Smallholder horticulture farmers in Honde Valley, the Manicaland Province, Zimbabwe, have bemoaned high costs of inputs, which they say are preventing them from realising their full potential.
Honde Valley is a vast communal land, about 95km north of Mutare where production of coffee, bananas, sugar beans, avocados, yams and sugar cane is the major source of livelihood.
But farmers who spoke to this publication indicated that the cost of inputs such as fertilisers, seed, coupled with high labour costs were a major drawback to the growth of their farming enterprises.
Mrs Tsitsi Magombeyi, a coffee farmer, said the sky-rocketing exchange rate on the illegal parallel market had worsened their plight as suppliers of fertilisers and seed were only accepting US dollars and in instances where they accepted the local currency, the prices were indexed to black market rates.
“The exchange rate is our biggest enemy,” she said in an interview.
“We cannot access inputs like fertilisers at an official rate which strains our profit margins. If only we could get 100% foreign currency retention on our coffee, it would ease the burden.
“But 40% of our payment comes in local currency at the official exchange rate.”
Amid the exchange rate volatility, the local currency is trading at between US$800 and US$850 against the greenback on the black market and US$416/US$1 on the auction market.
The annual rate of inflation, which fell to a record low in two years of 50.1% in June last year, jumped to 192% in June, the highest level in over a year.
Mrs Vangrista Muranda, also a coffee farmer, said because of squeezed profit margins, the profits they are generating were not enough to save.
This, she said, was the biggest drawback they face in efforts to expand their businesses into large scale enterprises.
For coffee, each station (comprising two plants) requires double the initial amount of fertiliser once it reaches harvesting to achieve better yields. Each station requires about 400 grammes to 1 kg of fertiliser, applied twice a season.
In addition to the cost of production, the farmers also highlighted limited or no access to funding from banks due to a myriad of challenges among them collateral.
“It takes over two years for a coffee producer to start harvesting and realising profits and because of this, we cannot access funding from financial institutions to capitalise our businesses.
“We have to fund ourselves right from the beginning which is difficult for many households who may want to venture into the business. But once you start harvesting and making profits it becomes easier to manage and also expand,” said Mr Leonard Nengomasha who is into both coffee and banana production.
A 50kg bag of fertiliser for bananas cost around US$70. The banana plants require at least 80g of fertilisers every month except for the winter season.
“As farmers, we appeal to the Government to assist us by establishing shops at our growth points where we can get fertilisers at affordable prices or at the official exchange rate.
“Right now we are approaching August and need to start applying fertilisers but the cost is too high,” said Mr George Duri.
The challenge with cost of production is not unique to small businesses alone but prevalent even with listed agriculture related businesses.
At their analyst briefing held recently, Seed Co Limited chief executive officer Mr Morgan Nzwere also indicated the disparity between the official rate and the parallel market rate as a huge challenge which strained profit margins, as suppliers demand USD or black market rates while the group sold final product at official rate.
“The gap between the official and alternative exchange rates in Zimbabwe is set to continue weighing down real profitability as it is not easy to de-link selling prices from official rates given the sensitivities around staple seeds in the country,” said Mr Nzwere.
Farmers in Honde Valley however, commended development partners who chipped in assisting them with irrigation facilities to minimise reliance on rain-fed agriculture.