Zim firms to fill in supply gaps from Ukraine conflict
Zimbabwe Stock Exchange listed agriculture firms and others in related industries say there is need to roll up the sleeves to meet local demand and offset the adverse impacts of the supply chain disruptions caused by the conflict in Ukraine.
Although the economy is projected to grow by 5,5 percent in 2022, market watchers maintain that inflation and currency instability could slow down the growth as they remain the biggest challenges to optimal industry performance.
Additionally, global trends and developments such as prices of commodities coupled with the war in Ukraine are expected to add to the strain negatively impacting the domestic economy as well as worsen inflationary pressures in the country.
Experts agree there is a nexus between the conflict in Ukraine and cost of production, which may dent the 2022/23 agriculture season going forward, therefore affecting the entire economic prospects.
The conflict in Ukraine started in February 2022 and created economic shocks being felt across the whole world with the potential to curtail economic growth, not only in Zimbabwe but across the world, especially in agriculture, grain supplies, energy, and food security.
The Russia-Ukraine conflict is already causing unprecedented shocks to supply chains globally giving rise to imported inflation, which is compounding the situation in already fragile African economies.
Seed producer, Seed Co International, has indicated it will play its part to boost the agriculture sector with better yielding varieties that are cost effective to offset the shortages stemming from the impact of the war in Ukraine, to ensure food security across the region.
“The war is adding onto existing Covid-19 and climate change induced challenges.
Agriculture however continues to receive enhanced priority to mitigate effects of the war as African governments work on import substitution initiatives to mitigate food shortages.
“Global supply shocks and imported inflation are expected to impact the cost of doing business and compound the effects of climate change in Africa.
“Regional food security will however remain top of the agenda to mitigate global supply shocks, and the group will step up its operations to satisfy the anticipated increase in the demand for seed in regional markets,” said group chief executive Morgan Nzwere in an operations review for the financial year 2022.
Russia is the second largest producer of ammonia after China while Ukraine was ranked 18th based on production statistics for 2020 and the war is going to contract supply of ammonia and hence cause a spike in its prices.
In terms of wheat production, Russia is the third largest producer while Ukraine is ranked 9th in the world and both countries account for about 15 percent of the global wheat production.
As such the war will disrupt supply chains and affect wheat delivery into the region and other countries relying on wheat imports in addition to subsequent price increases driven by high demand for the commodity.
Zimbabwe has already seen multiple upward reviews of prices of bread to $700 a loaf.
Beverages giant Delta Corporation has also acknowledged the challenges coming from the
conflict in Ukraine on the supply chain due to high shipping costs that will increase the
cost of imports.
There are, however, indications that aggregate demand will remain firm largely driven by
mining activities, diaspora remittances and infrastructure developments.
“The business remains poised to exploit these opportunities,” said Delta adding the group
is also undertaking an ambitious recapitalisation programme to address the capacity gaps
and improve customer service.
Other listed firms such as conveyor belts producer General Beltings Holdings Limited are
also angling to cash in on the supply gaps emanating from the impacts of the Russia –
Ukraine war by expanding the domestic market.
GB chairman Godfrey Nhemachena indicated the group will now target meeting the
anticipated increased local demand as the market will turn to local suppliers in the face of
logistical challenges caused by the war.
He added to the conflict, threatening to plunge the world into chaos particularly the
sources of primary raw materials.
“General Beltings is expected to increase its market consolidation as the anticipated
logistical constraints emanating from the conflict will compel its existing customers to
replace imports with locally produced products,” he said.
The group added demand for chemicals in the agriculture sector is also expected to boost
earnings for its business unit – Cernol Chemicals, which is also expected to help market
retention and consolidation.
Agriculture, together with mining sectors are expected to anchor the economic growth
together with other sectors such as manufacturing, tourism and construction under the
National Development Strategy (NDS1) which should usher the country into an upper
middle income economy.-The Herald
