Phosphate mining will require partnership, says Dr Mwansa

Phosphate mining will require partnership, says Dr Mwansa
By Joan Chirwa
Tuesday July 22, 2008 [04:00]

THE development of phosphate mining in Zambia will require joint ventures between local and foreign investors to provide adequate raw materials for production of fertiliser at NCZ, mines minister Dr Kalombo Mwansa has said. And the Food and Agricultural Organization (FAO) has said high prices of farming inputs have become a major impediment to efforts by developing countries to increase agricultural production, with projections that most African countries will require at least US $1.7 billion to revive agricultural systems that have been neglected for several decades.

Dr Mwansa indicated that the Ministry of Mines was ready to speed up the process of issuing mining licences for phosphates in Petauke and Western Province once investors expressed interest to undertake the venture.

“Government is ready to dialogue with investors that may wish to develop where phosphate deposits have been found,” Dr Mwansa said. “The Ministry of Mines will work towards finding an investor who can be given a licence to mine phosphates to feed into NCZ and other countries as well. One company has so far expressed interest and we will look at what they want to offer before we make a decision on whether to issue them with a licence or not.”

A couple of weeks ago, the Ministry of Agriculture and Co-operatives called for speedy investments in phosphate mining as one critical input in fertiliser production, since high deposits have been found in areas such as Petauke.

Industry analysts say fertiliser prices are expected to exceed K220,000 by August this year as the price of the commodity has reached an all-time high of US $1,500 per tonne, on the back of rising oil prices on the international market and increasing demand of the commodity by agricultural producing countries worldwide.

The current surge in fertiliser prices means a 50 kilogramme bag of the commodity could even cost around K200,000 from an average K115,000 at the beginning of the last farming season.

The situation has been worsened by China’s recent imposition of an export tariff of between 100 per cent and 135 per cent on all fertilisers, which effectively took 2.4 million tonnes of urea out of the world market. The supply of phosphate is also an issue, which is mainly sourced from Morocco and China; where production is largely controlled by the government.

With the current market situation, it seems unlikely that additional mining capacity will be granted, which would ultimately weaken the current price. However, the Ministry of Agriculture says the government, through the Ministry of Mines should work towards finding an investor to produce phosphate in Petauke district in Eastern Province.

Dr Mwansa said the government’s desire is to have a partnership between local and foreign investors in the development of phosphate mines, in line with the country’s Citizen’s Economic Empowerment (CEE) Act.

“Local and foreign investors need to join hands in the development of phosphate mines in Eastern and Western Provinces because deposits have been found in these places,” Dr Mwansa said. “As government, we are ready to dialogue over this matter so that we can have phosphates being produced within the country to feed into fertiliser production at Nitrogen Chemicals of Zambia (NCZ).”

NCZ – Zambia’s only fertiliser producing company – currently imports all its raw materials, a situation that has pushed up its operational costs owing to the hike in prices of inputs at source. Having raw materials produced locally is expected to ease prices of fertiliser which have reached an all time high on both the international and local markets.

The situation, according to agricultural experts, is threatening the further growth of the industry, which is predominantly composed of small-scale farmers whose incomes are far less than the expected costs of producing crops under the current input prices.

It is expected that small-scale farmers, who account for over half of the country’s annual maize production, might not produce as much as they have been over the past few years due to rising costs of inputs.

The government is currently subsidizing inputs for vulnerable but viable small-scale farmers under the Fertiliser Support Programme (FSP), although the number of beneficiaries is far much less than those in need of subsidies. For every pack of FSP inputs, farmers pay 40 per cent of the total cost while the remaining 60 per cent is offset by the government.

For example, a total of eight bags of fertilizer (both top dressing and basal) is required to produce around 100 bags of maize from a hectare. This means an average small-scale farmers with a hectare of agricultural land needs about K1.7 million to produce an average of 100 (50 kilogramme) bags of maize if correct farming practices are employed.

Adding up other costs such as seed and labour, the figure could exceed K2 million for a hectare’s production. However, yields per hectare in the country have been far below the expected average of eight tonnes. From the previous season, yields per hectare have fallen to around 1.31 tonnes per hectare (about 1,300 kilogrammes or 26 of the 50 kilogramme bags of maize).

And if yields per hectare remain at the current level, then farmers will end up incurring high production costs with little crop coming out of their fields. For instance, if yields are maintained at 1.31 tonnes per hectare from inputs worth K1.7 million – considering the current prices of fertiliser – a farmer will only get around K1.2 million, calculated at the current Food Reserve Agency (FRA)’s maize price of K45,000 per 50 kilogramme bag.

And FAO stated that African countries affected by rising prices of farming inputs need at least a total of US $17 billion to start reviving agricultural systems that have been neglected for several decades. This amount, according to FAO, is just for immediate and short term measures during 2008-2009.

“High prices of agricultural inputs have become a major obstacle to developing countries' efforts to increase agricultural production. For the period January 2007 to April 2008, fertiliser prices in particular shot up at a much faster rate than food prices,” FAO stated.

The United Nations (UN) agricultural organization has widened its support to small-scale farmers in Africa under its initiative on soaring food prices, this time covering 54 countries, Zambia inclusive.

It has just approved a series of projects in Zambia and 47 other countries for a total value of US $21 million to help small-scale farmers and vulnerable households mitigate negative effects of rising food and input prices.

The projects will provide farmers with agricultural inputs as of this month for an expected duration of one year under FAO’s Technical Cooperation Programme and part of the organisation’s initiative on soaring food prices.