World Bank and Zimbabwe's Agricultural sector.

The aim of World Bank under SAPs as a contribution through liberalization was to unleash the creative forces of private entrepreneurship within smallholder agriculture and indigenous trading systems. The major objective of the liberalization measures was to increase productivity in agriculture, particularly small holder activities so as to enhance incomes and food security at both household and national levels (Government of Zimbabwe, 1995). It was assumed that market reforms would favor the production of tradables such as horticulture, tobacco and cotton through affecting the relative prices of these commodities.

World Bank- plays a qualitatively different role than the IMF, but works tightly within the stringent SAP framework imposed by the IMF (Masanzu, et al, 1998). It focuses on development loans for specific projects such as the building of dams, roads, harbors and among many others that are considered necessary for ‘economic growth’ in a developing country (ibid). Since it is a multilateral institution, the World Bank is less likely than unilateral lending institutions such as the Export Import Bank of the US that offer loans for the purpose of promoting and subsidizing particular corporations (Makamure, 1996). Nevertheless, the conceptions of growth and economic well being within the World Bank are very much molded by western corporate values and rarely take account of local cultural concerns (ibid).

Agriculture is the backbone of Zimbabwe’s economy so it provides employment incomes for 70 % of the population, 60 % of the raw materials required by the industrial sector and contributes 40 % of total export earnings (Government of Zimbabwe, 1997). The sector directly contributes between 15 % and 19 % to annual GDP depending on the rainfall pattern (ibid). It contributes more than 60 % of the country’s total foreign currency earnings annually (Berman& Carter, 1997). However, the average growth rate of agriculture since the launch of ESAP in 1991, at 1, 4 % per annum (target is 3, 2 % per annum) has been inadequate to maintain national food supplies, to improve the incomes of small holder farmers, to meet the basic requirements of industry and viable export markets (Mukora& Friedrich, 1997). It is the purpose of this paper to outline the contribution of the World Bank to Zimbabwe’s agriculture.

ESAP was born in 1991 and consisted of a series of economic policy reforms which were to be carried out over a five-year period. The government instituted policies that were aimed at market deregulation, liberalization and export promotion (Makamure, 1996). In the Second Five Year National Development Plan (1991-95) the government said its major thrust was to enhance food self-sufficiency for the population, increase exports, expand employment and meet the raw material requirements of the manufacturing sector (Government of Zimbabwe, 1995). In general terms, ESAP resulted in government cutting budgets in several ministries and instituted measures towards curtailing losses of parastatals (Masanzu, et al, 1998). The government reduced its intervention that had been aimed at the further development of the agricultural sector while at the same time it pushed for export-oriented production (production of tradables) (ibid). In its agricultural policy statements over the years the government repeatedly pointed out that, one of the most important problems facing Zimbabwe was to generate substantially greater farm output from smallholder farming (communal, resettlement and small scale farming) in order to meet direct household consumption needs and to generate greater net farm cash incomes (Dorward, 1999).

Generally, the design of Zimbabwe’s agricultural sector policies as part of the country’s structural adjustment process since 1991 has been largely influenced by reduction of government’s direct involvement in the production, distribution and marketing of agricultural inputs and commodities (Masuko, 1999). More so, it concentrated on removal of price subsidies on farming sub sectors, including input supply and State-run credit schemes (ibid). At the same time promoting liberalization of export, import trade and privatization of agricultural marketing supply/demand balance for agricultural commodities (Berman & Carter, 1997). Contribution of the World Bank through Liberalization of agricultural exports has assisted the government in 1990 to start an all out export drive and designed a number of policies to stimulate exports (ibid).

Resulting to the introduction of the Export Retention scheme (ERS) which allowed exporters to retain a percentage of their export earnings and also the Open General Import License (OGIL) which started in October 1990 by putting in place agricultural inputs like stock feed, tyres and spares (Berman & Carter, 1997). There was also the Export Revolving Fund (ERF) which was introduced in 1983 which provided exporters with foreign exchange for needed imports and was replaced by the Export Support Facility (ESF) as an addition to the ERS (ibid).

The biggest export incentive however, was the devaluation of the Zimbabwe dollar throughout the 1990s (Makamure, 1996). As a result, agricultural producers suddenly got much higher prices in Zimbabwe dollars for their exports and there has now been partial liberalization of export and import trade (Mukora & Friedrich, 1997). Whilst on the other hand, the economic reform program implicitly made an incorrect assumption that production in the sector is homogeneous, therefore farmers in Zimbabwe have equal opportunities to enter and gain within this capitalist liberal market system (ibid). In order for producers to obtain higher producer prices in a liberalized market, they will have to produce those commodities for which they have a comparative advantage with respect to available markets (Berman & Carter, 1997). Producers located further away from markets had to produce high value commodities and they needed support to be able to make this transition (ibid). By definition, market reforms favored the production of tradables such as horticulture, tobacco and cotton through affecting the relative prices of these commodities (Friedrich, 1997). The local prices of these externally tradable commodities rise faster through devaluation than the locally tradable commodities such as maize (ibid).

While to some extent this has happened during the period of reforms, on the whole agricultural productivity in the small-holder sector has been threatened by lack of effective marketing systems, shortage of land, so as to lack of storage and transport facilities (Friedrich, 1999). More so, there was an evolution of soaring inflation especially since the start of the economic reform program in 1991, the high cost of money, high rates of taxes and other costs eroded the viability of farming and hit hard smallholder farmers who did enjoy economies of scale than their large-scale counterparts (Friedrich, 1998). The removal of input subsidies (for example fertilizer) caused a predictable crisis for smallholder and communal farmers, yet alternatives to them were underdeveloped (ibid).

According to the Ministry of Lands and Agriculture (1999) reported that,  the cost of producing one hectare of wheat had risen by 68,54 % between 1998 and 1999, and the direct costs of producing cotton had escalated by 120%. The cost of stock feed had increased livestock costs of production tremendously. For example, from the period January 1998 to January 1999, most beef concentrates increased over 100 %, dairy concentrates over 100 %, ostrich concentrates over 120 %,poultry and rations 72 %, pig concentrates over 76 % and in some cases stock feed additives had increased over 200 % (Dorward, 1999).

Very few agricultural production systems gave a return of the order of 50 % and farmers who borrowed money from commercial finance houses to grow crops, particularly non-export commodities were not able to benefit from devaluation, they also could not make any profit out of the exercise (ibid). Interest rates for example, comprised largest components of production costs. In smallholder agriculture, transport costs alone constituted about 25 % of total costs per ton produced compared to around 12 % in other sectors (ZFU, 1998).The high cost of credit has also hampered rural traders from constructing warehouses for input supply, provision of trucks to smallholder farmers to transport inputs and farm produce and the development of smallholder irrigation schemes (ibid).

Market reforms as part of World Bank’s contribution to the agriculture of Zimbabwe was the call for diversification, while essential, it could not be assumed that it would just happen (Muchena, 1995). Pre-requisites for effective diversification there is need for irrigation development, development of adequate technology options in the various farming regions and access to capital (ibid).   More so, there is need of availability of markets, improved farmer advisory services, stabilization of food crop production and specialized settlement schemes (Muchena, 1995). Most of the diversification options which are available on the market such as ostrich production and specialized horticulture are capital intensive and the start-up capital is far beyond the reach of many communal farmers (Oxfarm, 1995). Options that take a long time for returns to be realized will not be taken up by the resource starved small holder farmers (Friedrich, 1999).

To add on, the emergence of alternative marketing channels to some area in the country were considered as a welcome development, as it brought wider choice to farmers about where and when to buy and sell their produce (Makamure, 1996). In the focused group discussions conducted for this study in Chivi and Mutasa districts, farmers confirmed a four-fold increase in the use of private marketing channels (ibid). The study showed that the shift to private channels was in some cases attributable to low transaction costs and early payment of produce (Mukora & Friedrich, 1997). A similar study conducted by Intermediate Technology Development Group (ITDG) (1997) indicated that, in the case of groundnuts, sunflower and small grains, farmers in the district (for example, Gutu) had shifted completely to private marketing channels so as to take advantage of higher producer prices, low transaction costs and timely payment.

 Under ESAP, involvement of small traders, transporters and other entrepreneurs was recommended but lacked policy measures to enhance fairness and effectiveness. Following the worst drought in living memory in 1992, the government introduced to targeted smallholders free crop packs consisting of seeds, fertilizers, crop chemicals and contract ploughing in order to help resource poor farmers recover and increase their productivity (Whiteside, 1997). Since 1992, the government implemented five phases of seed, fertilizer and transport crop pack programs even during favorable rainfall years to ensure that smallholders achieved food security and reduced the cost of drought relief food distribution (Mukora & Friedrich, 1997). However, the government stopped the free crop pack program in 1997 and began to assist smallholder farmers to set up agric-input dealer agencies which however did not take off in earnest (ibid).

However, they were various constraints which existed in the marketing of agricultural products like poorly developed market information system to link farmers and buyers and lack of guaranteed markets for smallholder produce (Dorward, 1999). Furthermore, there was an addition of limited agribusiness dealers in rural areas and the absence of essential rural infrastructure particularly feeder roads, irrigation facilities, telephones, electricity and banking services (Masuko, 1999). For example, the National Farm Irrigation Fund, which was established in 1985 to meet the requirements of irrigation development, was used to a large extent by the large-scale sector (ibid).  More so, inaccessibility of some emerging marketing channels to smallholder farmers and partial liberalization of certain agricultural products (Chisvo et al 1999).

For example, The Case of Shamva District showed that the mean district to the market was 34, 8 km for maize, 89, 8 km for tobacco, 34, 4 km for cotton, 39 km for sunflower, 100 km for onions and 115 km for tomatoes (Masuko, 1999). Only 3, 6 % of the producers used their own vehicles to transport crops to the market (ibid). The survey also found out that the small holder sector showed limited response to changes in the global markets while there was a significant shift from non-tradables to tradables within the commercial farming sector while small holder farmers were still concentrated in the production of the staple food crop like maize (Mwanza, 1999). The involvement of the smallholder sector in the production of tradables was hindered by the limited access to some factors of production needed to produce tradables such as irrigation facilities, agricultural inputs, access to information and financing (Munhamo, 1998).

While liberalization did bring in more players on the market for different agricultural commodities as predicted, this did not necessarily result in higher prices and it did not improve the lives of rural households as anticipated (Munhamo, 1998). Some farmers (those who had better access to factors of production) benefited from liberalization in some ways and were able to improve their lives, whereas the majority was actually in a worse off position than before the introduction of ESAP (ibid).

To add on, the liberalization of the beef industry from 1991 under ESAP has led to the proliferation of private slaughterhouses (Makumure, 1996). There are about 54 registered private abattoirs at the moment. Despite the commission being registered as a private company in 1995, its dominance in the beef market has declined significantly (Muchena, 1995). Throughput to the CSC has dropped quite substantially from a peak of 656 396 in 1977 to 137 285 in 1999 (Oxfarm, 1995). The company is now handling between 20 and 25 % of national slaughtering. On the other hand, registered private sector activity has increased significantly since 1981 from 42 923 head of cattle slaughtered to 204 964 in 1999 (Mwanza, 1999). In other words, liberalization has only benefited private abattoirs (ibid). According to beef industry experts, the biggest mistake that was made by the government was not to make the beef industry strategic and provide enough support to producers (Munhamo, 1998).

Impact of liberalization on household food security, studies has found out that household food security was worsened during liberalization (Munhamo, 1998). While Zimbabwe was generally food secure in terms of national requirements, it is certainly that it has experienced unacceptable levels of household hunger as evidenced by the fact that 30 % of children under the age of five were chronically malnourished (Makamure, 1996).  Furthermore the National food security did not guarantee household food security and food security in Zimbabwe was only guaranteed when each and every Zimbabwean household had access to an adequate diet necessary for a healthy and active life, day in and day out (ibid).  In other words, the commercialization of smallholder agriculture has in practice meant the use of bought inputs (fertilizer, hybrid seed among many others) and an increased concentration on cash sales rather than production for home consumption (ZFU, 1998). This has tended to encourage agricultural extension services to provide more support to better-off smallholders and giving exclusive grazing and water rights to better-off farmers (ZFU, 1999).

For example, a study conducted in the Mutasa and Chivi districts by Chisvo , few households purchased maize grain from the market because most farmers were consuming grain from their own supplies at the time (Masuko,1999). However, maize production in recent years has been sufficient to cover the period immediately before the next harvest. With the rising cost of inputs, the proportion of food-deficit households usually rises during the November to March period. The respondents preferred to borrow or to buy grain from neighbors to replenish their depleted supplies because of the prohibitive costs of more refined roller meal (Mukora &Friedrich, 1997). With the implementation of ESAP, the sources of income for rural people have become more diverse.

The main source of income for most respondents was crop production. The poorest households said they supplemented their income from agriculture by hiring out their labor to better-off farmers for cash or food (Dorward, 1999). The Zimbabwe Agricultural Commodity Exchange ZIMACE was formed in March 1994 to provide an alternative route for agricultural marketing in line with the liberalization of agricultural markets (ZIMACE, 1999). It operated on an open outcry system whereby bid and offer prices were called out at each trading session and confirmed by the brokers in attendance (ibid). This enabled market forces, particularly supply and demand, to achieve a price agreed to on a ‘willing seller, willing buyer’ basis. The Exchange gained popularity among producers more and more small scale farmers were now trading their commodities through ZIMACE who were looking for a transparent market place with security, for legally binding contracts and for an arbitration facility which protected both parties (Masanzu, et al, 1998).

Three main crops traded at the exchange were maize, wheat and soya beans and there was potential to expand the commodities traded at ZIMACE.   Farmers were generally happy with the prices offered through ZIMACE which was strengthened over the years (Munhamo, 1998). The farmer now had the most important commodity information at their fingertips and they were also able to look at prices in the market place, talk to their broker, consider factors like the probable exchange rate at harvest time and could get information on international commodity prices (Rukuni & Eicher, 1994).

All this was vital in deciding what crops to grow and the Gokwe Farmers Marketing Association is a good example of small farmer participation in the exchange (ibid). The association has been trading small volumes of maize for the last two years and about 400 tons were traded in the 1998/99 marketing season (ZFU, 1998/99).

Milliken of Bateleur Ventures asserted that there were still some difficulties which needed to be conquered for more small-scale farmers to trade their commodities through ZIMACE (Munhamo, 1998). Among these was that the small-scale farmer’s need for instant cash payment instead of waiting the normal 14 days, and the amount of paperwork involved when trading small parcels of maize (ibid).  To facilitate the Gokwe farmers’ entry onto ZIMACE, Bateleur provided bridging finance needed to meet the farmers’ demands for instant payment therefore support from banks was critical (Munhamo, 1998). With more information the exchange could provide small-scale farmers with protection against grain buyers who offered lower prices for cash (ibid).

Formal employment in the agricultural sector remained constant at 300,000 in the first years of ESAP (Mwanza, 1999). However, the high inflation rate triggered by ESAP, reduced the real value of agricultural wages such that in 1992, real wages were half their 1990 level (ZCTU, 1996). Permanent employments in the LSCF sector–particularly tobacco and horticulture –increased by 10,000–15000, while casual labor increased by about 30,000 (ibid). The share of wages in the value of LSCF marketed output fell from an average of 36% over the 1980-83 periods to 35% during the period 1988 91, and less than 15% by 1993 (ZCTU,1999). Farmers’ responses to the new SAP measures were largely conditioned by the size and nature of their operations (ibid).

The total acreage under crop in the communal and resettlement areas declined, while at the same time more and more people became dependent on agriculture within the communal areas due to natural growth of the population and ESAP-induced retrenchments (CFU, 1999). The World Bank attributes this decline among other reasons to reduced availability of credit, less fertilizers and agro-chemicals and the reduced availability of seed (ibid). More so, there were also negative factors such as low rainfall levels, expansion of cultivation into more marginal areas, declining soil fertility and continued clearance of wood cover which resulted to erosion (Friedrich, 1999).  

While this analysis has its merits, it however placed little emphasis on the lack of land redistribution as a key constraint for smallholder production growth and basic cause of environmental degradation (Nyagura, et al, 1998). Thus, the attainment of improved productivity and higher food production among small-scale farmers, for example, remained an area of critical concern (ibid).

 According to the Ministry of Lands and Agriculture (1999) “Policy Strategies for Stimulating Agricultural Production and Food Security for the 1999/2000 Farming Season and Beyond” the problem of low productivity in the small holder farming areas was a function of factors which included poor farming skills, limited use of technical inputs, unavailability of technical inputs owing to poor infrastructure, poor soils and inadequate provision of extension back-up and farmer training. For example, small holder farmers consumed 25 % of the total fertilizer in Zimbabwe and on average apply 50 kgs of fertilizer compared to 700 kgs per hectare by large-scale commercial farmers (Mwanza, 1999). Well-intentioned as the policy may have been, Government did not implement complementary policies such as information flow, market research and infrastructure development and this led to the exploitation of farmers by traders in a liberalized market and dwindled the little benefits further (Masuko, 1999).

Farmers were buying agricultural inputs such as seeds, fertilizers and farming equipments at cheaper prices, until ESAP liberalized trade and allowed traders to charge exorbitant prices for these inputs (Oxfarm, 1995). They therefore could not cope with the higher prices, especially considering that they had other household financial obligations such as paying educational fees for their children (Mwanza, 1999). To try and cope, small-scale farmers had to cut down their expenditure on inputs (ibid). The obvious result was low yield, particularly for people in areas that received low rainfall and characterized by poorer soils. Farmers also reported that during ESAP, a lot of acquisitions had become taxable, including cattle and other domestic animals (Rukuni& Eicher, 1994). People were also required to pay dip tank chemicals and cattle treatment, although the frequency of dipping cattle had been reduced from weekly to fortnightly (Munhamo, 1998).

The costs of cattle tax and dip tank levies combined with inputs costs further dig deep into already shrunken pockets of poor people. Removal of farming subsidies has resulted in the cost of basic goods and services escalating thereby affecting food availability at household level (Makamure, 1996). The phase-out of subsidies should have been done in a cautious manner. An enabling environment should be created through among others, speeding up the surveying and developing of growth points, giving incentives to business people to start small scale, labor intensive input and processing industries at growth points (Government of Zimbabwe, 1997).

To add on, agricultural exports became increasingly unbalanced and earnings became unpredictable as by 1992 the contribution of the total agricultural export earnings of tobacco alone had increased to 78% (Muchena, 1995). The LSCF sector gained most from the government stimulated export drive under ESAP.

Conclusion, Structural Adjustment involved reforms to macroeconomic and trade policies, which were designed, among other objectives, to improve price incentives for producers of tradables. As the output mix of the agricultural sector including many smallholder sub-sectors, has a higher share of tradables and near-tradables than most other key economic sectors and a vigorous agricultural supply response had been anticipated via the improved terms of trade brought about by liberalization.Likewise, by lifting restrictions on private sector entry into the marketing of agricultural produce, it was hoped that there would be a strong private sector response in supplying inputs and in purchasing, storing, processing and (where appropriate) exporting produce. Additionally, it was thought that parallel financial sector reforms (encompassing monetary management at the macro-level, through banking sector reforms down to the commercialization or privatization of State-supported agricultural finance organizations) would catalyze the other elements of structural adjustment by channeling funds to emerging opportunities for profitable farming and trade.

Although Zimbabwe has gone very far in the area of liberalization of agricultural markets, it has realized modest success in smallholder and communal agriculture. In many developed economies, agricultural markets are still controlled and subsidized, with their farmers continuing to receive subsidies and other support. The World Bank however, expected farmers to adapt to an unsubsidized market-led environment in an unfairly short time period. Small holder agriculture has therefore failed to provide a route out of poverty for the majority. The role of the State in a liberalized agricultural marketing system and efficiently functioning institutions is critical to the success of the various measures. Programs to enhance smallholder agricultural productivity and relieving poverty in the communal areas need long-term government and donor support.

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