Drought strains SA’s neighbours

Picture: Itumeleng English

Picture: Itumeleng English

Published Nov 23, 2015

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Harare - Countries in the southern African region, like Zimbabwe and Zambia, have to prepare for further strains to their fiscal positions, as dry weather conditions have worsened into a drought.

The conditions will present a double blow to the regional economies, which are already set for marked economic decline, because of continuously softer commodity prices. Zimbabwe and Zambia are heavily reliant on mining for economic growth amid warnings that they diversify their economies.

Like South Africa, economies in the region are dependent on agriculture, which is now poised for a slow-down because of the dry weather conditions that experts say are being occasioned by the El Niño weather phenomenon associated with extreme temperatures and floods.

“We are faced with little rain,” Joseph Made, Zimbabwe’s Agriculture Minister, said. “We want to assist those who are vulnerable. We are also propping up irrigation to counter the effects of less rainfall.”

Poor rainfall will further worsen Zimbabwe’s economic performance and productivity, with the growth outlook for 2015 already cut back to 1.5 percent with agro-processing companies such as Delta Corporation, a unit of SABMiller, and Hippo Valley, the Zimbabwe listed subsidiary of Tongaat Hulett, expected to be the hardest hit.

Christie Viljoen, a senior economist at NKC African Economics, told Business Report that Zimbabwe’s “import bill is projected to be only 2.5 percent smaller this year as a jump in demand for cereals (due to drought conditions) translate into a smaller decline than the generally weak economic environment would suggest”.

The overall cost and impact on the economy will likely be significant, according to other experts. Regional economies are major exporters of beef to the EU, a lucrative market that is key for much needed revenues, but the drought will affect beef production in countries such as Zimbabwe, Namibia and others.

Caradee Yael Wright of the Applied Centre for Climate and Earth Systems Science and co-author for a report on the impact of the southern African drought conditions released this week, said the region had suffered “from dramatic year-on-year changes in climate”.

Severe droughts

“This has led to severe droughts and disturbance in the marine or terrestrial ecosystems. Such variability of climate affects the agricultural industry, water reserves, fisheries and, as a result, the broader economy. There is a 50 percent chance of a drought occurring this summer that could have an impact on the whole region,” the report said.

Zimbabwe’s most important cash crop is tobacco, with this year’s tobacco auction season expected to start a few weeks later than usual due to adverse weather conditions, which delayed maturity and drying processes for the tobacco crop.

The value of sales for the 2015 Zimbabwe tobacco crop declined by almost 17 percent to $586 million and Viljoen said weather induced decline in tobacco would scrap by some margin the agriculture sector’s contribution to gross domestic product (GDP).

Tongaat Hulett has already experienced production and profitability setbacks as a result of the dry weather conditions in the region. Agriculture accounts for about 11.2 percent of Angola’s GDP, while it accounts for 11 percent and 13 percent of GDP in Zambia and Zimbabwe, respectively.

Economists said Zambia was highly exposed to weather conditions due to the linkages of the agricultural sector to the country’s real economy.

Agriculture “is the lifeblood for the majority of the workforce and dominated by small-scale farming with weak irrigation systems, thereby rendering the sector vulnerable to weather conditions,” Irmgard Erasmus at NKC African Economics said.

“In addition, power generation in Zambia is primarily hydro-based, which means that low (and falling) dam levels increases the daily power deficit. The power deficit is estimated at 1 000 megawatts, necessitating the importation of power… at high cost to the fiscus.”

BUSINESS REPORT

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