Zimplow, one of the country’s largest manufacturers of agricultural implements for small-scale farmers, says business has declined so much this year that this could be the most difficult year in its 64-year history.
Unit sales for the three months to September were down by 30 percent compared to the same period last year. Exports, on the other hand, grew by 30 percent but the dollar value of the exports was almost “meaningless” because of the unrealistic exchange rate.
The company made a net profit of $7.3 billion during the year ended June but said volumes on the local market had declined by 9 percent. Exports grew by 25 percent but contributed 57 percent of total sales.
The company’s chief executive, Anthony Rowland, said until four years ago, the bulk of the company’s business was local. It was only exporting 25 to 30 percent of its products with the local market consuming the rest.
Ironically, the slump coincided with the government’s concerted land reform exercise which should have been a major boost for the company, but Rowland said while the government had resettled hundreds of people, it had not provided them the means of production.
The emphasis had been on supplying inputs such as seed and fertiliser. The new farmers had been encouraged to use tractor drawn implements instead of tried and tested animal drawn implements which they could afford.
“What has happened is that the government has transferred people but not the means. People have to wait for DDF (District Development Fund) tractors to till the land. They cannot afford these tractors so they have to be subsidised by the government.
“Africa is ripe for small-scale farming but people have to be properly resourced and trained. People don’t respond to handouts. They want to be self-sufficient like the cotton farmers of Gokwe. They are using simple animal drawn implements yet they produce the bulk of the cotton in the country,” Rowland said.
He said because of the drop in the local market, the company had gradually switched to the export market which now accounted for 60 percent of sales. The only problem now was the exchange rate.
Rowland said the “controlled” foreign currency auction system was like a price control because it had not kept pace with inflation. Though year-on-year inflation had dropped from 622 percent at the beginning of the year to 209 percent last month, inflation this year had increased by over 80 percent.
If the exchange rate had kept pace with inflation it should be between $10 500 and $12 000 to the greenback now.
“The exchange rate has to follow the CPI,” Rowland said.
The CPI which stood at 27 714.7 in January had risen to 50 704.8 last month, an increase of 83 percent.
Central bank governor, Gideon Gono, the architect of the current economic reform programme, argued in his monetary review statement last month that the auction was “controlled only to the extent of prioritising beneficial payments, without manipulation of the exchange rate itself”.
He said the bank had invited more than 200 visitors from the diplomatic community, captains of industry and other stakeholders to attend the weekly auctions to “observe and attest the reality of what transpires” at the auction.