Harare - Informal traders in Zimbabwe are bracing for a dip in business as tobacco farmers, their biggest customers, are expecting lower yields and suppressed revenues owing to the dry weather conditions caused by El Nino.
Tobacco farmers raked in US$885m in 2015, an 11% jump on the previous year’s sales value. But this year will be very different with the dry weather conditions hammering southern Africa affecting both grain and tobacco farmers. Those that rely on summer rains are facing bleak prospects.
“The yields will be affected and in some areas it is a complete write-off. Revenues will certainly come in lower because the quality may also be poor because of the little and late rains we are having,” said Moses Chibaya, a tobacco and maize farmer in Karoi, north west of Harare.
Zimbabwe’s economy has increasingly become informal, with an unemployment rate estimated at 80%. Informal traders mostly sell pre-owned goods and other finished products imported from South Africa, Botswana and China. Commercial and formal companies in manufacturing have been closing down or are scaling down operations in a bid to survive. Business growth has been described by top economist Chris Mugaga as a “luxury” for most firms.
The remaining agro-industry companies left in Zimbabwe have been hardest hit by the current drought conditions. Fertiliser and seed companies are not realising any meaningful revenue as they are producing into stock, according to executives in the industry.
“Right now we are producing into stock and we are not realising any meaningful sales because of fears of the drought conditions. This has affected the whole fertiliser industry and we are just stockpiling,” said Jack Murehwa, chief executive officer of Sable Chemicals, a Zimbabwean ammonium nitrate fertiliser and agro-chemicals producer.
The United Nations World Food Programme said this week that the region faces hunger owing to failed rainfall seasons as El Nino takes its toll. Worst affected countries include Zimbabwe, Zambia, Malawi and others such as Lesotho, with food inflation in most of the region now on the rise.
“It has been a slow start to the year and our peak period, which is boosted by tobacco farmers, will likely be less lucrative this year because of problems with the rains. It will be difficult to push sales but we are just hoping that I will at least be able to get something for my family to survive,” said a trader at Mupedzanhamo second-hand clothes market in Harare.
The impact of the drought on Zimbabwe's economy will be more pronounced this year because tobacco has become the biggest export earner for the country. Traders in Harare said they will fight for the little revenue that the tobacco farmers will earn and try to push their goods hard.
“We certainly will have to import more and more of maize from other countries. On tobacco, we will see a decrease in output and revenue,” said Chibaya.
Reuters quoted Andrew Matibiri, chief executive officer of the Tobacco Industry and Marketing Board, as saying a lengthy dry period has affected the tobacco crop for the current season, whose auctioning period starts in March.
“The El Nino effect came with prolonged dry and very hot weather during the transplanting phase of the crop. This obviously decimated those crops that could not be irrigated,” said Matibiri.