The low levels of productivity in the agricultural sector necessitated Government to pay unsustainable high producer prices that have resulted in budget deficits amounting to several billions of dollars, this is according to the 2019 Pre-Budget Strategy Paper (Strategy Paper) that was prepared by the Ministry of Finance and Economic Development.
According to the Budget Strategy Paper, which has since been presented before Cabinet, low productivity in agriculture is compromising competitiveness of locally produced agro-products in relation to regional and international contenders, threatening viability of the sector and the economy at large.
In addition, “low levels of productivity are necessitating the current unsustainable high producer prices offered by Government for major crops such as maize, wheat and soya beans, which has become a major source of budget deficits,” reads the Budget Strategy Paper.
The country is expected to close the year with an overall fiscal deficit of $2,3 billion, which is 59,4 percent of the previous year’s revenue.
This comes as Government is expecting to have spent $475 million on grain procurement by end of 2018.
Government, through the Grain Marketing Board (GMB) is paying $390 per tonne of maize which is about 30 percent higher than prevailing regional market prices of $290 per tonne. For soya bean, Government is paying $780 which is 62 percent above import parity.
GMB is currently paying $500 for a tonne of wheat and indications are that the price might be reviewed upwards despite import parity prices averaging about $340 per tonne.
Low yields, according to the Budget Strategy Paper, are attributable to sustained low levels of investment in extension services, research and development in the sector, which increases the cost of production.
“Government allocations towards these areas have been minimal while priority has been on inputs and outputs subsidies for the sector.”
Extension services are seen as critical in disseminating information on agricultural technologies and improved practices to farmers, thereby enhancing agricultural productivity, especially for small scale farmers.
Treasury believes provision of extension services is critical at this juncture as the new land owners have limited commercial farming experience and skills.
To improve access to extension services, Government will reprioritise allocations of resources to the sector towards extension services to improve training and experience of extension workers, as well as their mobility with a view to enhance the capacity of farmers, reads the Budget Strategy Paper.
Government will also increase resource allocation towards the area of research and development as a way of improving yields.
Well-funded research services will allow adoption of new technologies and varieties in the agricultural sector, critical for enhanced productivity of local farmers.
Lack of market access also increases post-harvest losses, undermining farmers’ earnings, as absence of markets often leaves farm produce to either rot or disposed of at give-away prices.
As a result, Government will facilitate access to markets by farmers through re-establishment of commodity exchange markets, which will also transform agriculture output into effective collateral for borrowing by farmers.