Zimbabwe’s economic measures must be focused on countering the rising threat of rising fertiliser and oil prices, according to CBZ, the biggest lender to Zimbabwean farmers.
Exporters, such as miners, may benefit from higher commodity prices, but the economy will face high production costs due to the rising costs of raw materials, the bank says in a trading update.
“Rising global geopolitical tensions are expected to continue exerting both upside and downside risks to the economy. In particular, mining and other export-oriented sectors, are likely to benefit from firming commodity and food prices on the global markets,” CBZ says.
“However, rising prices for oil, fertilisers, and other critical imported raw materials, will translate into higher domestic production costs, thereby adversely impacting on competitiveness and viability. Measures that limit the adverse impact of the external shocks, should therefore be prioritised.”
Zimbabwe imports a quarter of a million tonnes of Russian fertiliser each year from Russia. High gas prices have also made production more expensive for local manufacturers such as Sable Chemicals. Since the Russia-Ukraine war started, fertiliser prices have gone up by 300%, and the continent faces a fertiliser shortage of two million metric tonnes this year, according to the African Development Bank.
“Zimbabwe’s exposure to the Russia and Ukraine conflict is that of nitrate,” Graeme Barr, managing director of Nutrimaster, the Innscor unit that imports fertiliser into Zimbabwe, said recently. “There is no plan B. Prices for nitrate are going to soar.”
Farmers were already facing high costs before the war, and a 50 bag of top-dressing fertiliser now costs over US$70.
Rising fertiliser prices are bad news for CBZ, whose CBZ Agro-Yield unit is the biggest funder of agriculture, where loan default is high.
CBZ’s 2021 results show that the bank has put over half of its loans into agriculture, with the distribution sector second at 18%.
CBZ Agro-Yield took over funding of agriculture from the state-led Command Agriculture in the 2019-2020 season, issuing state-guaranteed loans to farmers. The bank offered loans with a tenor of 270 days at 10% interest.
Only 22% of the loans issued to maize farmers in the first season were recovered, according to Treasury data. Soyabean farmers repaid about 13%. Recoveries were better from tobacco farms and wheat producers, who returned 77% of their loans.