THE Reserve Bank of Zimbabwe (RBZ)’s foreign currency auction system has been a game changer for the fertiliser industry as firms have been able to give impetus to Government’s agricultural programme such as Presidential Input Scheme and Pfumvudza, legislators have heard.
Fertiliser producing companies have said the provision of foreign currency through the auction system has enabled them to plan operations with certainty.
This emerged during a recent sector meeting with Parliament’s portfolio committee on Lands, Agriculture, Fisheries and Rural Resettlement.
The Committee chaired by Gokwe Nembudziya MP, Justice Mayor Wadyajena, toured ZFC, Windmill and Sable Chemicals to have an appreciation on preparedness to provide the product for Government initiated programmes.
Sable Chemicals chief executive officer, Mr Bothwell Nyajeka, said the auction floor system has brought efficiency and predictability in terms of importing ammonium nitrate gas, a raw material for the production of Ammonium Nitrate fertiliser.
“The biggest impact has been easier access of foreign currency. We have been able to apply for foreign exchange from the auction floor. This has enabled us to plan better in terms of accessing raw materials, plan better in terms of our production and also enable us to produce and deliver AN as per our customers’ expectation” said Mr Nyajeka.
He said they were also investing US$11 million in their business this year in order to increase the number of rail tankers that bring AN gas from South Africa and refurbish the plant.
“We have an import substitution roadmap so that we increase locally produced AN,”
He said the road map will start this year where they will increase production to 60 000 tonnes this year before doubling it to 120 000 next year until they get to full capacity of 240 000 in 2024.
ZFC managing director, Dr Richard Dafana, said they were getting US$500 000 per week from the foreign currency auction system and the money has given certainty to their production.
He said owing to the auction system, they had enough fertiliser in their stocks to ensure that the programme was a resounding success and were also setting their sight on the summer cropping season.
Dr Dafana stressed the need for additional financial instruments to fund the fertiliser industry adequately and timely provision of the product ahead of the summer cropping season.
He said the country should consider letters of credit and other instruments to complement the Reserve Bank of Zimbabwe spearheaded auction floor system.
Dr Dafana said if financial allocation does not increase they might be need to explore other avenues.
He said importation of raw materials in huge quantities would give them a competitive edge to negotiate for better prices thereby making the product cheaper to a farmer who is the end user.
“Right now we have an auction floor which has been a success story. But as ZFC we need US$50 million per year and at the auction floor we get about US$500 000 per week which is not enough to fund the fertiliser industry. With US$500 000 we will get small quantities and you cannot compete with big companies in other countries like India because you get what is called spot price, you cannot negotiate for better prices,” said Dr Dafana.
“So we need financial instruments. Those instruments must have the blessing of the RBZ.”
He said the country had enough capacity to produce adequate fertiliser but what was required was to come with a financing model that made the production viable and helpful to farmers.
Windmill Fertiliser chief executive officer, Mr George Rundogo commended the central bank auction system saying it has kept his company going.
He, however, implored Government and other stakeholders to timeously place orders so that the production process would continue commence on time.
“We are capable of supplying the required fertiliser as an industry. What we need is to conclude contracts early because that will trigger the production process and the process to mobilise resources. Some of the raw materials are imported and require a lead time of about three months,” he said.
Legislators expressed concern on the delay by fertiliser industry to provide the market with the product on time particularly top dressing.
They urged the industry to consider producing in equally large quantities fertiliser for the open market in addition to that of Government programmes.