Zimbabwe: Poor Liquidity Hits National Foods Farming Scheme

27 March 2020

Agri industrial concern, National Foods Holdings Limited (NatFoods), says poor liquidity has had a knock on effect on its contract farming projects, although the agro-processing giant is continuing its support to increase food production in the country.

As such, support for the contract scheme was lower in 2019 as compared to the prior year. During the 2019 winter wheat season the NatFoods funded 2 495 hectares of local wheat that produced 10 374 tonnes.

"The group continues to support local farming, although the schemes were heavily curtailed compared to last year due to the shortage of bank funding on the back of constrained market liquidity," said chairman Todd Moyo in a statement accompanying the group's financials for the half year to December 31, 2019.

Moyo added that the plantings for the 2019 - 2020 summer season consisted of 2 200 hectares of maize and 1 250 hectares of soya beans.

Indications are that the group anticipates to continue importing significant quantities of raw materials up to at least June 2021 as prospects from the agriculture season are not very promising.

Agriculture anchors the Zimbabwean economy and provides 70 percent of raw materials required in the manufacturing industry.

However, improved performance in the agriculture sector is contingent on a desirable rainfall season, increased support towards rehabilitation and development of irrigation infrastructure to sustain agriculture activities, and an enabling economic environment.

Power supplies also play a critical role especially for irrigation purposes for crops like soya beans and strategic grains such as wheat and maize.

Said Moyo: "The outlook for the coming agricultural season is not encouraging, with plantings having significantly reduced and yields likely to be impacted by poor weather."

All things being equal, the group has indicated it has the capability to significantly increase the size of its contract farming programmes with improved access to financing facilities.

Meanwhile, while the economy is expected to remain depressed in the near future, NatFoods expects to bank on its increased milling capacity as well as firm demand for maize. The group's Mutare and Masvingo maize mills have both been reopened, with the resuscitation of the Masvingo mill being especially noteworthy as it was last run in 1998.

During the half year to December 31, 2019, the group recorded depressed volumes all across segments but maize, as the market battle high inflation resulting in disposable incomes.

According to the group's financial statements, the flour division, cooking oil, groceries, snacks and treats as well as the stockfeeds divisions experienced significant volume declines as the market battled reduced consumer spend due to rising inflation.

Demand for maize meal, however, remained firm. Towards the end of the period, Government lifted restrictions and import duties on basic food commodities which is likely to put pressure on local manufacturers who are already dealing with an extremely difficult environment.

Subsidies were progressively reduced during the period, with maize meal being the only subsidised product from the group's basket by the end of the period.

NatFoods has played a significant role in supplying maize meal on the Government subsidy programme, with over 45 000 tons having been milled for the programme since it was launched in December 2019.

Moyo added the group will also continue with its growth agenda in the snacks, biscuits and cereals categories, which are logical forward integration opportunities from the basic milling portfolio.

"Whilst demand in these categories is currently muted, the work on broadening the offering in these categories will continue, developing the company's repertoire for improved economic circumstances," he said.

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