Includes 3 FREE quarterly updates
BMI View: The Zimbabwean agricultural sector needs far greater private and public sector investment to meet its potential. The government's weakening fiscal position, coupled with confused policy-making, which has been criticised for being at odds with the needs of the economically-important agricultural sector, is likely to restrict the effectiveness of government support over the short term. Meanwhile private sector investment will be constrained by ongoing political uncertainty. We have a more constructive view towards the sector over the medium-term and we see output of key crops such as sugar, corn, cotton and tobacco increasing. However, Zimbabwe remains a long, long way from regaining its status as a regional breadbasket, especially as regional neighbours continue to develop their own agricultural sectors more quickly and more effectively.Key Views We have revised down our sugar consumption growth forecasts for 2012 (from 20% to 15%) and 2013 (from 11% to 7%). We expect lingering political uncertainty to impact investment and tighten liquidity, which will prove bad for an economy already affected by the expectation of lower agricultural output. We expect this to negatively impact consumer confidence and result in moderating consumption.
We have revised our corn production forecast for the 2012/13 harvest season down to 1mn tonnes (a 29% year-on-year (y-o-y) contraction) due to widespread drought and reduced fertiliser use among grains farmers. This will dramatically increase Zimbabwe's grains import needs. We maintain our view that price growth will accelerate over 2012 and have made an upward revision to our year-end forecast (to 7.5%, from 7.0%) due to an upward adjustment to our global oil price forecasts and a downward revision to our corn production forecasts. However, tight liquidity (reducing demand-driven inflation) and a weaker rand (making South African imports cheaper) will limit inflation.
Industry Developments Political Risk: Heightened political risk, due to ZANU-PF succession concerns, uncertainty surrounding the establishment of a new constitution and the ongoing indigenisation drive, are all weighing on investor sentiment, which is in turn strangling liquidity and weighing on economic growth. This is a major risk for the agricultural sector, which needs private capital to help drive sustainable long-term production growth.
Government Fiscal Dynamics: We believe that fiscal revenue will continue to fall short of target over the course of 2012 as diamond revenues underperform relative to what the Treasury planned on receiving from the sector. Given that the government is operating a cash budget which by definition will be balanced, we believe that spending will be cut by an amount commensurate with the revenue shortfall.
While we believe that revenues and spending will come in below target, we do not believe the government will face a fiscal crisis but rather continue to limp along spending what it can, when it can.
Nonetheless, this could impede investment in further agricultural support programmes. Added-Value Needed: The government has stressed its desire to develop added-value industries upstream of its existing agricultural activities. It is keen to take a larger slice of the value chain, rather than export primary materials. Its desire to develop ethanol processing capabilities could be seen as illustrative of this - development here helping to support the sugar sector downstream of it. Cotton could be an initial beneficiary of this drive, with more cotton going towards textile manufacturing domestically, rather than being exported.
Tobacco A Bright Spot: The performance of Zimbabwe's major exports is forecast to be robust in 2012. The volume of tobacco, the primary agricultural export, sold by the end of March was 21.0% above the corresponding period in 2011. Furthermore, because of higher prices, the value of tobacco sold by the end of March was 48.0% higher than the same period a year earlier. Farmers told BMI during a trip to Harare in late April that auction prices had remained firm during April and that volumes had also remained well ahead of 2011 levels. We therefore expect tobacco export revenues to grow strongly from the US$400mn earned last year.
BMI View: The Zimbabwean agricultural sector needs far greater private and public sector investment to meet its potential. The government's weakening fiscal position, coupled with confused policy-making, which has been criticised for being at odds with the needs of the economically-important agricultural sector, is likely to restrict the effectiveness of government support over the short term. Meanwhile private sector investment will be constrained by ongoing political uncertainty. We have a more constructive view towards the sector over the medium-term and we see output of key crops such as sugar, corn, cotton and tobacco increasing. However, Zimbabwe remains a long, long way from regaining its status as a regional breadbasket, especially as regional neighbours continue to develop their own agricultural sectors more quickly and more effectively.
We have revised our corn production forecast for the 2012/13 harvest season down to 1mn tonnes (a 29% year-on-year (y-o-y) contraction) due to widespread drought and reduced fertiliser use among grains farmers. This will dramatically increase Zimbabwe's grains import needs.
Industry Developments Political Risk: Heightened political risk, due to ZANU-PF succession concerns, uncertainty surrounding the establishment of a new constitution and the ongoing indigenisation drive, are all weighing on investor sentiment, which is in turn strangling liquidity and weighing on economic growth. This is a major risk for the agricultural sector, which needs private capital to help drive sustainable long-term production growth.
Government Fiscal Dynamics: We believe that fiscal revenue will continue to fall short of target over the course of 2012 as diamond revenues underperform relative to what the Treasury planned on receiving from the sector. Given that the government is operating a cash budget which by definition will be balanced, we believe that spending will be cut by an amount commensurate with the revenue shortfall.
While we believe that revenues and spending will come in below target, we do not believe the government will face a fiscal crisis but rather continue to limp along spending what it can, when it can.
Nonetheless, this could impede investment in further agricultural support programmes. Added-Value Needed: The government has stressed its desire to develop added-value industries upstream of its existing agricultural activities. It is keen to take a larger slice of the value chain, rather than export primary materials. Its desire to develop ethanol processing capabilities could be seen as illustrative of this - development here helping to support the sugar sector downstream of it. Cotton could be an initial beneficiary of this drive, with more cotton going towards textile manufacturing domestically, rather than being exported.
Tobacco A Bright Spot: The performance of Zimbabwe's major exports is forecast to be robust in 2012. The volume of tobacco, the primary agricultural export, sold by the end of March was 21.0% above the corresponding period in 2011. Furthermore, because of higher prices, the value of tobacco sold by the end of March was 48.0% higher than the same period a year earlier. Farmers told BMI during a trip to Harare in late April that auction prices had remained firm during April and that volumes had also remained well ahead of 2011 levels. We therefore expect tobacco export revenues to grow strongly from the US$400mn earned last year.
Executive Summary
SWOT Analysis
Zimbabwe Agriculture Swot
Zimbabwe Business Environment SWOT
Supply Demand Analysis
Zimbabwe Grains Outlook
Table: Zimbabwe Corn Production, Consumption & Trade
Table: Zimbabwe Corn Production, Consumption & Trade
Zimbabwe Sugar Outlook
Table: Zimbabwe Sugar Production, Consumption & Trade
Table: Zimbabwe Sugar Production, Consumption & Trade
Commodity Price Analysis
Cocoa: Signs Of Life
Coffee: Holding Key Support
Palm Oil: Uptrend Intact
Sugar: Watching Brazilian Yields
Cotton: Downside Risks
Select Commodities - Performance & BMI Forecasts
Monthly Grains Update
Wheat: Upside Risks Materialising
Corn: Moderation In Place
Soybean: Looking Weak
Rice: Temporary Strength
Commodity Performance
Economic Outlook
Table: Zimbabwe - Economic Activity
Downstream Analysis
Industry Forecast Scenario
Table: Zimbabwe's Food Consumption, 2009-2016
Mass Grocery Retail
Country Snapshot: Zimbabwe Demographic Data
Zimbabwe's Population By Age Group, 1990-2020 ('000)
Zimbabwe's Population By Age Group, 1990-2020 (% of total)
Zimbabwe's Key Population Ratios, 1990-2020
Zimbabwe's Rural And Urban Population, 1990-2020
BMI Forecast Modelling
How We Generate Our Industry Forecasts
Global Food & Drink View
Food & Drink Roundup
Food Inflation Less Of An Issue In 2012
Domestic Demand Uncertainties Abound In Developed Markets
EM-Oriented Companies To Perform Strongly
Table: Core Views
SWOT Analysis
Zimbabwe Agriculture Swot
Zimbabwe Business Environment SWOT
Supply Demand Analysis
Zimbabwe Grains Outlook
Table: Zimbabwe Corn Production, Consumption & Trade
Table: Zimbabwe Corn Production, Consumption & Trade
Zimbabwe Sugar Outlook
Table: Zimbabwe Sugar Production, Consumption & Trade
Table: Zimbabwe Sugar Production, Consumption & Trade
Commodity Price Analysis
Cocoa: Signs Of Life
Coffee: Holding Key Support
Palm Oil: Uptrend Intact
Sugar: Watching Brazilian Yields
Cotton: Downside Risks
Select Commodities - Performance & BMI Forecasts
Monthly Grains Update
Wheat: Upside Risks Materialising
Corn: Moderation In Place
Soybean: Looking Weak
Rice: Temporary Strength
Commodity Performance
Economic Outlook
Table: Zimbabwe - Economic Activity
Downstream Analysis
Industry Forecast Scenario
Table: Zimbabwe's Food Consumption, 2009-2016
Mass Grocery Retail
Country Snapshot: Zimbabwe Demographic Data
Zimbabwe's Population By Age Group, 1990-2020 ('000)
Zimbabwe's Population By Age Group, 1990-2020 (% of total)
Zimbabwe's Key Population Ratios, 1990-2020
Zimbabwe's Rural And Urban Population, 1990-2020
BMI Forecast Modelling
How We Generate Our Industry Forecasts
Global Food & Drink View
Food & Drink Roundup
Food Inflation Less Of An Issue In 2012
Domestic Demand Uncertainties Abound In Developed Markets
EM-Oriented Companies To Perform Strongly
Table: Core Views
