Financing challenges inhibit dairy sector

ZIMBABWE’S dairy sector, despite achieving remarkable growth in milk production, is struggling to access the working capital needed for further expansion and efficiency improvements.

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The Zimbabwe Dairy Industry Trust chairperson, Themba Mutsvairo, emphasised the need for long-term financing options.
“Currently, the buyer-willing seller system is no longer providing adequate foreign currency to the processors to meet their foreign currency obligations. The local financial services are unable to meet our capital expenditure and operating expense requirements as processors. Also, the local financial services provide short-term finances, which are quite expensive,” Mutsvairo said.
High production costs, reaching 67 US cents per litre, are significantly affecting the sector’s competitiveness compared to regional averages. This disparity is driving consumers towards cheaper, unregulated imports, raising concerns about the impact of the African Continental Free Trade Area (AfCTA) on the local industry.
Mutsvairo warned, “If the borders open and this legislation of the AfCTA is opened in Zimbabwe right now, we won’t have a dairy industry to talk about because we will be depending on imports and our products won’t be taken into the market.”
The Zimbabwe Association of Dairy Farmers chairperson, Edward Warambwa, highlighted the urgency for policy intervention, particularly regarding loan servicing difficulties due to fluctuating payment structures for raw milk.
“Given the fact that we are at the onset of planting season, no bank can actually rely on a farmer to say, if a farmer is being paid 60 percent in US dollars and 40 percent in ZiG, how is he going to service the loans?” Warambwa said.
Despite these challenges, the dairy sector has shown promising growth, with a 20 percent increase in milk production in the first half of 2024.
Milk intake by processors also rose by 20 percent due to significant investments.
However, extreme weather conditions and reliance on imports continue to pose challenges.
Industry players remain optimistic, projecting a 13,2 percent increase in milk production in 2024. While the dairy herd has also grown, the sector still faces a considerable gap in meeting the national milk requirement.
newsdesk@fingaz.co.zw

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