Grain millers struggle to repay debt

HARARE - Already feeling the pinch from slowing economic growth, the grain milling industry is  finding it increasingly hard to get hold of foreign currency due to central bank restrictions and may struggle to repay their debts to wheat, rice and salt foreign suppliers.

The grain milling industry’s debt has risen close to record highs of $90 million, reflecting anxiety despite an assertion by the central bank that no borrower will default due to the currency shortage.

The grain milling industry is accumulating $400 000 monthly in interests, creating inflationary pressures towards product pricing, Grain Millers Association of Zimbabwe chairperson Tafadzwa Musarara said.

Storm clouds have been gathering over the stuttering southern African economy as the price of bread went up by 10 percent with effect from last week due to an increase in the price of wheat — a key raw material in the manufacture of the commodity.

This comes at a time when millers are frantically making logistical arrangements to bring in a consignment of wheat which had been held up in neighbouring Mozambique to avert bread shortages that were starting to emerge.

Companies across the board have started feeling the dollar shortage due to restrictions imposed by the central bank to preserve its foreign currency reserves.

The development is an indication that shortages and rise in prices of bread obtaining in the country could persist.

Innscor Africa issued a statement indicating that a loaf of bread which had been pegged at $1 will be $1,10 starting last Saturday.

Musarara said the situation can be addressed by addressing the parlous currency situation in the country.

“The grain milling industry is currently saddled with a $87 million foreign debt to wheat, rice and salt suppliers,” he said.

“This debt is accruing $400 000 monthly on interests, creating inflationary pressures towards product pricing.

“We wait with bated breath the full text of the proposed currency reform and hope that our outstanding nostro liabilities will be ring fenced against exchange losses.”

Musarara pointed out that $25 million is required to pay for wheat, rice and salt imports every month.

“The current national wheat stocks remain below national requirement with some mills having suspended wheat milling operations owing to unavailability of the product.

“However, bread flour supplies are being prioritised to the major bakeries that constitute 90 percent of market share and have national geographic spread.”

Musarara pointed out that global prices worsened by the adverse El Nino-induced weather in the western world is negatively impacting on wheat exporting countries such as Germany and the United States of America whose wheat supplies have been revised down.

He said Russia which is the world’s second largest wheat exporter and a major source market for Zimbabwe, has cut its export quota.

Musarara also said there is an accelerated wheat importation plan on the cards.

“GMAZ, Reserve Bank of Zimbabwe (RBZ) and the Agriculture ministry have put in place comprehensive contingent measures for the expedited shipment of wheat into the country commencing.

“We have already negotiated for the movement of 30 000 metric tonnes of wheat to Beira on an instalment prepayment arrangement.

“The final payment on this shipment will be paid by tomorrow by RBZ and the shipment of the same to Zimbabwe will commence immediately thereafter both by rail and road. We aim to deploy 100 trucks to compliment rail.”

— Additional Reporting Equity Axis

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