By Paison Tazvivinga and Nyenge Dzinotyiwei
The past two decades have witnessed unprecedented local economic volatility.
This came in the form of hyper inflation, economic meltdown, company closures, job losses, value erosion of the local currency which wiped away savings, among others.
The beef sector was not spared.
The sector was more commercial and export-oriented during the post-colonial era but it grew to be a pale shadow of its former self.
Post fast-track land reform programme, Zimbabwe witnessed diminishing exports and failure in national disease control.
This was exacerbated by severe climate fluctuations.
Persistent droughts (at least one in every three years) impacted negatively on livestock production. However, this is not withstanding the fact that Zimbabwe is a very important producer of beef cattle.
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This is the basis upon which the government has zeroed in to revive the ailing sector.
However, wherever taxpayers’ money is involved, it is prudent to make known the business/economic case of such expenditures.
It is, therefore, the aim of this article to put forward the economic case for most players in the beef value chain.
Value chain analysis help to understand how agricultural development fits within market dynamics.
It also permits an assessment of the value chain’s impact on smallholder farmers and businesses.
Financial case
The prevailing economic environment complicates business operations.
The economic environment is marred with inflationary pressures which followed periods of relative price stability during the Unity government era.
This distorts business operations and must be factored in when assessing financial viability of livestock sector.
Besides the inflationary environment, the economy is experiencing liquidity and foreign exchange challenges which culminates in different pricing for the same unit.
Also, rent seeking opportunities are diverting funds from productive sector to speculative purposes.
To add to all these, the cost of doing business is high, this weighs heavily on the shoulders of communal farmers.
For example, when they trade their livestock using electronic money, IMTT claim a sizeable percentage of their income.
Over and above the fact that communal farmers are price takers as they lack access to well established and regularised markets.
However, despite these challenges, livestock production remains a profitable business.
In a study on the profitability of beef value chain by the European Commission, it was concluded that both commercial and communal farms are profitable in a range of 20 to 40% profitability.
This is despite the fact that communal farmers have other obligations which are prioritised over profit making.
These include, livestock keeping as a form of social capital, milk production and draft power.
Other players in the beef value chain such as abattoirs were also observed to be profitable.
This makes the livestock sector a viable business operation.
About 20% to 40% return in investment, is a lucrative return on investment especially in an environment where policies seem to discourage production in favour of rent seeking opportunities.
If the right intervention is directed towards the sector, with good intentions, it has the potential to address some of the challenges bedevilling the nation today.
It has the potential to contribute massively to poverty alleviation.
Moreso, it will improve the economic status of those in the low quartile of the income strata (communal farmers).
According to the World Bank, extreme poverty (people living under the food poverty line of US$29.80 (£21) for each person a month) in Zimbabwe reached 42% in 2019, up from 30% in 2017.
Of the extremely poor, about 90% lived in rural areas with 1.6 million of them being children.
It, therefore, follows that if livestock production is promoted with the right policies and other intervention strategies, there is an opportunity to address some of these challenges.
At national level, the livestock and livestock products contribute about 30-35% of total agriculture GDP, in turn agriculture contributes about 17% of total national GDP.
The sector also indicates a high rate of value chain integration, around 0.87.
It, therefore, can be discerned that the sector has a lot of potential to contribute more to national treasury, if properly managed.
On a global scale, the European Commission discovered that the local beef value chain has a domestic resource cost ratio of about 0.15. this represents a strong competitive advantage for the sector as local resources are cheaper than international resources measured with international prices.
In other words, the economic value created by the beef value chain is better with local resources compared to the one created using international resources.
We are, therefore, better off investing in local beef value chain as it gives us better returns at all economic levels, local (household), national and international level.
The livestock sector also proved to be a growth inclusive sector. 55% of the beef value chain net income is attributed to production and transformation.
Communal farmers, retain about 30% from the value chain, signifying a handsome return for family labour considering that most of the labour is now family supplied rather than outsourced.
The above analysis has put forward the business case for livestock production in Zimbabwe.
More importantly is the conviction that beef value chain has normal operating profits even in an unfavourable economic environment.
It has also been observed that the livestock sector has the potential to turn around the fortunes of the rural populace where according to the Food and Agriculture Organisation it is estimated that up to 60% of rural households own cattle, 70-90 percent own goats, while over 80 percent own chickens.
If the right interventions and policy stance is adopted, livelihoods will be improved especially for children who normally bear the brunt of the misery through school dropouts and failure to afford formal healthcare.
It, therefore, follows that government and other players must prioritise rejuvenating the livestock sector as it presents low hanging fruits.
Veterinary services are the elephant in the room, if not addressed, many farmers will continue to lose their precious livestock to diseases, which can be cured or those which can be dealt with if farmers are educated on the correct preventative measures.
Recent efforts by government towards dam construction, road and irrigation rehabilitation are commendable.
Such efforts must then be complimented with revamping agriculture related research work and institutions as a matter of urgency.
The importance of research and development cannot be over emphasised further than Hindle et. al., (2016) who alluded that in the long run, research and development tend to have higher returns per unit of spending compared to investment in infrastructure like roads.
It goes without question that agriculture extension services have deteriorated, with limited capacity to provide effective services.
Research and development have declined and have been exacerbated by the loss of human capital.
These challenges call for more tailored policies if the sector is to realise sustainable growth.
If these negative trends are not deliberately reversed through well-structured and well-targeted policies, there is little hope of achieving set targets in agriculture strategies like the livestock growth plan.
- *Paison Tazvivinga is a development economist and Nyenge Dzinotyiwei is an animal scientist. You can email Tazvivinga on [email protected].
- These weekly articles are coordinated by Lovemore Kadenge, an independent consultant, past president of the Zimbabwe Economics Society and past president of the Chartered Governance and Accountancy Institute in Zimbabwe. Email [email protected] and Mobile No. +263 772 382 852.
