The Zambian economy has faced challenges of constricting fiscal space and the devastating effects of climate change. Fiscal space is commonly defined as the budgetary room that allows a government to provide resources for public purposes. How has the constricting fiscal space and the devastating effects of climate change affected the livestock subsector? In this article, I attempt to answer this question and suggest ways in which we can strategically intervene to mitigate the effects and stimulate the domestic economy. I hope that this article will stimulate debate among stakeholders, which can aid in coming up with holistic solutions in a participatory way.
The livestock subsector has faced several challenges in 2019 among them: unstable macroeconomic fundamentals, power cuts (load shedding), drought and animal disease outbreaks. Let us start by discussing how volatile macroeconomic fundamentals have increased the cost of production for livestock and livestock products across various livestock value chains.
The cost of production for most livestock products almost doubled in 2019, with a marginal increase in prices, which has pushed some value chain actors out of the market. At the macroeconomic front, the Nation has experienced a rise in inflation from 7-10.5% and unstable foreign exchange rates from K9.00 to K15.00 per United States Dollar. To stabilise inflation and exchange rate, the Overnight Lending Rates, Statutory Reserve Ratio, and Monetary Policy Rate have all been increased to tighten liquidity (amount of cash in the economy). These interventions have further increased the cost of credit (borrowing), which has eventually increased the cost of production for livestock farmers and other actors along the entire livestock value chains. These costs have been passed on to the consumers who unfortunately also do not have the disposable income to buy livestock products. This has pushed many livestock farmers, mostly small and medium scale out of the market, and commercial farmers are scaling down. For instance, some Processors and Retailers of livestock products had to reduce the number of retail outlets by over 40% through layoffs and putting staff in those outlets on forced leave.
Similarly, power cuts (Load shedding) of more than 12 hours per day has had severe effects on the livestock subsector, especially commercial livestock farmers. The cost of running generators for more than 12 hours pushed the cost of production up. The current scenario has seen livestock farmers failing to break even. A number of them are currently under enormous financial pressure, as livestock is no longer a money-spinner as the cost of production has outstripped profits. Consequently, the cost is pushed to the consumer who also has had either no salary for months, delayed salary or no salary increment despite the breakdown in macroeconomic fundamentals. This translates into pushing most livestock farmers and other actors out of the market as I highlighted earlier. Consumers have also stopped buying perishable livestock products such as milk and meat in bulk due to power cuts. This has also affected processors of livestock products who can only produce what the market demands, hence down-sizing the labour force. Since local livestock companies cannot survive the high cost of production, some opted to flood the market with cheap imported livestock products that benefit farmers in the countries of origin. For example, we have imported milk and meat on our shelves. Much as this keeps the companies on the market, how will the local companies survive if they have to compete with such companies’ imported cheap products? Worse off how will local producers benefit?
On another front, as if all the above aren’t enough for the livestock farmer, came the Foot and mouth disease (FMD). The disease was seen to have devastated livestock in Southern, Eastern, Central, Copperbelt and Lusaka provinces, which together hold more than 80% of the Nation’s livestock in Zambia. The severe effects of FMD have left the subsector reeling from its impact. The livestock movement ban due to FMD outbreaks caused price distortions at a national level. For instance, due to the livestock movement ban, the farmers opted to sell livestock within their districts with cattle being sold as low as K1,000 per head due to oversupply. Since the movement of carcases was allowed under special conditions, several beef processors preferred to go to these areas and get cheaper carcases than buy expensive cattle from commercial farmers in FMD-free urban and peri-urban areas. Low prices of cattle coupled with a high cost of production have led to some livestock farmers opting out of the industry for other investments.
On the other hand, came in the effects of climate, which were again profoundly felt in the same subsector. Drought in some areas of Southern, Central, Western and Lusaka provinces severely affected the livestock subsector. The vast feed resource base for animal production purposes was severely affected owing to the bimodal effect of pasture and fodder loss, coupled with lack of watering points for animals due to drying up of most lagoons, river streams and other water bodies. A cursory look on animals’ body conditions even to an inexperienced observer in these areas revealed undernourished, emaciated and weak livestock. For instance, during a field visit in Namwala district in September and December 2019, I interviewed farmers who were losing cattle daily through being stuck in the mud (in search of drinking water) due to weakness arising from poor nutrition. These animals all ended up being sold cheaply. One striking thing is that in these drought-hit areas, rural communities have only been able to survive solely due to livestock. The total crop failure meant that it was the sale and trade in livestock such as goats and chickens that empowered these communities to obtain that bag of maize meal (Unga), soap and send their children to school. Many traders from urban areas such as Lusaka exchanged a bag of maize meal with livestock in these drought-hit areas. This demonstrates the significance of livestock in building economically resilient households and stimulating domestic growth.
Looking at the challenges that the livestock subsector has faced in 2019, you may ask, what is the outlook of the livestock subsector in 2020? Well, the forecast looks even gloomier as the economy may only see nil to minimal marginal improvements in macroeconomic fundamentals. The Government of the Republic of Zambia has reduced funding by over 50% from about 1.16 million in 2019 to 488 million in 2020, despite the livestock sub-sector being a strategic pro-poor development tool if well harnessed, especially in creating employment, reducing poverty, improving food and nutritional security etc. This does not give hope to the livestock subsector in 2020.
In my opinion, the budgetary allocation to the Ministry of Fisheries and Livestock falls far short of being strategic and can’t stimulate the current depression being faced by the livestock sector. In other words, this is going to worsen the already worse scenario as I have outlined above. Why do I say so? The 2020 budget theme is, “Focussing National Priorities Towards Stimulating the Domestic Economy” in the spirit of “Doing More With Less” which was echoed by the president in his State of the Nation Address (SONA). The ultimate goal for the spirit of “doing more with less” is to achieve economic stability, sustainable growth and development amid the constricting fiscal space and the devastating effects of climate change. My understanding of this theme is that amid the economic hardship, the country has to identify strategic sectors, which will actually produce more with fewer resources, and prioritise these sectors to stimulate the domestic economy, which is currently facing low economic growth (at 2%). When you talk about strategic areas, which need prioritisation in Zambia, it cannot go without mention that the livestock sub-sector is one of them, which is crucial and strategic in unlocking the current economic challenges.
Looking at the challenges that the livestock subsector has faced in 2019, what was I expecting with regards to the 2020 budgetary allocation to the Ministry of Fisheries and Livestock? I was expecting the stakeholders to start by looking at which type of livestock can strategically stimulate the domestic economy and prioritise funding to the identified strategic areas. For instance:
To mitigate the effect of disease, I was expecting the Government to strategically allocate more resources towards Zambia National Vaccine Institute (former Vaccine Production Unit at CVRI) to commercialise the production of critical vaccines to the Nation and the region to deal with the recurrent burden of animal diseases. Perhaps, the Government should consider partnering with the private sector to make the production and distribution chain profitable and generate the much-needed revenue.
To build resilience livestock community households, I was expecting the Government to strategically allocate more funds towards the development of value chains for climate-resilient livestock species. In the 2019 budget, an allocation of K483.2 million was put towards climate-resilient livestock management and small ruminant value chain support project in response to the Saudi Arabian export market. What happened to this allocation? How much of this allocation was disbursed? Did the Ministry of Fisheries and Livestock use the funds for an intended purpose? Were small ruminant value chains developed?
In conclusion, there is an urgent need for the stakeholders in the livestock value chains to hold an INDABA or livestock summit to discuss and suggest ways in which we can strategically transform the livestock subsector. On a gloomy note, I wish the readers and stakeholders in the livestock industry a happy and prosperous 2020.
The author is a Senior Lecturer of Livestock/Animal Health Economics at the University of Zambia, School of Veterinary Medicine. Email: firstname.lastname@example.org, Mobile: +260977717258