Overall market risk: As in other parts of the world, the economic deceleration in the region has led to stricter monetary policies, higher living costs, and the appreciation of the dollar against several currencies, according to the International Monetary Fund (IMF). However, the IMF’s recently released World Economic Outlook anticipates that Kenya’s growth rate will increase to 5.3% in 2023, up from the 5.1% forecast in October 2022. The IMF has revised projections for Rwanda, Uganda, Burundi and the Democratic Republic of Congo (DRC) downwards. According to the 2023 Malawi Government Annual Economic Report, the importation of pharmaceuticals, fertilizer and diesel fell in 2022 by 80%, 37% and 30%, respectively. The country is still reeling from the aftereffects of Cyclone Freddy which has worsened the outlook for both inflation and economic activity due to the serious damage caused to crops and infrastructure.
In the agriculture sector, long rains experienced in different parts of East Africa give a positive outlook on food production. In the southern region, crop harvest is ongoing. Despite the fact that the Covid-19 pandemic and the Ukraine-Russia conflict have subsided, their consequences are still being felt, one being the high and unaffordable prices of fertilizers that are affecting many farmers. The delta between landed prices for fresh stock coming in hasn’t yet been fully reflected in the retail price points with most outlets yet to fully match the new price levels. If the favourable weather currently being experienced continues, farmer demand will continue to draw in fresh imports and eventually a lower price.
Availability and Affordability: The second quarter has been marked by increased supply and improving uptake of fertilizers in the Eastern Africa region. No major fertilizer shortage has been reported in the region. In Kenya, most farmers are almost done with planting and top-dressing has already begun in other areas. The national Fertilizer Subsidy that was rolled out by the government has so far released approximately 3 million 50-KG bags (150,000 Mt) to farmers of various fertilizers. The same case is in Uganda where demand for top-dressing fertilizers such as NPK 17-17-17 and CAN is rising as the rains continue. In Mozambique, the areas affected by the cyclone have registered low supply and uptake due to poor infrastructure. The availability of carryover stocks at the agrodealer level from last season is another reason for low supply by the hub dealers. In Zambia, the Ministry of Agriculture has disclosed that 1, 024, 434 farmers will benefit from the Farmer Input Support Program (FISP) during the 2023-2024 agriculture season. Contributions towards the program will remain at K400. The 2023/24 FISP tender received bids in April and is in the process of being evaluated. In Zimbabwe, fertilizer manufacturers and distributors are unwilling and unable to carry sizeable amounts of stock due to high-interest rates for borrowing and due to cash flow constraints arising from the liquidity crunch in the market. There is therefore limited stock available in the retail chains. This will affect the viability of the same and we have already started seeing some stockists and distributors closing shop. In South Africa, it is projected that there will be the odd spike in demand for urea in Q2; the overall supply-demand balance is heavily tilted towards supply. The next Indian tender is unlikely to emerge until mid-Q2 and Europe is showing signs of its seasonal demand downturn already starting.
Distribution: The region’s ports are operating normally, with an uptick in activity that is gradually easing in the East due to the ongoing cropping season. Fertilizer vessels are already docking at Mombasa and Dar es Salaam ports this month, and more are expected in the coming weeks. In the south, there has been a decline in the importation and transit of fertilizer to neighbouring countries as the harvest season approaches. Inland and cross-border transportation is normal, but high fuel prices is a limiting factor. In areas of Malawi and Mozambique that were affected by Cyclone Freddy, the supply and distribution of commodities including fertilizers is still a major challenge due to poor infrastructure.