EDITORIAL COMMENT: Wheat imports need to be sorted out

Zimbabwe’s bakers and millers are worried that a complex system of paying for wheat imports is driving up the landed cost of this grain and that this will almost certainly result in higher prices for bread unless a simpler and more direct way of paying for wheat is put in place.

Bakers operate on thin margins, possible because they have high volumes and sufficient data on sales to have very low percentages of each day’s baking left unsold at the end of the day.

A combination of assured supplies of raw materials, mainly flour, and tight management allows consumers to have a reasonable deal while properly run bakers can still make adequate profits.

But the National Bakers Association, which groups those who make and sell the bread, and the Grain Millers Association of Zimbabwe, whose members mill the wheat into flour and who are generally the direct importers although bakers can import wheat for contract milling, are concerned that their bankers are incurring exchange losses and service fees in converting euros, pounds and rands into US dollars to pay for the imports.

These banking charges are passed onto the wheat importers.

Zimbabwe can, of course, grow some of its own wheat. But this has to be grown under irrigation which drives up costs. Generally imported wheat, grown by dry-land farmers, will be cheaper than Zimbabwean-grown wheat, even when transport and other costs are included.

Wheat only started being grown locally after UDI during a time when the economy was incredibly tightly controlled and exchange rates were set without any connection with market realities.

Those days have gone, but it is probably still worthwhile to have some careful costing done again to see if contract wheat farming is a partial solution.

The Government has been clamping down on flour imports, vastly preferring to see wheat grain alone being imported with all milling and packing costs being borne locally without touching the scarce export earnings.

The two associations have now combined to see if the Reserve Bank of Zimbabwe can give a higher priority to clearing all outstanding invoices for wheat and then provide $16 million a month in US dollars to maintain required imports of grain.

We think the Reserve Bank should urgently see how the payment of wheat imports can be smoothed and made far more efficient, but at the same time the bank, or some other agency, should be allowed to see quite detailed internal accounts from milling and baking companies.

Three bakers and two or three milling companies dominate the bread and flour business in Zimbabwe so it would not take long for an independent accountant to establish quickly the legitimate requirements of the industry.

But the fact that these quite strong competitors are looking for nothing more than a simpler and more efficient system of importing wheat suggests that they are probably tightly and honestly managed.

If there were undesirable combinations or widespread bad management then other requests would have been made.

We assume that basic foods have a high priority on the import list. We note that the imports are rolling in and there are no bread shortages. The whole problem brought up by the millers is the complexity of financing these imports. It should not be difficult to sort that out.

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