THE Zambia National Farmers Union says the 2021 budget has shown that Zambia’s economy is between a rock and a hard place.
And the Union says Zambia’s agriculture sector is dire stress and that strides that have been made over the years will be wiped off if no meaningful reforms are put in place.
In a statement, Union public relations manager Calvin Kaleyi stated that despite some positive steps included in the 2021 budget, the union observed that the submissions made for relief on taxes such as the removal of VAT to lower production costs, among others, were not granted.
“ZNFU notes that the budget is bold and lays bare that the economy is between a rock and a hard place. Hence, the budget tried to strike a middle ground to improve the business environment for selected agricultural commodities by enhancing protective measures while also earning some revenues for government. We further observed that on the budget submissions we made, asking for relief on taxes, especially on removal of VAT to lower production costs, these were not granted apart from removal of VAT on tractors,” Kaleyi stated.
“However, it is important to note that some specific incentives have been granted to the horticulture and floriculture industries. Producers of export flowers, vegetables and fruits are in a difficult situation because of the COVID-19 pandemic which resulted in export markets disappearing overnight. The support through the listed measures in the budget is welcomed and appreciated as it will help the industry going forward.”
He stated that the Union noted an increase in non-performing loans to 12.6 percent which was worrisome as the agriculture sector had loan repayment challenges due to various factors.
“As stated earlier, in 2020, the economy has been struggling as seen from the economic indicators and other factors amplified in the budget, which included management of debt commitments, liquidity issues and a volatile exchange rate that has led to the Kwacha depreciating by 41.9% in 2020 alone. We also noted that non-performing loans increased to 12.6% as at July 2020 from 8.9% in December 2019. This is worrisome as agriculture has had loan repayment challenges due to various factors. We would, therefore, urge our Minister of Finance together with the Bank of Zambia, to take a keen interest to put in place measures that will help farmers to remain in operation,” Kaleyi stated.
“Other factors explaining the 2020 poor performance of the economy which is now projected to decline by 4.2% are; the adverse impact of the COVID-19 pandemic on general economic activity and employment. Episodes of load-shedding due to low electricity supply. Rising costs of production largely associated with rising energy costs. Amidst these challenges, the 2021 budget aims to support local producers and local value addition. This is a huge plus from the budget as it should curtail exportation of jobs and farmers welcome this. We just want to appeal to government to be ahead of the mischief of those that are in the art of evading such measures in various ways.”
He praised the government’s decision to increase import duty to 40% from 25% on agro products as the country would greatly benefit from the motive.
“The budget identifies agriculture as one of the sectors that will drive economic growth besides mining, tourism and industrialisation while energy and infrastructure will be the enabling factors. In the energy sector, the commissioning of Kafue Gorge Lower at the end of the year is positive news and we encourage government to improve access to power for production of food especially for irrigated crops,” Kaleyi stated.
“The local content incentive is good as it will create market opportunities for local products and the reduced threshold for accessing incentives under the ZDA Act means businesses can expand and become eligible for incentives. These are good measures. Customs and Exercise; increased import duty to 40% from 25% on agro products such as beef and beef processed products, pork and pork processed products, chicken and chicken processed products, and fish imported from outside the SADC and COMESA regions. Job well done. This country can produce enough beef, chickens, pigs necessary for value addition. Fish farming is a growing industry. Farmers are happy with this support. Going forward, it’s important to recognize that the livestock industry in Zambia is still in its infancy when compared to other countries in SADC and COMESA. Hence, a way should be found for further protection against competitors in the region.”
He stated that it was necessary for government to come up with a policy statement backed by a legal undertaking that would guarantee exports of the farmers’ produce.
“As farmers, we embrace the challenge for diversification, capturing of emerging opportunities as a result of COVID- 19, to produce for local value chains. Here, we want to add that pragmatic policies aimed at facilitating exports especially into nearby regional markets are necessary,” Kaleyi stated.
“Suppose more maize is grown, the farmer will not be able to make money because the borders are closed. Therefore, a policy statement backed by a legal undertaking to state that all farmers who can grow maize without FISP should register, grow it and when it is ready, exporting is guaranteed, would give farmers hope of a market. This, coupled with repatriation of foreign exchange into the country, would contribute positively towards stabilisation of the Kwacha against other currencies.”
He stated that farmers in the country would not positively benefit from the Africa Continental Free Trade Area if the price of maize was not attractive to cover the cost of production.
“The price of maize should be attractive to cover the cost of production. How will farmers in Zambia take advantage of the Africa Continental Free Trade Area, COMESA and SADC if the borders are closed for exports most times? The 2021 budget exempted an increase in import tax for commodities from SADC or COMESA to encourage free trade in the region but export bans persist for products where Zambia has unlimited potential to produce. This should be addressed urgently,” stated Kaleyi.