SD Publication Series Office of Sustainable Development Bureau for Africa Comparative Economic Advantage of Crop Production in Zimbabwe Chrispen Sukume !!!!! Ephias Makudze !!!!! Ruvimbo Mabeza-Chimedza !!!!! Nancy Zitsanza Department of Agricultural Economics and Extension, University of Zimbabwe Technical Paper No. 99 November 2000 This publication is part of the Regional Trade Agenda Series USAID / Africa Bureau Office of Sustainable Development Agriculture, Natural Resources and Rural Enterprise Division Food Security and Productivity Unit and Regional Economic Development Support Office Eastern and Southern Africa, Office of Agriculture and Natural Resources Activity Title Regional Trade and Comparative Advantage in Eastern and Southern Africa: Implications for Food Security The series includes the following publications: ! Comparative Analysis of Economic Reform and Structural Adjustment Programs in East Africa: With Emphasis on Trade Policies ! Comparative Analysis of Economic Reform and Structural Adjustment Programs in East Africa: With Emphasis on Trade Policies—Annex ! Comparative Transportation Cost Analysis in East Africa: Executive Summary ! Comparative Transportation Cost Analysis in East Africa: Final Report ! Comparative Analysis of Structural Adjustment Policies in Southern Africa: With Emphasis on Agriculture and Trade ! Comparative Cost of Production Analysis in East Africa: Implications for Competitiveness and Comparative Advantage ! Methodologies for Estimating Informal Cross-Border Trade in Eastern and Southern Africa ! Reported Trade in East and Southern Africa: Analysis of Officially Reported Data ! Analysis of Policy Reform and Structural Adjustment Programs in Malawi: With Emphasis on Agriculture and Trade ! Structural Adjustment and Agricultural Policy Reform in South Africa ! Policy Reforms and Structural Adjustment in Zambia: The Case of Agriculture and Trade ! Analysis of Policy Reform and Structural Adjustment Programs in Zimbabwe: With Emphasis on Agriculture and Trade ! Informal Cross-Border Trade Between Kenya and Uganda: Proceedings of a Workshop Held at the Mayfair Hotel, Nairobi Kenya, December 6, 1996 ! Unrecorded Cross-Border Trade Between Kenya and Uganda: Implications for Food Security ! Comparative Costs of Transport: The Northern Tier Countries of the Greater Horn of Africa ! Comparative Costs of Transport: The Northern Tier Countries of the Greater Horn of Africa: Executive Summary ! Unrecorded Cross-Border Trade Between Malawi and Neighboring Countries ! Unrecorded Cross-Border Trade Between Mozambique and Her Neighbors: Implications for Food Security ! Unrecorded Cross-Border Trade Between Tanzania and Her Neighbors: Implications for Food Security ! Comparative Economic Advantage in Agricultural Trade and Production in Malawi ! Regional Agricultural Trade and Changing Comparative Advantage in South Africa ! Comparative Economic Advantage of Crop Production in Zimbabwe ! Analyzing Comparative Advantage of Agricultural Production and Trade Options in Southern Africa: Guidelines for a Unified Approach ! Analysis of the Comparative Economic Advantage of Alternative Agricultural Production Options in Tanzania ! Comparative Economic Advantage of Alternative Agricultural Production Options in Swaziland ! Comparative Economic Advantage of Alternative Agricultural Production Activities in Zambia ! Analysis of Comparative Advantage and Agricultural Trade in Mozambique For more information about the series, contact: Brian D’Silva Kitiabi R.M.K. Kiti USAID/AFR/SD USAID/REDSO/ESA-RTAA TEL: 202-219-0466 FAX: 202-219-0518 TEL: 254-2-86-2400/2; FAX: 254-2-86-0949/0562/9870 Email: [email protected] Email: [email protected] Productive Sector Growth and Environment Office of Sustainable Development Bureau for Africa U.S. Agency for International Development Comparative Economic Advantage of Crop Production in Zimbabwe Chrispen Sukume Ephias Makaudze Ruvimbo Mabeza-Chimedza Nancy Zitsanza Department of Agricultural Economics and Extension, University of Zimbabwe Technical Paper No. 99 November 2000 ii Contents List of Tables v Foreword vii Acknowledgements ix Executive Summary xi Glossary of Acronyms and Abbreviations xiii 1. Introduction and Background 1 1.1 Why Regional Trade? 1 1.2 Objectives of the Study 4 1.3 An Overview of the Economic Environment 4 1.4 Reforms in the Agricultural Sector 6 1.5 The Structure of the Agricultural Sector 7 1.6 Zimbabwe’s Trade in the Southern Africa Regions 8 2. Procedure for Analyzing Comparative Advantage 15 2.1 Introduction 15 2.2 Domestic Resource Cost Method 16 2.3 Procedure of DRC Computation 16 2.4 Framework of Analyses 20 3. Background on Crops Analyzed 23 3.1 Maize 23 3.2 Wheat and Barley 24 3.3 Sorghum 24 3.4 Oil Seeds 25 3.5 Tobacco 25 3.6 Cotton 26 3.7 Other Crops 26 4. Competitiveness of Crop Production in the Large Scale Commercial Farming Sector 27 4.1 Private Profitability 27 4.2 Social Profitability 27 4.3 Policy Interventions in Large Scale Commercial Agriculture 27 4.4 Comparative Advantage in Large Scale Commercial Sector 29 4.5 Sensitivity Analysis of Comparative Advantage 29 iii 5. Competitiveness of Crop Production in the Small-scale Commercial Farming Sector 31 5.1 Private Profitability 31 5.2 Social Profitability 31 5.3 Policy Interventions Effects 32 5.4 Comparative Advantage in the Small Scale Commercial Sector 33 5.5 Sensitivity Analysis of Comparative Advantage 33 6. Competitiveness of Crop Production in the Communal Farming Sector 35 6.1 Private Profitability 35 6.2 Social Profitability 35 6.3 Policy Interventions on Tradables 36 6.4 Comparative Advantage in the Communal Sector 37 6.5 Sensitivity of Comparative Advantage 37 7. Summary and Conclusions 39 7.1 Economically Suitable Crops by Sector 39 7.2 Highlights of Policy Effects 40 8. References 43 Appendix 1 Communal Sector Budgets 45 Appendix 2 Large Scale Commercial Sector Budgets 51 Appendix 3 Small Scale Commercial Budgets 61 Appendix 4 Input Import Content of Conversion Factors 67 iv List of Tables 1.1 Populations of SADC Member Countries 1 1.2 Principle Agricultural Exports of SADC States aa a Percentage of Total Exports 3 1.3 Economic Sub-Sectors and Contributions to GDP 4 1.4 Economic Indicators 1985 – 1995 5 1.5 Land Classifications by Natural Regions and by Farming Sector 8 1.6 Principle Agricultural Exports, 1981 – 1995 11 1.7 Production of Principle Agricultural Exports by Province (in metric tons) 12 1.8 Percentage Production of Principle Agricultural Exports by Province 13 2.1 Zimbabwe’s Farming Sub-Sectors 15 2.2 International Output Prices 19 2.3 Policy Analysis Matrix 20 4.1 Private Profitability for Large Scale Commercial Sector by Agroecological Zone 27 4.2 Social Profitability for Large Scale Commercial Sector by Agroecological Zone 28 4.3 NPC and EPC for the Large Scale Commercial Sector by Agroecological Zone 28 4.4 RCRs for the Large Scale Commercial Sector by Agroecological Zone 28 4.5 LSC: Percentage Change in World Price to Make Crop Competitive (+) or Uncompetitive (-) 30 4.6 LSC: Percentage Change in Yield that Makes Crop Competitive (+) or Uncompetitive (-) 30 5.1 Private Profitability for Small Scale Commercial Sector by Agroecological Zone 31 5.2 Social Profitability for Small Scale Commercial Sector by Agroecological Zone 32 5.3 Net Policy Effects for Small Scale Commercial Sector by Agroecological Zone 32 5.4 NPC and EPC for Small Scale Commercial Sector by Agroecological Zone 33 5.5 RCRs for Small Scale Commercial Sector by Agroecological Zone 33 5.6 SSC: Percentage Change in World Price to Make Crop Competitive (+) or Uncompetitive (-) 34 5.7 SSC: Percentage Change in World Price to Make Crop Competitive (+) or Uncompetitive (-) 34 6.1 Private Profitability of Crop Production in the Communal Farming Sector 35 6.2 Social Profitability for Communal Farm Sector by Agroecological Zone 36 6.3 NPC and EPC for Communal Sector by Agroecological Zone 36 6.4 RCRs for Communal Farm Sector by Agroecological Zone 37 6.5 COM: Percentage Change in World Price to Make Crop Competitive (+) or Uncompetitive (-) 38 6.6 COM: Percentage Change in World Price to Make Crop Competitive (+) or Uncompetitive (-) 38 7.1 Rankings of RCR in Sector by Agroecological Zone 39 v vi Foreword Southern Africa was characterized by a heavily regu- Agricultural Trade and Changing Comparative Advan- lated agricultural market before the late 1980s but, tage in Southern Africa. The comparative economic since then, countries in the region have followed a analysis (CEA) study in Zimbabwe forms part of a strategy to remove restrictive measures from the agri- larger activity to determine comparative advantages in culture sector. The deregulation process has taken the region. These studies not only examine the exist- place within the context of worldwide liberalization of ing comparative advantages, but also provide a means agriculture. These changes have meant that Zimba- to evaluate the impact of different agricultural policies bwe, and the entire southern Africa region, has to on comparative advantage. This proves to be an es- compete internationally in a more open agricultural pecially valuable tool to guide policymakers in the market. In order to be competitive, southern African region. countries have to use resources more efficiently by Comparative economic analysis establishes that exploiting their comparative advantages. Policy and groundnuts and sunflower are competitive in decision-makers should be guided so as to implement Zimbabwe’s large and small scale commercial sec- policies and strategies that will enhance the competi- tors, as well as the communal sector. It also reveals tiveness of agricultural producers. that maize is competitive in only two of the five Various studies have shown that countries can agroecological zones, despite the subsidization and improve their welfare by opening up their borders to emphasis on maize production. Drawing from these freer trade. There is, furthermore, a worldwide move results, the study’s authors examine the potential im- toward economic integration; the European Union plications of the study’s findings on policy and iden- probably being the most prominent example. Southern tify taxation of the agricultural sector as one area re- Africa is no exception with the region’s move toward quiring further attention. Cash crops in Zimbabwe are a Free Trade Area under the auspices of the Southern heavily taxed yet it appears that only a small percent of African Development Community (SADC). Not only the revenues are ploughed back into the agricultural is it foreseen that this movement will improve welfare sector in the form of research, development, and in- in the whole region, but the region’s competitiveness stitutional support. could also improve. Within the framework of eco- This study is one in a series of studies on Africa’s nomic integration in southern Africa, countries will regional trade and comparative advantage, a joint ac- only reap the benefits by exploiting comparative ad- tivity of USAID Africa Bureau’s Office of Sustainable vantages that may exist within the region. Development, Agriculture, Natural Resources and Zimbabwe is one of seven countries in the SADC Rural Enterprise (ANRE) Division and the Regional participating in the Research Program on Regional Economic Development Services Office for Eastern and Southern Africa (REDSO/ESA). Dennis Weller, Chief Agriculture, Natural Resources and Rural Enterprise Office of Sustainable Development Bureau for Africa U.S. Agency for International Development vii viii