" PDL" " " Poverty"Datum"Line" PICES" " " Poverty"Income"Consumption"and"Expenditure"Surveys" PRIZE" " " Promoting"Recovery"in"Zimbabwe" PRP" " " Protracted"Relief"Programme" RBZ" " " Reserve"Bank"of"Zimbabwe" RSA" " " Republic"of"South"Africa" SADC" " " Southern"African"Development"" SAFEX" " " Southern"African"Futures"Exchange" SAFIRE" " " Southern"Alliance"for"Indigenous"Resources" SDF" " " Social"Development"Fund" SGR" " " Strategic"Grain"Reserve" STA" " " Seasonal"Targeted"Assistance" STERP" " " Short"Term"Economic"Recovery"Plan" UN" " " United"Nations" UNAIDS" " United"Nations"Programme"on"HIV/AIDS" UNICEF"" " United"Nations"Children's"Fund" UNMCOR" " United"Methodist"Committee"on"Relief" USAID" " " United"States"Agency"for"International"Development" VAT" " " Value"Added"Tax" VGF" " " Vulnerable"Group"Feeding" WFP" " " World"Food"Programme" WHO" " " World"Health"Organisation" WTO" " " World"Trade"Organisation" viii"

ZAIP" " " Zimbabwe"Agricultural"Sector"Investment"Policy" ZESA" " " Zimbabwe"Electricity"Supply"Authority" ZFU" " " Zimbabwe"Farmers"Union" ZHDS" " " Zimbabwe"Health"and"Demographic"Survey" ZIMPREST" " Zimbabwe"Economic"and"Social"Transformation"Programme" ZIMVAC" " Zimbabwe"Vulnerability"Assessment"Committee" ZR" " " ZunderaMambo" ix"

EXECUTIVE!SUMMARY!

Study!Objectives!

This"study"examines"the"performance"of"Zimbabwe’s"food"grain"production"economy"in"the"context" of"the"recent"liberalisation"of"food"grain"input"and"output"markets,"the"reorganization"of"the"rural" economy" resulting" from" the" Fast" track" Land" Reforms" (FTLR)," and" the" on^going" recovery" of" the" broader"economy."The" study" focuses"on" the" two"principal" staple" food"grains" in"Zimbabwe,"maize" and"wheat." Stated" broadly," the" objective" of" this" study" is" to" provide" an" empirical" analysis" of" the" current" food"grain"economy" in"Zimbabwe," in"order" to"enhance"the"government’s"decision^making" process"as"it"develops"strategies"for"improving"agricultural"performance"and"food"security.""

Achieving"this"objective"requires"a"thorough"interrogation"of"not"only"the"current"policy"approach" to" the" food" grain" economy" and" its" outcomes," but" also" the" outcomes" of" previous," more" interventionist"approaches" in"Zimbabwe"and"the"region."This"study"explores"the"precise"nature"of" these" changes" in" the" food"grain"policy" regime"and"associated" safety"net" systems" since"2000," and" their"role"in"enhancing"or"constraining"Zimbabwe’s"grain"economy"and"the"food"access"conditions"of" vulnerable"populations.""

Study!Background!

As"Zimbabwe"emerges" from"a"decade" long"economic"crisis," two" fundamental" shifts"are"underway" that"have"important"implications"for"both"the"structure"of"the"country’s"food"grain"economy"and"for" strategies" for" achieving" sustainable" food" security." First," the" Fast" Track" Land" Reform" Programme" (FTLRP)" has" radically" reconfigured" the" agrarian" structure" such" that" the" number" of" small" and" medium^scale" farmers" has" increased" while" the" commercial" farm" sector" has" diminished" (Moyo" 2012)."In"the"short"term,"this"shift"in"the"agrarian"structure"has"contributed"to"a"significant"decline" in"the"production"of"most"agricultural"commodities,"partly"due"to"the"sorts"of"capital,"technological," and" credit" constraints" that" are" faced" by" smallholders" throughout" the" SADC" region." This" restructuring"has"had"broad"ramifications"on"the"overall"economy,"as"agricultural"GDP"and"national" GDP"are"closely"linked"to"agricultural"output"and"productivity.""

Since" 1980" Zimbabwe’s" agricultural" sector" has" contributed" between" 16%" and" 20%" of" GDP," and" inputs" to"and"outputs" from"the"sector"accounted" for"60%"of"national" industrial"activity,"while" the" sector"contributed"at"least"40%"of"national"export"earnings."From"1999"to"2005"the"value"of"formal" agricultural" GDP" contracted" from" US$960" million" to" a" low" of" US$337" million." The" sector" then" initiated"a"process"of"recovery,"spurred"in"part"by"policies"aimed"at"freeing"up"agricultural"markets" that"were"adopted"in"2009."By"2011"agricultural"GDP"reached"an"estimated"US$1.2"billion"or"13.2%" of"total"GDP"(Binswanger"and"Moyo,"2012)."Agriculture"is"the"largest"source"of"formal"and"informal" employment," accounting" for"over" two"million" self^employed" jobs"and"around"500,000"permanent" wage"jobs"(Chambati,"2011)."Most"of"the"sector’s"farm"production"activities"are,"however,"for"own" x" family" consumption." Thus," agricultural" sector" contraction" from" 2002" to" 2008" contributed" to" significant"contractions"in"household"incomes,"industrial"activity,"employment"opportunities,"as"well" as"food"availability."Each"of"these,"in"turn,"can"contribute"to"elevated"risks"in"food"security.""

The"FTLRP"has"also"introduced"new"forms"of"agrarian"differentiation"(Moyo"and"Chambati"2013)."In" particular," it" lessened" the" stark" differences" between" commercial" and" small^scale" farmers," while" increasing"the"heterogeneity"within"the"smallholder"sector"in"terms"of"A1"and"A2"land"beneficiaries" (Binswanger^Mkhize"and"Moyo"2012;"Kapuya"et"al"2010)."The"majority"of"the"family"farmers"focus" their" production" activities" and" consumption" preferences" around" maize," cotton" and" cattle," and" increasingly" on" tobacco." Both" family" farms" and" commercially" oriented" farms" tend" to" practice" different" degrees" of" mixed" crop" and" livestock" farming" across" all" the" agro^ecological" regions."

However,"half"of"the"small"farmers"do"not"own"cattle."Production"patterns"tend"to"be"differentiated" according"to"land"endowments"and"access"to"finance"for" inputs,"but"these"vary"according"to"agro^ ecological" location" and" connection" to" the" limited" transportation" network" (Moyo" 2012)." Being" cognizant"of"this"variability"is"critical"for"developing"a"comprehensive"understanding"of"Zimbabwe’s" cereal"economy.""

High"levels"of"smallholder"heterogeneity"are"a"common"attribute"of"smallholder"production"systems" in"the"region"and"have"important"implications"for"the"appropriate"types"of"interventions"needed"for" driving"agricultural"productivity"growth"and"achieving"food"security"(Jayne"et#al"2010)."For"example," smallholder" farmers"with" relatively" large" land" holdings" located" in" good" agro^ecological" zones"will" require" a" far" different" set" of" investments" than" smallholders" with" smaller" or"more"marginal" land" holdings."However,"in"the"medium"to"long^term"the"new"agrarian"structure"which"has"enabled"over" 180" 000" previously" landless" farmers" to" acquire" over" 9" million" hectares" may" offer" significant" opportunities"to"use"agriculture"as"a"vehicle"for"poverty"reduction"and"economic"growth.""

Second,"beginning" in"2009,"Zimbabwe" initiated"a"process"of"agricultural"market" liberalization" (see" chapter"2)."This" included"scaling"back"the"scope"and"scale"of"the"Grain"Marketing"Board"(GMB)"to" create"space" for"greater"private"sector"participation" in" food"markets,"and" freeing"up"cross"border" trade" in" agricultural" commodities" (Ministry"of" Industry" and"Commerce"2012;"USAID"2012)." In" the" context"of"a"changing"agrarian"structure,"the"liberalization"of"agricultural"markets"has"prompted"an" important" reorganization" of" agricultural" food" markets." In" particular," Zimbabwe" has" witnessed" a" proliferation"of"“informal”"small^scale"trading"systems"and"associated"small^scale"milling"enterprises" (Kapuya"et#al"2010;"Binswanger^Mkhize"and"Moyo"2012).""

The"growth"of"small^scale"trading"and"milling"is"a"common"response"to"market"liberalization"in"the" region"(Barrett"1997)."This"is"because"small^scale,"informal"marketing"and"processing"systems"have" both" relatively" low" barriers" to" entry," particularly" in" terms" of" capital" requirements," and" are" well" suited" for" aggregating" small" and" highly" dispersed" surpluses" that" characterize" smallholder" production" systems" (ibid)." Through" appropriate" support" mechanisms," the" development" of" new" channels" for" marketing" and" processing" grain" may" prove" beneficial" to" grain" consumers," as" xi" competition" from" this" sector"has"been" shown" to"help"drive"down" the"margin"between"wholesale" grain"and"retail"milled"grain"prices"(Mason"et#al"2011).""

In"many"ways"Zimbabwe"stands"at"an"agricultural" crossroad." In" the"context"of" significant" shifts" in" the" organization" of" food" production,"marketing," processing," and" trade," it" is" critical" to" identify" an" effective" strategy" for" promoting" food" security" and" growth" through" appropriate" policies" and" investments" in" the"cereal"grain"sector."A"“one"size" fits"all”"policy" strategy"may"not"be" relevant" to" Zimbabwe’s" recent" agrarian" transformation," and" its" emerging"mix" of" diverse"producers" and" grain" markets,"in"the"context"of"a"changing"international"grain"economy."

Methods!and!Approach"

The"study’s"approach"mainly"entailed"a"review"of"literature"and"the"analysis"of"existing"information."

Findings"and"analysis"from"secondary"data"sources"and"existing"literature"were"triangulated"through" strategic" group" and" individual" key" informant" interviews." National" consultations" based" on" draft" inception"and"overall"reports"were"also"undertaken.""

Secondary"information"relevant"to"national"and"regional"food"and"nutrition"security"used"included:"

food"grains"production,"statistics,"food"and"nutrition"security"monitoring"and"assessments,"poverty" monitoring" and" assessments," and" the" performance" of" safety" net" programmes" in" Zimbabwe."

Secondary"information"from"government"sources"were"critical"to"this"study,"given"that"little"primary" data" was" collected." These" sources," included" the"Ministry" of" Agriculture" databases" (MAMID)," the" FAO" food"production"data,"WFP" food"aid"data"and"Zimstat" income"and"expenditure"will" be"used," while" the" study" relied" on" the" other" sources" such" as" ZIM"VAC" and" FEWSNET" data" on" production," trade"and"prices,"and"draw"from"the"USAID"funded"“Bellmon"Estimation"Studies"for"Title"II"“(2012).""

Some" information"was"garnered"from"interviews"with"key"actors" in"the"food"security"scene" in"the" country" (GMB," Parastatals," EU," and" other" development" partners)." Semi^structured" key" informant" interviews"with"individuals"and"small"groups"were"conducted"with"selected"representatives"of"main" players"in"the"different"sectors"of"food"grain"economy,"focusing"on"key"priorities"issues"in"food"and" nutrition"security"in"Zimbabwe"as"well"as"the"main"constraints"and"opportunities"for"the"food"grain" economy"to"contribute"more"effectively" to"national" food"and"nutrition"security."These" informants" included" food" producers," food" distributors," bankers," agricultural" inputs" suppliers," agricultural" researchers,"agricultural"extension"agents,"humanitarian"sector"workers"and"Government"decision" and"policy"makers."One"national"level"consultative"workshop"will"be"held"to"garner"the"views"of"all" the"key"actors"in"the"food"grain"economy,"and"consolidate"the"recommendations.""

"This" analysis" of" the" policies" and" trends" affecting" the" food" grain" economy" and" food" access" conditions" in" Zimbabwe"were" used" to" develop" a"multi^market"model" of" Zimbabwe’s" cereal" grain" economy."This"model"explores"the"key"factors"which"shape"the"realisation"of"food"security,"within" the"various"scenarios"which"confront"policy"makers"over" the"next" ten"years."This"model" identifies" xii" the" basic" impacts" of" changes" in" the" levels" of" subsidies," social" safety" net" programmes," food" assistance," prices" in" international"markets" and"production" shocks" on"domestic"market" prices" and" consumption,"and"generate"a"commodity"market"outlook"under"various"assumptions"and"policy"and" market"scenarios.""

Key!Findings!

Between"2003"and"2007"Zimbabwe"was"perceived"to"have"the"worst"agricultural" incentives" in"the" World" (Anderson," ed." 2010)." Yet," with" the" initiation" of" market" liberalization" policies" in" 2009," coupled"with"a"more"stable"political"and"macro^economic"environment,"the"incentive"structure"for" agricultural"investment"improved"considerably"(Moyo"and"Binswanger"2012)."As"a"result"of"unified" exchange"rates," lower" levels"of" industrial"protection," low" levels"of"export" taxation"and"removal"of" direct"or" indirect"export" controls,"Zimbabwean" farmers"and"agri^businesses"confront"a"potentially" conducive" environment" for" improved" incomes" and" profitability." " However," the" response" of" grain" producers" to" these" incentives" has" been" slow," due" to" a" range" of" issues," including" poor" weather" conditions,"coupled"with" inputs," infrastructure"and"credit"market"constraints." In"many"ways" these" producer"constraints"have"been"exacerbated"by" the" inadequacy"of"public"and"private" financing" in" grain"market"development"and"grain"production."As"a"result,"cereal"grain"productivity"has"stagnated" or" in"some"cases"declined"since"market"reform"in"2009."These"production"and"market"deficiencies" are"also"occasioned"by"a"variety"of"economy^wide" structural"bottlenecks,"which"mainly"affect" the" financial" sectors’" illiquidity" and" results" in" high" interest" rates." This" has" also" limited" capital" investments" into" the"agro^industries," and" the"water" and"energy" infrastructures"which" serve" grain" production."This,"in"turn,"is"related"to"Zimbabwe’s"relative"isolation"from"global"financial"markets.""

Taken" together,"our"analysis" finds" that"while" Zimbabwe"has"made" significant" strides" in" improving" the"overall" policy" conditions" for" enhancing" agricultural" production," and" resultantly" lowering" rural" poverty,"much"still"needs"to"be"done."Critical"investments"needed"to"enhance"both"the"production" and"availability"of"staple"food"grains"will"require" leveraging"public"resources" in"ways"that"enhance" the"productivity"of"smallholder"farms,"where"food"security"tends"to"be"concentrated,"and"utilizing" regional" and" global" trade" and" food" aid" systems" to" fill" the" food" gaps" that"will" likely" persist" in" the" medium^term."These"investments"must"be"complimented"by"system^wide"policies"and"strategies"to" improve"the"functionality"of"credit"markets"throughout"the"cereals"value"chains.""

The"specific" constraints" in" terms"of"Zimbabwe’s"production," trade/output,"and"credit"markets"are" detailed"below:""

Production/Productivity-Constraints- The"decline" in"grain"outputs"since"2002" largely" reflects" the"declining"productivity"of"maize"among" small"farm"producers,"and"a"reduction"in"area"cropped"to"wheat"by"larger"farms."Despite"growth"in" the" number" of" small^scale" maize" producers" and" the" expansion" of" maize" cropped" areas," output" remains"on"average"35%"below"the"domestic"requirements."This" is" largely"occasioned"by"declining" xiii" access" to" affordable" inputs" and" inclement"weather." Conversely," the"major" reduction" in" the" areas" cropped"to"wheat"is"primarily"the"result"of"declining"state"support"for"the"sector,"coupled"with"the" degradation"of"and"the"lack"of"investments"into"new"irrigation"facilities."-

Our" analysis" suggests" that" grain" policy" needs" to" address" the" constraints" imposed" by" increasingly" erratic"weather," the" increasingly" limited"use"of" fertiliser" inputs" to"produce"maize," and" to" support" the" recovery"of" irrigation" facilities" among"A2" farmers." Support" to" increase" the" irrigation"of"maize" should"have"the"objective"of"bringing"500"000MT"of"maize"into"commercial"production"in"order"to" fill"the"food"gap"left"by"large"scale"commercial"A2"farmers."

Trade-and-Output-Market-Constraints- In" terms"of"output"market"performance"our" findings" suggest" that"Zimbabwe’s" food"grain"markets" and" the" policy" regime," coupled" with" large" food" aid" programmes," have" generally" ensured" the" availability"of"grain"in"the"domestic"markets"and"through"food"welfare"transfers."This"has"minimised" extreme" hunger" and" prolonged" grain" shortages," and" averted" famine" over" the" last" 3" decades," including"since"2001/2"when"the"effects"of"the"Fast"Track"Land"Reform,"numerous"extreme"droughts" and"the"extensive"market"controls"became"pervasive."However,"the"grain"markets"exhibit"a"series"of" deficiencies,"which"inhibit"their"effective"functioning,"and"this"contributes"to"the"disincentives"that" grain"producers"face,"while"limiting"the"opportunities"for"credit"markets"to"develop"further.""

Specific" constraints" to" improvements" in" the" performance" of" output" markets" for" cereals," and" ultimately" retail" markets" for" consumers," include:" weak" transportation" networks" in" key" agro^ ecological" areas," leading" to" low" producer" prices" and" high" transaction" costs;" limited" private" investment"in"storage"facilities"and"underutilization"of"public"storage."This"is"primarily"the"result"of" credit" market" constraints" and" a" historical" legacy" of" significant" state" control" of" cereal" markets;"

limited"market"information"for"producers"and"buyers"to"inform"decisions"about"sales,"storage,"and" transport;" and," numerous" ad" hoc" trade" restrictions" imposed" by" Zimbabwe’s" regional" neighbors," leading" to" uncertainty" over" the" extent" to"which" regional" trade" can" be" used" to"manage" domestic" supply"shortfalls"and"prices.""

Credit-Market-Constraints- Overarching" the" persistent" constraints" to" the" production" and" output" markets" for" cereals" in" Zimbabwe" is" the" high" cost" and" limited" availability" of" credit" for" the" sector." There" is" general" consensus"that"the"financing"of"the"grain"production"by"the"private"financial"sector"and"government" is"well"below"the"scale"of"funding"required"to"enable"sustainable"growth"of"maize"and"wheat"yields," based"on"the"use"of"appropriate"levels"of"fertiliser"and"irrigation"resources."Given"persistently" low" yields,"gross"margins"are"also" too" low" for" the"existing"high"costs"of" credit."Existing"credit" supplies" tend" to" focus" on" short" term" funding," which" limits" available" financing" for" the" capitalisation" of" commercial"scale"wheat"and"maize"production."To"some"degree,"the"absence"of"full"formal"title"(i.e."

A1"permits"and"the"A2"leases)"also"dampens"the"appetite"of"private"banks"to"lend,"especially"to"the" xiv" new" A2" farmers" whose" track" records" they" are" apparently" not" yet" convinced" of." The" funding" constraint"is"also"common"among"the"small^scale"traders,"millers"and"rural"agro^dealers."

Innovative" financing"mechanisms" for" the" development" of" grain" markets," such" as" the" warehouse" receipt"system"and"commodity"exchange"platforms"do"not"yet"exist,"and"they"lack"legal"backing"or" even" consensual" policy" support." The" high" interest" rates" and" poor" liquidity" reflect" wider" macro^ economic"weaknesses," including" the" paucity" of" concessional" lending" from" IFIs." These"macro^level" issues" can" only" be" resolved" through" the" re^engagement" of" the" GoZ" with" donors." Unlocking" the" existing," and" economy^wide," constraints" to" Zimbabwe’s" credit" market" generally," and" to" the" agricultural" sector" specifically," is" critical" for" achieving" the" sorts" of" improvements" to" the" cereal" markets"needed"to"lower"poverty,"improve"food"security,"and"grow"Zimbabwe’s"economy.""

Study!Recommendations!

1. Improve!grain!production!practices!

To"maximize"returns"to"producer"investments"in"inputs,"as"well"as"to"more"effectively"cope"with"the" vagaries" of" Zimbabwe’s" rainfall," sustained" and" increased" investment" in" improving" the" crop" production"practices"of"Zimbabwean"farmers"is"necessary."Specific"recommendations"are"as"follows:""

• Enhancing"research"and"extension"services"to" intensify"“conservation"farming”"approaches" adapted" to" water" retention," as" well" as" the" adoption" of" other" progressive" agronomic" practises"which"respond"to"climatic"variability"and"improve"soil"organic"matter;""

• Create" a" government" backed" loan" facility" dedicated" to" promoting" the" rehabilitation" and" extension"of"the"area"under"irrigation"by"Zimbabwean"farmers."The"objective"of"this"facility" should" be" to" support" the" production" of" wheat" and" maize" on" about" 120,000" hectares," achieving"600,000"mt"of"production"or"30%"of" the"national" annual" requirements"over" a"5" year"period;""

• The" mobilisation" of" research" and" development," extension" and" marketing" resources" to" promote"greater"specialisation"in"the"allocation"of"labour"and"resources"towards"producing" maize"in"provinces"with"high"agro^ecological"potential,"while"improving"the"productivity"and" market"development"for"small"grains"in"the"rest"of"the"country;""

2. Improving!input!markets!

To" improve"the" functionality"of"Zimbabwe’s"cereal" input"market," including"seed"and" fertilizer," the" following"recommendation"are"proposed:""

• Support"the"expansion"of"viable"agro^dealer"networks"through"the"use"of"“smart"subsidies”" which" raise" effective" demand" for" inputs" and" crowd" in" private" actors." These" should" be" coupled" with" innovative" financing" strategies" to" enable" agro^dealers" to" effectively" stock," store,"and"manage"inputs;"

• The"effectiveness"of"any"subsidy"scheme,"including"smart"subsidies,"depends"on"effectively" targeting"beneficiaries"who"lack"the"capacity"to"acquire" inputs"without"support."Effectively" targeting" of" subsides" therefore" requires" investment" in" developing" accurate" farmer" xv" registries."The"development"of"registries"and"the"identification"of"beneficiaries"can"be"aided" by"public,"village^level"targeting"meetings."

• Regulatory" reforms" and" seed" capital" support" and" credit" to" enable" the" establishment" of" contract" grain" farming" over" a" short" period" (this" is" being" considered" by" government" and" needs"to"be"carefully"designed);"and""

• Expanding"the"capital"base"of"Agribank"and"private"banks,"targeting"short"and"medium"term" credit"for"grain"inputs"procurement."

As" suggested" by" the" Industrial" Policy" (2012)," there" is" need" to" review" the" current" trade" policy" cautiously." In" particular" there" is" need" for" the"mobilisation" of" concessional" financial" resources" (at" US$110mn"in"the"medium"term),"and"the"reform"of"trade"policy"(i.e."towards"zero"tariffs"on"fertiliser" raw"material"imports"and"increased"tariffs"on"manufactured"fertiliser"in"the"medium"term"to"enable" the"recovery"of"the"fertiliser"production"capacity."

3. Strengthening!grain!outputs!markets!and!trade!policy!

Critical" investments" to" improve" the" functioning" of" output" markets" and" cereal" graining" trading" systems"include"the"following:""

• The"establishment"of"effective"market"information"systems."This"system"should"capture"key" reference" prices" in"major" trading" areas" and"disseminate" this" information" broadly" through" radio,"print"media"and"social"media"(ICTs);""

• Related" to" the" first" recommendation," the" generation" of" a" reference" price" can" be" best" achieved" through" a" transparent" and" well^traded" commodity" exchange." Promoting" the" development" of" a" commodity" exchange" requires," among" other" things," a" stable" policy" environment,"acceptable"arbitration"services,"sufficient"volume,"and"an"adequate"number"of" diverse" buyers" and" sellers." Given" the" low" levels" of" production" and" limited" number" of" processors" and" commercial" grain" sellers" a" local" commodity" exchange" may" not" be" appropriate"for"Zimbabwe."However,"regional"trading"platforms"are"developing"and"may"be" worth"exploring"in"the"context"of"Zimbabwe.""

• The"introduction"of"warehouse"receipts."Warehouse"receipts"enable"farmers"and"traders"to" collateralize" their" grain" stocks" in"order" to" smoothen" seasonal" cash" flow"constraints,"while" enabling" seasonal" arbitrage." For" these" receipts" to" function," a" reference" price" that" is" acceptable" to" lenders" is" required," as" are" regulations" on" the" certification" and" bonding" of" stocks"held" in"storage."These"are"critical" in"order"to"move"toward"warehouse"receipts"and" ultimately"futures"contract"for"commodities.""

• Develop"a"coordinating"body"with"the"government"which"enables"policy"decision"regarding" stock" management" by" GMB," import," and" exports" to" be" managed" in" a" predictable" and" transparent" manner." Lessons" from" the" region" suggest" in" the" absence" of" this" sort" of" coordinating" body" state" intervention" in" cereal" markets" can" become" unpredictable" and" politically"motivated,"leading"to"a"loss"of"investor"confidence"in"the"sector;"

xvi"

• Revamping"the"capital"base"of"the"GMB,"with"an"eye"toward"managing"the"nation’s"strategic" reserve"and"overcoming"market"failures"in"outlying"areas."Yet"it"is"critical"that"investment"in" GMB" does" not" lead" to" a" reversal" in" the" liberalization" agenda," as" this" will" divert" needed" resources" from" more" important" areas" for" public" investment," such" as" roads," market" information,"and"extension"services;""

• Strengthening" farmers’" organisations" to" enable" them" to" act" as" points" of" aggregations" for" small^scale" farmers." This" will" lower" the" transaction" costs" of" purchasing" grain" from" smallholders,"leading"to"higher"farm"gate"prices.""

• Farmers" market" skills" training." The" ability" to" identify" price" opportunities" and" negotiate" prices" with" private" buyers" is" a" critical" skill" in" liberalized" agricultural" markets." This" is" an" important"role"that"can"be"filled"by"the"government"extension"service."

• Contract" enforcement." One" of" the" major" obstacles" to" the" development" of" cost" effective" grain"markets"is"the"lack"of"adequate"contract"enforcement."Without"contract"enforcement" buyers" and" sellers" can" walk" away" from" existing" contracts" if" prices" move" against" them" without" fear" of" repercussions." This" elevates" the" risk" of" trading" in" grain," leads" to" lower" famers’"prices,"and"undermines"the"development"of"more"impersonal"trading"systems,"such" as"commodity"exchanges.""

4. Strengthening!the!financial!markets!

Improving" the" functioning" of" Zimbabwe’s" credit"markets" for" the" agricultural" sector" is" required" to" increase"investments"throughout"the"sector."These"credit"markets"are"both"commercial"and"public."

Actions"to"strengthen"credit"markets"include:"

• Continued" improvements" in"macro^economic"policies" in"order" to"provide"more" incentives" to"banks" and" farm"production" contractors" to" lower" their" rates" and" improve" their" lending" conditions.""

• Mobilise"domestic"and"external"resources"for"the"financial"sector,"through"re^engagement" with" donors," leading" to" new" sources" of" concessional" loans," and" attracting" new" investors" into"the"grain"markets.""

• Clarification" of" land" rights" and" ownership" through" the" issuing" of" credible" land" tenure" documents" (permits" and" long" leases)." This"must" be" coupled"with" appropriate" tracking" of" land" ownership" and" transactions" in" order" to" stimulate" the" collateralization" of" land" and" a" functional"but"regulated"land"lease"and"rental"market.""

• Further" capitalisation" of" Agribank," with" lending" portfolios" tied" to" the" government’s" approved"national"investment"plan;"

• "Facilitation"of"warehouse"receipts"as"discussed"in"section"7.2.3"

5. Food!transfers!!

Food"social"transfers"programmes"that"can"effectively"respond"to"the"needs"of"the"chronically"food" insecure" people" and" have" the" capacity" to" response" to" the" dynamics" of" transitory" food" insecurity" requires" sound" and" predictable" financial" resources." Having" the" necessary" funding" mechanism" in" xvii" place" will" take" some" time" given" Zimbabwe’s" current" socio^economic" challenges." It" there" recommended"that;"

• "Government" continue" to" nurture" and" strengthen" the" collaboration" and" multiple" partnerships" it" has" with" the" international" community" that" have" been" successful" in" mobilising" funding" and" social" transfer" resources" this" far." This" collaboration" and" partnership"should"also"focus"on"developing"Government"capacity"to"effectively"design" and"manage"effective"social"transfer"programmes."

• Government" considers" being" part" of" the" African" Union" Africa" Risk" Capacity" (ARC)" initiative" which" is" being" developed" with" technical" support" from" WFP." The" proposed" mechanism"provides"a"form"of" insurance"that"gives"a"country"the"financial"flexibility"to" respond"to"effects"of"shocks"whenever"they"occur.""

Higher"incidences"of"poverty"in"the"rural"areas"of"Zimbabwe"significantly"explain"the"higher"levels"of" food" insecurity"prevalent" in" these"areas."Hence," effectively" addressing"poverty" through"measures" that"promote"improved"smallholder"agriculture"has"great"potential"for"reducing"the"population"that" could"suffer" from"hunger"and"malnutrition"and" therefore" reduce" the"burden"on"social" food"social" transfer" programmes" in" the" long" run." In" the" meantime" social" transfer" programmes" aimed" at" improving"non^labour"constrained"households’"capacity"to"produce"beyond"subsistence"level"could" be"integral"components"of"broader"poverty"reduction"programmes."

6. Improved!coordination!of!National!Food!and!Nutrition!Policy!

Grain" policy" measures" however" need" to" be" sufficiently" coordinated" by" various" government" agencies,"private"actors"and"farmer"organisations,"through"a"clear"time^bound"and"results"oriented" programme," based" on" the" careful" targeting" of" beneficiaries" of" such" reforms." To" better" inform" appropriately" designed," targeted" and" timely" implemented" social" transfer" programmes" sound" and" credible" information" systems" are" required" to" produce" timely" information" for" decision"making" at" both" national" and" sub^national" levels." Such" an" information" system" could" be" based" on" the" newly" created"and"evolving"Food"and"Nutrition"Security"Committees"(FNSCs)."

Fiscal!Implications!of!the!proposed!grain!subTsector!reforms!

To" ensure" that" the" grain" economy" is" moved" into" a" sustainable" development" path" in" the" long" run," government" and" cooperating" partners" ought" to" commit" substantial" resources" towards" the" design" of" sound"food"grain"policies,"and"the"effective"implementation"and"monitoring"of"a"coherent"10"year"Grain# Development#and#Investment#Programme#(GDIP.#This"should"provide"incentives"to"leverage"farmers’"and" private"sector"investments"into"improving"grain"productivity"and"market"development.""

It" is"proposed"that"this"begins"with"fiscal"commitments"to"a"5"year" investment"programme"nested" into" a"Medium" Term" Fiscal" Framework" (over" two" successive" 3" year" budget" plans)." The" new" and" additional"budgetary"allocations"proposed"over"5"years"are"detailed"in"chart"7.1,"beginning"with"the" xviii"

2014" Budget." 1" The" preliminary" estimates" of" the" specific" investments" proposed" cover" 5" critical" components"of"the"grain"development"programme,"and"amount"to"just"over"US$"1.5"billion"over"5" years," at" an" average" of" US$300" million" per" annum." Given" the" front^loading" of" the" concessional" lending,"investments"in"irrigation,"the"revolving"credit"funds"and"capitalisation"projects,"the"annual" investments"peter"down"to"about"US$"200"million"by"2018."From"then"on"budgetary"provisions"are" mainly"focused"on"welfare"transfers"of"food"grains"and"inputs"support"targeting"vulnerable"groups" as"grain"yields"would"have"risen"sharply."

Table7.1:"Summary"of"estimated"investments"required"over"5"years" " Programme!components! $mn/5!years! %!

1" Measures"intended"to"increase"grain"productvity" 815.3" 54" 2" Improved"access"to"grain"markets"and"viable"prices" 6.7" 0.5" 3" Access"to"food"grain"welfare"transfers" 441.1" 29.1" 4" Grain"loans"and"credit"facilities" 239.5" 15.8" 5" Enabling"policies"and"institutional"capacity" 10.5" 0.7" " Total! 1,5133.5! 100!

This" proposal" assumes" that" public" investments" in" other" long" term" enablers" and" drivers" of" sustainable" and" equitable" agricultural" growth" and" development" (such" as" increasing" the" stable" supply" of" electricity," rural" feeder" roads" and" bridges" rehabilitation" and" extension," railways" rehabilitation" and" extension;" new" and/or" large^scale" dam" developments" and" agricultural" higher" education"and"basic" research"development"etc)"shall"be"adequately"provided" for" in" the"Recurrent" Budgets"from"2014"to"2018."Furthermore,"it"is"assumed"that"the"institutional"investments"proposed" shall"entail"the"rationalisation"on"re^organisation"and"capacity"development"of"existing"public"sector" institutions"rather"than"the"creation"of"new"institutions."

This"investment"plan"also"needs"to"l…