The bumper maize harvest now being harvested and delivered will be saving Zimbabwe US$300 million in imports over the next year, and there will be enough carry-over stocks to keep millers supplied while the next harvest is reaped, dried and delivered.
Reserve Bank of Zimbabwe Governor Dr John Mangudya was happy in his latest interview that he no longer has to find the foreign currency to buy 100 000 tonnes of maize a month, but the even bigger benefit is that instead of paying foreign farmers for maize, we are now going to be pumping that money into the bank accounts of our own farmers, keeping it in Zimbabwe.
Over the next five months, the Grain Marketing Board is going to be spending $60 billion in buying the commercial part of the latest harvest, Dr Mangudya noted, with farmers retaining what they need for their own household and farm needs.
Pumping that sort of money into Zimbabwe’s rural areas is going to make a huge difference to the lifestyles of many families, since with land reform and the various Government input schemes, the $60 billion is going to be quite widely spread.
There is a huge double benefit to Zimbabwe and to Zimbabweans.
On the foreign currency side it is now well-known that Dr Mangudya has had to be juggling his cash flows, finding the currency to supply the Reserve Bank auctions where the fertiliser companies are among the top bidders as well as finding the cash for the bulk of food imports, although millers have been helping out with their own funds.
That juggling, especially with the seasonal flows of foreign currency from the tobacco exports, had led to delays in supplying successful bidders at the auctions with the currency they had bought.
But already this is being sorted out with most of the US$120 million backlog being cleared last week when the RBZ was able to release US$100 million, part of which must have come from the drying up of food imports.
Now Dr Mangudya has the easier cashflow problem of paying Zimbabwean farmers as they deliver their harvest. But he was pleased to note that the millers have already shown willingness to buy stocks in advance, providing a third of what he needs in total for maize payments, and more will be flowing in from sales over the next five months while the harvest is being delivered and paid for.
So he is confident that he can manage without having to indulge in the dubious financing that is now basically banned by the Second Republic reforms.
Even if there is some borrowing for the GMB this is borrowing that is backed by a real asset, a lot of maize in silos. It is not creating money out of thin air, but converting the hard work of Zimbabwean farmers into cash.
In any case it is something that all agricultural societies know how to deal with and is basically merchant banking, finding the big whack of cash at the beginning of the season to buy the inputs, which is paid back as the harvest is delivered, and then finding the cash for paying the farmers their profits, which is recovered when the harvest is sold to the factories that process the food.
At the same time the tobacco farmers are being paid out by their contractors, 60 percent of the net after inputs are deducted in foreign currency. This pumps another large stack of cash into rural areas.
The foreign currency component does not diminish export earnings by much. The contractors, who are the processors and exporters, add a lot of value before they pack the containers in the initial stages of processing and making up the precise orders they have received.
And this year’s cotton harvest looks good, after a bad spell, and is at long last being paid for on delivery by the contractors. Cotton provides a double harvest, the seed, most of which is sold locally to the companies producing cooking oil and stockfeed, and the fibre, most of which is still largely, and unfortunately, exported.
Here we need to get our basic textile industry back into shape. We should not be exporting fibre, but rather yarn and cloth, and then using our own secondary industry, which is in better shape, to be exporting things made from that cloth.
Since one of the largest cotton contractors is not only a seed processor, but also eager to rebuild the fibre processing industry there are good grounds for optimism that we will soon earn a lot more from what our farmers grow.
But all these savings in imports and rises in exports, important as they are as we maintain our current account balance in foreign currency, are to a large extent dwarfed by the growing prosperity in rural Zimbabwe as we commercialise our small-scale farmers, converting them from subsistence farmers who scrape a living into business people with cash profits to spend.
Despite the large pools of urban poverty, generally speaking the rural communities are far more impoverished, so the tens of billions of dollars now flowing to those families as they sell their harvests of the three major summer crops has huge social as well as economic benefits.
As we keep stressing, the Vision 2030 enunciated by President Mnangagwa requires a middle income population, with no one left behind to create a middle-income country. On the social and fiscal side the Government can now redirect some tax income away from social payments to poor rural families needing to buy food, or giving them relief food. They have largely been growing most of their food and earning their own money.
That allows the Government to step up its longer-term capital development, making sure those same rural communities have more dams, more irrigation, better roads and better schools and health facilities.
But the urban areas are not going to be left behind by growing rural prosperity. Those hundreds of thousands of farming families with cash are going to be spending most of their total of tens of billions of dollars over the next year, hopefully carefully.
But this means they will be buying things made in Zimbabwean factories, so long as those factories ensure that they offer the right products at the right prices.
This is the whole point of building an economy on production, rather than on shuffling paper or even on shops.
Producers add the wealth, and the money they earn then circulates, But since it is based on something real, the national economy grows in real terms, so everyone in the end benefits. That is how we will meet Vision 2030.