eBusiness Weekly
Industry paying steep local prices… Local soya industry not competitive
Golden Sibanda
Zimbabwe is paying a heavy price for uncoordinated investment in the soya bean production value chain, forcing the country to rely on imports despite a severe foreign currency shortage or to suffer high prices of the locally produced soya beans, a study has revealed.
The study undertaken by Zimbabwe Policy Analysis and Research Unit (ZEPARU) for Confederation of Zimbabwe Industries (CZI) says Zimbabwe’s competitiveness in the soya bean market has sharply declined over the last decade.
The country’s soya is currently deemed uncompetitive domestically and regionally.
“Low yields, high production costs and ineffective policy implementation has largely driven this phenomenon between 2000 and 2015, production of the crop has declined from 135 417 metric tonnes (MT) to 41 768mt” the study noted.
Similar sentiments were shared by University of Zimbabwe (UZ) lecturer and Professorial Chair in Department of Soil Science and Agricultural Engineering, Professor Sheunesu Mupepereki who noted that the challenges in soya industry were a result of lack of investment in the value chains.
“We have not invested in value chains,” he said.
We must educate both farmers and extension officers on production of soya beans. We also needed dedicated research institutions as is the case with Brazil, United States, Argentina and Canada to look at things like soil type and diseases,” he added.
Production of soya beans requires technical support to farmers. You can see that even with the Command Agriculture programme, farmers can’t produce even 2 tonnes per hectare. Farmers need equipment such as combine harvesters,” he said.
Professor Mupepereki said Zimbabwe had not invested adequately in technical capacity such as planters, which was critical for a sensitive crop such as soya beans.
“Others problems include the fact that we need supplementary irrigation,” he said. He said soya beans production required close monitoring and supervision.
The UZ lecturer said solutions were available locally; but what was needed was investment in critical technical areas as well as political will to enforce the interventions. Professor Mupepereki said while some of the mechanical equipment was available in the country; it has not been made productively available.
Apart from being one of the leading African research scientists in legume biological nitrogen fixation, rhizobium inoculant technology and soil fertility management, processing and marketing, Professor Mupepereki is also recognized as an expert in soya bean production, having farmed it for 18 years now.
Zimbabwe soya uncompetitive
The lack of competitiveness in Zimbabwe’s soya value chain has led the country to be a net importer of soya bean and soya bean products, importing approximately 9 300 tonnes of soya beans and seed, approximately 119 000mt of crude oil and 78 900mt of soya meal in 2016.
ZEPARU concluded that relying on imported soya beans was not sustainable for a country using a basket of foreign currencies dominated by the US dollar to transact, but generating very to meet it huge appetite for imports.
Towards end of 2017, Zimbabwe had nearly $600 million worth of foreign payments backlog, but has not done enough to develop and invest in value chains and production processes in order to cut down on imports to serve elusive forex.
It is all the more insensible by a country so richly blessed with suitable climatic and soil conditions and skilled human resources to be able to produce for itself competitively; only if it had appropriate value chains framework, ZEPARU noted in study on issues basetting the production of soya beans.
“This is a precarious challenge given Zimbabwe’s liquidity crisis. Source countries for imports have mainly being Zambia, Malawi and India. Soya bean imports from regional neighbours such as Zambia, land in Zimbabwe at $250-$300/mt, significantly cheaper than the local price of $500/mt (more or less the break-even cost of production of local soya bean farmers).
Locally produced soya expensive
Processers and agribusiness value chain actors therefore find it more competitive to import inputs for manufacturing rather than buying them locally.
As a result of current foreign currency shortages, however, soya imports have been constrained resulting in local soya meal prices surging to $680/mt as of December 2016 compared to an average landed price of $599/mt for imported soya meal, according to the Zimbabwe Poultry Association. This has important implications for related industries such as livestock.
Current output from soya production falls short of the national demand of 600 000 metric tonnes required for oil expressing and 200 000mt required for livestock feed production with the gap filled by competitive imports of soya bean, crude oil and cake.
“Addressing competitiveness issues in the soya value chain is therefore critical to manage liquidity in the country and unlock the full potential of other agricultural value chains,” the findings from the study by ZEPARU noted.
Oil Expressers Association of Zimbabwe (OEAZ) indicated early this year that it was targeting to increase soya beans hectarage to 120 000 within four years to avert a shortage of the most critical ingredient in cooking oil making.
Why Zimbabwe soya performs poorly
Results from the study identified several reasons for the poor performance along different segments of the value chain for the soya beans industry. Firstly, the study says low competitiveness of production inputs in Zimbabwe drives up cost of soya production to regionally uncompetitive levels. These inputs required to produce soya beans include fertilizers, seed, and chemicals.
Secondly, soya beans production is adversely affected by inefficient farming practices. Profitable and competitive soya farming depends on economies of scale.
Farmers’ limited knowledge on good crop management; inadequate farm mechanization and irrigation infrastructure however all affect productivity of local farms resulting in declining yields and increased transaction costs per unit output.
This has resulted in uncompetitive break-even prices of locally produced soya products. Investment in farm infrastructure and world-class technologies along the value chain is therefore critical to develop a competitive soya bean value chain. With constrained public finances, private sector investment in Zimbabwe’s agricultural sector is a must to drive growth.
An unpredictable investment climate in the country’s agricultural sector has, however dampened such investment over the last decade. Further, the study says that competition from other crops such as maize, which receive higher public investment, have crowded out private sector participation and created perverse incentives for players to prioritise maize production and distribution at the expense of weakly supported crops such as soya bean.
Government intervention critical
The study opined that a government driven strategy to coordinate land use for various crops as part of an overall agricultural strategy is therefore key to drive competitiveness across the sector, including the soya bean sub-sector.
In Zimbabwe, low prioritization of soya bean production at both public and farmer level, has also resulted in market failures in support services such as extension and research; marketing; access to market information; and public investment in production.
This has affected the predictability of supply in the domestic soya market and overall competitiveness of the value chain. From the processing side, the value chain also faces challenges that impact the viability and sustained competitiveness of value added products.
These include inconsistent availability of raw materials; obsolete equipment; lack of access to affordable finances; high costs of production; weak linkages with other segments of the value chain; stiff competition from imports and regulatory issues.
