Zimbabwe: Land Reform Gives Away Markets

Source from:  Financial Gazette (Harare) Felix Njini 06/04/2004

THERE is little hope on the horizon for the revival of the critical tobacco, horticulture and tourism industries as the country continues to reel from negative perceptions caused by the government's disruptive land reform, analysts say. The economic analysts cast doubt this week over Zimbabwe's ability to realise any meaningful foreign currency earnings from the three sectors, which have contributed immensely to the country's reserves. There are fears that Zimbabwe might fail to recover some of the lucrative export markets it has lost in the tobacco and horticulture industries. For instance, the tobacco industry, which used to produce more than 200 million kilogrammes of the golden leaf, is now producing an estimated 60 million kgs. As a result, Zimbabwe has lost the confidence of major markets in Europe as a reliable supplier of quality flue-cured tobacco, which is in high demand because of its blending quality, while competitors have capitalised on the local industry's problems to eat into its market share. Century Holdings Limited group economist Moses Chundu said the future of the horticulture, tobacco and tourism industries was still dim. Chundu said in addition to the traditional buyers, the country now needed to aggresively market its products in new markets. "This is a period when we cannot realise our own potential. The land reform is still in gestation, but the markets have been lost for ever," Chundu said. The horticulture sector, like all other industries in Zimbabwe, has been operating under difficult economic conditions which the analysts said might derail growth in the future. But the biggest threat for the sector, they said, remained the land redistribution exercise. The agrarian reform has affected a number of companies, including leading horticultural concern Interfresh Limited, which had almost half of its citrus estate in Mazowe invaded by pro-government supporters. Recently, the government, in controversial circumstances, took over Kondozi Farm, one of the largest horticultural exporters in the country located in Odzi. "The dilemma is in the marketing of the products. Some markets have already turned their backs on Zimbabwe and this is being worsened by continuous seizures of privately owned properties," Chundu said. Statistics from the Reserve Bank of Zimbabwe indicate that horticulture contributes about 5.8 percent of total agricultural output and about eight percent to the farming sector's foreign currency earnings. Export earnings from horticulture rose from US$19.5 million in 1992 to an estimated US$67.7 million in 2001, with more than 80 percent of flower exports destined for the European market. Players in the sector have indicated that world flower markets for Zimbabwean breeder-protected varieties have been firm. According to Ariston Holdings, another major horticultural exporter, prices have risen in line with strong demand. But Zimbabwe has not been able to take advantage of this surge in world prices, a fact the analysts blamed on the government's often disruptive land affirmative action. Apart from the agrarian exercise, input costs have also hamstrung production in the horticulture sector. Economic commentator Jonathan Kadzura said the cost of specialist fertilisers, as well as poor-quality products, most of which were being rejected on world markets, might have discouraged new farmers who had ventured into horticulture. Farming industry players also note that there has been a consistent deterioration in the tobacco output, which has seen the country losing market share to regional competitors. Zimbabwe Tobacco Association president Duncan Millar said the industry needed to stablilise first before regaining the confidence of the world market. "Firstly, we have to prove to the market that we are now stable and then they will start treating us as reliable suppliers . . . then the industry can move forward," Millar said. It is estimated that about 75 percent of the market which used to be serviced by Zimbabwean tobacco exports is not being served. Chundu said high capital requirements and lack of funding from the government and commercial banks could hinder a rapid recovery of the tobacco sector. To produce a hectare of tobacco, a farmer needs about $30 million from the growing stage to marketing. "It depends on the ability of the state to supply resources but there has been a problem of resources not being adequate or not being allocated in time, resulting in little corresponding returns on the investment," Chundu said. Annual tobacco output has fallen from a record 237 million kilogrammes in 2000 to 83 million kilogrammes in 2003 and 60 million kilogrammes in the current season. An estimated US$200 million a year has been lost since 2000 because of the declining output, which has been attributed to the government's chaotic land reform programme. This has meant that the country has lost out on a 33 percent jump in world prices of tobacco since 2000, the year the land invasions began. According to Kadzura, the Zimbabwean tobacco industry has not been short of markets. "The problem remains that we have not produced enough crop to earn substantial amounts of foreign currency as we used to do. The utilisation of tobacco farmland fell far short of expections," Kadzura said. "One other problem is that for the past two years the Ministry of Lands has been talking too much about the marketing of tobacco and this led to a wait-and-see situation, which resulted in reduction in output of the crop," he said. Kadzura said he hoped new incentives being put in place by the central bank would speed up the recovery of the tobacco industry. Chundu said to attract tourists, Zimbabwe had to convince the world that the situation was now back to normal in the country. The sector has been hit hard by the bad press the country suffered as a result of the land reform and because of the political violence that accompanied the watershed 2000 and 2002 parliamentary and presidential elections. Tourism, which earned the country more than US$770 million in 1999, is seen as a long way off from recovery. A senior official in the Ministry of Tourism and Environment said the forthcoming 2005 general election was already causing worries among tour operators. Since February 2000 when the ruling ZANU PF party lost a referendum on a new constitution, elections in Zimbabwe have been characterised by violence. The violence was particulary extreme in run-up to the June 2000 general poll, when ZANU PF faced its stiffest challenge in the opposition Movement for Democratic Change, and towards the 2002 presidential poll. "On our part as the ministry, there is nothing we can do. We can't act as if we are anticipating violence because then we will be admitting that there is violence in Zimbabwe," the Tourism Ministry official said. "But for all we know, tourism will be damaged because there is going to be violence," she added. Enditem