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October 11, 2012

Zambian government to prop up ailing fertilizer producer

Making fertilizer more accessible to African farmers is a topic of perennial discussion.

Most of whatever fertilizer that reaches African farmers is imported, but a few countries have made efforts to produce their own, either by state-owned or private companies. But the fact that there is a huge demand for it does not necessarily mean fertilizer producers are able to easily mint money.

The obstacles they face are many, and vary from country to country.

What are the costs of inputs, versus what they can reasonably charge for their products? Are they allowed to charge market prices for this deeply 'political' commodity? If they are, how do their prices compare to those of imported products? Is electricity supply reliable enough to keep their plants operating at optimal, profitable capacity? Does the government (often the single biggest buyer) pay on time for product it has ordered?

And so on and so forth. Particularly for fertilizer companies in which the government has a stake, all sorts of political considerations in the way the companies are allowed to do business means they are often on the brink of insolvency. However, also because of the political nature of fertilizer and food security, many governments want to be seen to be supporting their fertilizer factories, even when they often are also the chief cause of the troubles of those companies. 

With that in mind, the Zambia Daily Mail (August 17)says the government will "recapitalize the Nitrogen Chemicals of Zambia, to the tune of Kwacha 25 billion (US$ 4.8 million) by rehabilitating the ammonium nitrate plant in a bid to create jobs."

"Minister of Agriculture Emmanuel Chenda....said government was unable to find an equity partner after attempts to privatize the fertilizer company failed. And Mr Chenda said government awarded Nyiombo Investments a tender to supply (imported) fertilizer for the Farmer Input Support Programme after a transparent bidding process."

Why did the company fall on hard times in the first place? And why were there no eager bidders for equity in the company?

In the answers to those questions and many more are the 'secrets' to why many fertilizer companies in various African countries find the going very rough, and why there is still dependence mostly on imported fertilizer even where there is the edifice of a local fertilizer industry.

African Agriculture  

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