Kwacha Gain Implies Loss of K680bn in Agricultural Exports - Robinson

Source from:  The Post (Lusaka) December 7, 2005 Kelvin Chambwa 12/08/2005

STAKEHOLDERS in the agriculture sector have warned that the recent drastic appreciation of the kwacha against the US dollar would lead to loss of incomes for thousands of rural farmers. And the kwacha yesterday remained stable at Monday's opening rates of between K3,700 and K3,850 per US dollar on the retail market and between K3,480 and K3,660 on the interbank market. By midday yesterday, the Bank of Zambia rate for a dollar was K3,587 and K3,657 for buying and selling respectively. On Monday, the kwacha lost some of its earlier gains against the US dollar after it depreciated by about eight per cent on the retail market but appeared to have stabilised yesterday at the new margins. For most of last week, the Kwacha was trading at between K3,100 and K3,500 against the US dollar. Market analysts have predicted that the local currency would this week most likely record additional gains against the dollar or remain stable. Dunavant Zambia announced yesterday that it had issued a cautionary warning to farmers that it would reduce the indicative price of cotton payable to farmers to K975 per kilogramme from K1,220. The Tobacco Association of Zambia (TAZ) also announced that the increase in the Kwacha's value against the dollar would effectively lead to farmers incomes reducing by K430 for every dollar earned. During a joint press briefing yesterday, Zambia National Farmers Union (ZNFU) president Guy Robinson said the revaluation of the kwacha implied a loss of K680 billion to the agricultural exports sector. Robinson said growth in the non-traditional exports (NTEs) to US$425.5 million has been hard won and should not be left to go down just like that. "Primary agricultural products amount to US$112.2 million out of US$425.5 million but in the reduction in Kwacha returns, due to revaluation from K4,800 to K3,200 per US$1 implies a loss of K680 billion," Robinson said. "This withdrawal from growers of cotton, coffee, tobacco, vegetables, flowers and honey has a catastrophic impact." Robinson said this would render these sectors non-viable and result in a loss of income to many thousands of rural poor families. "And if Zambia in future finds a means of becoming competitive again, the markets will no longer be open to us since the gaps will have been filled by producers in other countries," he said. Robinson said it was important that the export industries were provided with a means of surviving the Kwacha appreciation if livelihoods were to be sustained. TAZ president Dave Gordon suggested that the government should allow an export incentive for dollar earners to survive at least for this year so that they could change their cropping programme next year. He said, the gross earning for the tobacco sector, which employs over 200,000 people, were this year projected at US$46 million. Gordon also said the fall in the dollar's strength against the Kwacha would reduce farmers' earnings. He said during the period April to October this year, the kwacha gained by about K440 and that there has been no corresponding decreases in prices offered by traders and suppliers to farmers. Dunavant Zambia chairman Rickard Laurin said the company had no choice but to reduce the unit price of cotton purchased from small-scale farmers. He said cotton farming currently employs by some 300,000 rural based farmers and that the cash income derived from the crop supports these farmers and approximately 1.5 million dependants, which he said represents close to 16 per cent of Zambia's population. "If the Kwacha remains at its current strength, both now and in the future, the livelihood of these Zambians is seriously threatened," said Laurin. Zambia Export Growers Association (ZEGA) chief executive Luke Mbewe said the government should acknowledge the negative impact a strong kwacha was having on the export industry. "There is a serious risk that several jobs may be lost as a result of the unfavourable operating environment for non-traditional exports," said Mbewe. Enditem