• Maize harvest in Zimbabwe drops by 70%, reaching the lowest level since 2016
• Drought and reduced planting contribute to the severe agricultural crisis
• ZiG is set to suffer most

Harare- Zimbabwe is facing a dire agricultural crisis as the Ministry of Agriculture reports an estimated staggering 70% decrease in maize harvest for the farming season 2023/2024 compared to the previous season.

The outlook report projects a production of only 696,116 tonnes of maize, a sharp decline from the estimated 2.3 million tonnes in 2023. This would mark the smallest harvest since 2016 when the country produced a mere 512,000 tonnes. The decrease in maize hectarage, with a 12% drop this season, is attributed to farmers planting less due to the adverse effects of drought.

In April, the government declared a national disaster over a drought caused by the climate event known as El Niño with President Emmerson Mnangagwa saying the country needs US$2billion in aid to help millions of people who are going hungry.

The Grain Marketing Board, which lost its monopoly on maize purchases last year, currently holds stocks of 145,604 tonnes of maize, 43,964 tonnes of traditional grains, and 244,705 tonnes of wheat. However, the country requires 1.8 million tonnes of maize for food consumption and an additional 400,000 tonnes for stock feed.

To address the significant shortfall of 318,723 tonnes, the government aims to bridge the gap while encouraging the private sector to import as much as needed. The strategic grain reserve, including maize, traditional grains, and wheat, stands at 434,293 tonnes, excluding a donation of 25,000 tonnes from Russia, as reported by the Ministry.

Last year, Mashonaland West and Mashonaland East were the top maize-producing provinces. However, this year, these traditionally robust farming regions were severely affected by low rainfall. The assessment reveals that Midlands province is expected to have the largest harvest, projected at 381,056 tonnes compared to 414,249 tonnes in 2023. Mashonaland West's production is projected to drop to 290,005 tonnes from 523,023 tonnes, while Mashonaland East's harvest is expected to decrease to 225,675 tonnes from 415,574 tonnes.

Among the hardest-hit provinces is Mat North, where the area planted under maize declined by 30%. This year, the province is projected to produce 95,726 tonnes, a slight improvement from the previous year's 82,739 tonnes, which surpassed expectations.

The severe impact of drought on Zimbabwe's maize harvest underscores the urgent need for measures to mitigate the effects of climate change and ensure food security in the country.

Implications on National Fiscus

The government is currently basing to cover the hunger gap with imports. Agriculture usually saves as the second largest contributor to exports trailing the mining sector. However, with the influential arm being affected by drought, at a time the mining sector has been affecting by depressing global metal prices, this means a disaster, upon another disaster.

The big jump in imports is expected hence, amplifying the country’s import bill. This will add strain to already strained economy as more foreign currency is going to be churned out to purchase maize to offset hunger. This means the coffers of the government in terms of forex will be heavily affected.

Zimbabwe's trade balance, which has been in deficit for most of the past decade except in 2019, will be severely impacted.

An escalating negative trade balance will primarily undermine the newly introduced Zimbabwe Gold (ZiG), which requires substantial backing from U.S. dollars earned through exports – primarily from the mineral sector.  Said to be backed by US$285 million, the ZiG is already suffering a stilldeath.

However, with global metal prices depressed due to geopolitical crises and gold mining not yet operating at full potential, the ZiG's foreign currency backing is under threat. This will expose it only to the backing of threats by the government, yet one can not legislate a currency to be accepted.

This precarious situation is likely to precipitate exchange rate volatility, a peril the ZiG is already grappling with. Within just a month of its inception, the ZiG has plummeted by 35% against the U.S. dollar on the parallel market. This stark depreciation overshadows even the troubled bond note, which declined by a comparatively lower 20% during its first month of circulation. 

The ZiG's rapid devaluation on a month-to-month basis raises alarming questions about its long-term viability and stability as legal tender. Without robust export earnings and foreign currency inflows to buttress its value, the ZiG could spiral into a crisis of confidence, mirroring the ill-fated Zimbabwean dollar it has replaced.

With a foreign currency liquidity crunch, exporters are going to be hit hard as foreign currency will be heavily required to sustain operations. In turn, they will turn to black market, where the greenback is obtained at inflated prices widening their loss positions and affecting production efficacy.

This is likely to cause a premature death for the ZiG and accelerate poverty for the general populace. Without proper fundamentals in place, the government should start thinking a new name for another currency.

Equity Axis News