Low capacity hits fertiliser industry

BUSINESS REPORTER

Zimbabwe’s troubled fertilisers industry has been hit by low-capacity utilisation amid revelations that companies in the sector can only satisfy about 15% of the national demand, a new report has shown.

The low capacity was largely attributed to a number of challenges including power cuts, limited working capital, limited foreign currency to import critical raw materials and high interest rates which discourage the companies from borrowing, among other problems, a new report by University of Zimbabwe economics lecturer, Albert Makochekanwa shows.

The economics professor was commissioned by the Ministry of Industry and Commerce to undertake the investigation.

Other major problems are non-availability of key raw materials in bulk quantities in the local market, smaller profit margins and non-availability of fertiliser endowments.

According to the report, the fertiliser companies produced about 90 000 metric tonnes in 2022 against a national demand of about 780 000mt. Out of this, 380,000mt of top-dressing fertilisers are required while Zimbabwe requires 400,000mt of basal fertilisers (compounds and blends). The consumption of 380,000mt of top-dressing is further divided into top dressing direct application (that is ammonium nitrate (AN)) and input into compounds (urea), while the consumption of 400,000mt of compounds is further divided into phosphate, potassium and AN.

“On average, actual annual production is about 90,000mt which only satisfy 15% of annual national demand,” the report said.

It continued: “ Evidence shows that idle capacity is mainly due to non-allocation of foreign currency to import ammonia gas which is one of the major ingredients in production of fertiliser. The average fertiliser manufacturing or production capacity utilisation for the year 2022 in the fertiliser sector was 52%, while the figure ranged between 80% on the upper bound and 38% on the lower bound.

“A number of challenges were enumerated as the major hurdles to effective implementation of local content. The challenges include unavailability of raw materials locally, poor or inconsistent quality of locally produced inputs,  higher local prices for inputs when compared to imports, unreliable local suppliers and unavailability of technology, among others.”

The shortfall has resulted in Zimbabwe becoming a perennial importer of fertiliser year in and year out.

Industry and Commerce minister Sekai Nzenza said the government was working on import substitution strategies, such as the development of a local content plan.

She said the strategy was aimed at promoting the utilisation of domestic resources as inputs along value chains, thereby achieving the objectives of increasing average local content levels, capacity utilisation, and manufactured exports in prioritised sectors.

“The development of local content thresholds for the (fertiliser) sector will go a long way in complementing other efforts that the Government has put in place to promote the use of local resources,” Nzenza said.