Presentation by Dr. Augustine Zvinavashe (University of Zimbabwe) at Wheat for Food Security in Africa conference, Oct 9, 2012, Addis Ababa, Ethiopia.

1. Wheat Value Chain and Business Environmental
Factors in Zimbabwe
JACKQELINE MUTAMBARA and AUGUSTINE ZVINAVASHE
University of Zimbabwe
Department of Agricultural Economics and Extension

2. The presentation
• Introduction
• Study objectives
• Research methodology
• Wheat value chain in Zimbabwe
• Performance in wheat value chain
• Business environment factors affecting wheat
production
• Conclusions and recommendations

3. Introduction
• Zimbabwe agricultural sector contribution to the
GDP varies between 15% and 20% annually.
• Provides 40% of export earnings and
• Supplies over 60% of agro-industrial raw
materials (Zimstat, 2012).
• Further, it provides markets for the fragile
manufacturing sector.
• This has enabled approximately 70% of the
population to depend on the agricultural sector
as a source of food, income and employment
(GoZ, 2011).

4. Introduction continued
• Wheat farming is a major cropping activity and the
commodity is highly valued particularly its product, bread,
which has become a key staple food in Zimbabwe thus
wheat has evolved into the second most important grain
crop after maize (Kapuya et al, 2010).
• Wheat contributes about 4% to the GDP of Zimbabwe (RBZ,
2009).
• The immediate wheat products are flour and bran.
• Flour is the main ingredient for making bread and other
confectionaries, consumed daily by mostly urban
Zimbabweans
• Wheat bran is mainly used in the stock-feeds
manufacturing sector.

5. Introduction continued
• The country’s production levels fell from a
record high of 340 000 mt in 2000 to a record
low of about 40 000mt in 2011 against a
consumption level of about 450 000mt / year
(index mundi ).
• The decline in national wheat production is
attributed to many factors which led to
reduced areas planted and declining
productivity of wheat over the years.

6. Study objectives
• The broad objective of the study is to provide
background information and discuss about key issues
surrounding wheat production and marketing that will
form the basis for future policy decisions on wheat
production in Zimbabwe given the problems
bedevilling the sector at the moment.
– Specifically the study maps the wheat value chain,
– Assesses emerging production and consumption patterns,
– Evaluated performance
– Identified performance-influencing factors at various
stages in the value chain.
This crucial data can then provide background
information for future policy decisions on the country’s
wheat production, marketing and consumption
decisions.

7. Research Methodology
Data collection
• The study uses literature review,
• Key informants and
• Focus group discussions to obtain information and data.
• Key stakeholders identified from the literature were consulted by
use of key informant interviews and focus group discussions to
identify competitive constraints in the industry.
Data Analysis
• Descriptive statistics was used to present and summarize data.
• Costs and profit functions were used to determine the performance
of the value chain at various levels.
• Performance indicators such as prices and volumes of production
will be considered and compared to either international parity
prices or theoretical standards.
• Ranking and scoring were the techniques used to streamline the
constraints and provide the focus for further analysis.

8. Wheat value chain map in Zimbabwe
Fertilizer Companies (ZFC, Seed Houses: (Seedco,
Windmill, Omnia) Agricultural Chemicals
Pannar, Pioneer, Agriseeeds)
Input
Suppliers
Wholesale and retail
channels
Large Scale Imports
Producers A2 Farmers Others
Commercial Farmers (83%)
Traders GMB, Staywell, Croplink, Crodium, Integrain and others
Foreign Millers
Processors Formal millers (GMB, National foods,
(Imports)
Blue Ribbon and others
Wheat bran-
Flour -Baking
Animal feed
industry
End manufacturing
Wholesale and retail
Markets
Households and other Livestock
consumers producers
Figure 1: Wheat value chain in Zimbabwe

9. Performance of wheat value chain-
farmers
• The average total cost of producing one
hectare of wheat is $ 1,788.00.

10. Performance of wheat value chain-
farmers
Wheat production is currently unprofitable and not viable. Average gross
margin per hectare are negative, about -$461.00 and profits are about -
$623.81 per hectare
Yield level (t/ha) 2.50
Blend selling price ($/t) 466.00
Gross Income ($/ha) 1165.00
Total Variable Costs (TVC) ($/ha) 1626.19
Total Fixed Costs (10%) of TVC ($/ha) 162.62
Total Cost 1788.81
Gross Profit ($/ha) -623.81

11. Performance of wheat value chain-milling industry
The average milling cost of wheat is about $579.00 per tonne.

12. Performance of wheat value chain-
milling industry
Millers are collecting a profit of $111.23 per
tonne of wheat milled.
Item Value ($)
Total Cost /t 578.77
selling prize (16% mark up)/t 690
Profit Margins/t 111.23

13. Performance of wheat value chain-bakeries
The cost of making one standard loaf of bread is
currently at $0.84

14. Performance of wheat value chain-bakeries
Bread making is viable and profitable in Zimbabwe with bakers realizing a profit of
$0.16 per loaf of bread baked.
Item Value ($)
Total Cost Per Loaf
0.84
1.00
Retail Price
Profit 0.16

15. Constraints in wheat value chain
Cross cutting issues
• Finance
• Delayed Payments Economic Impacts
• Infrastructure
• Supply of Raw Materials
• Low Capacity Utilization
• Skills and Knowledge Gaps
Feasibility of reform
• Technology Gap
• Time
• GMO Policy Inconsistency
• Resources
• Increased • Action
Search/Transaction Cost
• Border Protocols
• Corruption at boarder posts

16. Constraints in wheat value chain
Farm Input Suppliers
– Low Demand for Improved
Farm Inputs
Farm Production: Grain and Economic Impacts
Legumes Producers
– Low Productivity
– Climate Change
Dry Milling Industry Feasibility of reform
– Unfair Trade Practices: • Time
Dumping of Wheat Flour
• Resources
Bakers • Action
– Decreasing Demand for Bread
– Duty on Imported Flour

17. Prioritized constraints
Results from prioritization of constraints
indicated that the main business environment
factors with percentage weight of scores as-:
• Availability and cost of finance (9.14%),
• Delayed payments (12.25%),
• Unfair trade practices such as dumping of
wheat flour (12.80%),
• Skills and technology gap (7.86%) and
• Duty on flour (12.80%) among other factors.

18. Prioritized constraints

19. Conclusions and policy recommendations
• Wheat value chain (farmers, millers and bakers) is not attractive in
Zimbabwe as returns to production are far below economic
thresholds.
• Stakeholders recommended that the government creates a
favorable environment to address some identified issues such as -:
– Creating a conducive environment for direct foreign investment in
order to improve access to finance and infrastructural development.
– The link between farmers and markets needs to be strengthened
through the establishment of a futures exchange that will provide
farmers with a ready market for their wheat.
– Investment in farmer training and research in technology development
is recommended to improve production and processing in order to
increase efficiency and lower production costs. T
– he local industry needs protection from unfair trade practices such as
dumping of wheat flour through government protective policy on
imports.
– Further studies on the impacts of the identified factors should be
carried out to provide evidence for lobbying and advocacy by
stakeholders for a favorable business environment.

20. End, thank you