Fertiliser contract bundling proves costly

The fertiliser supply contract between the Government and Sable Chemicals, the country’s sole producer of ammonium nitrate has been cancelled after the Treasury raised concerns over violation of laws, sources have said.

Sable and the Government entered into a contract to supply fertiliser for State assisted programmes in June last year, but the contract was not implemented after the Ministry of Finance and Economic Development failed to release the funds as per agreement.

Sources said the agreement was not implemented because it violated some provisions of the Public Finance Management Act, and in particular, that no private company can be directly funded by the Treasury.

Zimbabwe is currently facing a shortage of ammonium nitrate and this has been partly attributed to depressed local production.

On Wednesday, a high level meeting was held which sought to review the performance of the contract between Sable and the Government.

It was attended by top officials in the Ministries of Industry and Commerce, Finance and Economic Development and Lands, Agriculture, Water, Fisheries and Rural Resettlement.

“It (the meeting) was told by (George) Guvamatanga (Finance Permanent Secretary) that the way in which the contract was structured is illegal under the Public Finance Management Act and that is why it was not honoured,” said one official from the Ministry of Finance who declined to be named because he is not authorised to talk to press.

Another source said: “Dr Masuka (Agriculture Minister) then suggested that an addendum be put in the contract so that Sable can be supported.”

This would be done in the context of supporting local production and boosting availability of the commodity whose shortage is threatening a promising season.

“The meeting was surprised how the Treasury remained silent when it knew that the contract was illegal; only to say it seven months after it was signed,” another source said.

“It was, however, concluded that the Treasury will only release money to CBZ Bank where Sable can obtain the Zimbabwean dollar and then go and source foreign currency from the auction system.”

Efforts to obtain official comment from the Finance Ministry were not successful by the time of going to press.

The bulk of early planted maize crop now requires top dressing fertiliser, especially at a time the country continues receiving excessive rains.

While the crop is doing reasonably well, prolonged rains have caused water-logging, and this could severely cut potential output if little or no fertiliser is applied on badly leached soil.

Zimbabwe Farmers’ Union executive chairman Paul Zakariya said the crop situation was good, save for few areas where it has been affected by heavy rains.

Last year, the Government approved a five-year roadmap aimed at reducing fertiliser imports over the next five years through capacitating local manufacturers.

The country, whose economy is largely agro-based, has been importing significant quantities of fertiliser as local producers struggled to meet demand largely due to foreign currency shortages.

Over the past seven years, Zimbabwe spent nearly US$662 million on fertiliser imports.

Had the local industry been adequately supported, the country would have spent US$400 million or US$262 million less.

According to the roadmap, Sable will ramp up annual production to 240 000 tonnes from the current installed capacity of 90 000 tonnes.

Presently, the company is operating at 33 percent of its capacity largely due to foreign currency shortages.

Chemplex will increase production to 100 000 tonnes over the same period, from the current capacity of 80 000 tonnes.

It is presently using 75 percent of its capacity. Demand for fertiliser in a normal farming season is around 600 000 tonnes, of which 70 percent goes towards the Government farming programmes.-ebusinessweekly.co.zw