aurora
Martin Kadzere
Sable Chemicals, the country’s sole producer of ammonium nitrate has received $335 million out of nearly $1,5 billion that was targeted for the period between April and August under a contract it entered with CBZ Agro Yield for the supply of top dressing fertiliser for Command Agriculture, Business Weekly can exclusively reveal.
The Kwekwe-based AN producer entered into a $3 billion deal with CBZ Agro Yield, an agriculture financing unit owned by CBZ Holdings — the country’s largest banking group — to supply 60 000 tonnes of AN between April 2021 and February 2022.
Target production between April and August was 30 000 tonnes, but CBZ Agro Yield only released $335 million, significantly less than $1,45 billion needed for the period, sources said.
As a result, Sable only produced 8 000 tonnes, missing the target by 22 000 tonnes and “poor contract performance may lead to a shortage of AN next season”.
Funding needs for the period between September 2021 and February 2022 is $1,2 billion (US$13,7 million) for the importation of raw material and $400 million to meet local costs.
“The last batch of disbursements was in June this year but the contract requires CBZ (Agro Yield) to release money every month,” one source, who requested not to be identified because the matter is private told Business Weekly.
CBZ Agro Yield managing director Walter Chigodora, declined to comment over the phone while Sable Chemicals chief executive Bothwell Nyajeka declined to comment “on the contract in the absence of the other party”.
Last year, Sable was contracted to produce 30 000 tonnes of AN for Command Agriculture in a deal worth $1,6 billion but CBZ Agro Yield released
$557 million, resulting in a production shortfall of 18 600 tonnes. Foreign currency savings loss was US$3,8 million.
“That is partly the reason why we had a shortage of AN early this year,” another source argued.
“The CBZ failed to release the money as per the contract and the country ended up importing, which also became a challenge due to disruptions caused by a tropical storm in Mozambique and challenges related to Covid-19.”
Sources said the “timely release” of the funds would enable Sable to participate on the auction system. Sable, which recently secured a US$11 million facility from Afreximbank for retooling needs at least $240 million or US$690 000 to procure raw materials per month. It also needs about $80 million to meet local costs.
“Any disruption in weekly funding allocation disrupts the supply chain and negatively impacts (on) production,” according to a recent presentation by Sable to Government.
In the presentation, Sable made a request to have weekly foreign allocation from the auction market increased to US$690 000 from US$500 000 and allocation period cut from six weeks to seven days.
Lost savings
Savings lost due to under performance of the contract between April and August this year was US$4,3 million (on production shortfall of 21 919 tonnes), Sable said.
Projected foreign currency savings for the period between September 2021 to March 2022 is estimated at US$6 million on production shortfall of 30 000 tonnes.
The country could potentially loose US$23,5 million in 2022 and US$40 million in 2023.
Sable has started deploying US$11 million capital loan from Afreximbank and is looking to ramp up production to 200 000 tonnes by 2023. The company is also seeking access to contracts to supply fertiliser to other State assisted farming programmes such as Presidential Cotton Inputs Scheme currently held by Fertiliser, Seed & Grain (FSG).
Last year, FSG is understood to have signed a five-year contract to supply fertiliser for the cotton scheme. Lobbying efforts by local companies to also have access to the Presidential Cotton Inputs Scheme contracts have so far failed to yield results. Last year, Zimbabwe launched a five-year road map aimed at reducing fertiliser imports through capacitating local firms.
The country, whose economy is agro-based has been importing significant quantities of fertiliser as local firms are struggling to meet demand largely due to foreign currency shortages and operational challenges.
While Zimbabwe spent nearly US$700 million on fertiliser imports in the past seven years, with the Government, being the largest financier though State assisted farming programmes, the huge spending had a little impact on local fertiliser producers.
Bongani Ndlovu