Government Owes Seed Co US$13.31 Million
Seed Co Limited, a major seed supplier in Zimbabwe, faces a liquidity crisis due to a US$13.31 million debt owed by the government for maize seed supplied under national farming programs. Despite challenges, CEO Morgan Nzwere remains hopeful, noting partial payments and ongoing engagements with the government. To mitigate financial strain, Seed Co plans to boost exports to East Africa amid reduced local demand caused by drought. The company operates in 35 African countries, aiming to sustain operations and profitability amidst financial hurdles.
Seed Co Limited is owed a substantial US$13.31 million by the Zimbabwean government for seed supplied during the previous farming season.
The government procures maize seed for its Pfumvudza and Presidential Input Scheme programmes, which provide subsistence farmers with free agricultural inputs.
These government-backed initiatives aim to support smallholder farmers by supplying them with essential inputs, including seed, fertilizers, and other resources.
The programmes play a crucial role in enhancing food security and supporting the livelihoods of vulnerable farming communities.
Speaking to The Standard on the sidelines of the company’s annual general meeting (AGM) held in Harare last week, Seed Co chief executive officer Morgan Nzwere said:
Well, the main amount is about US$13 million which is still owed by the central government.
However, the government is an important customer so every year they buy a lot of seeds.
There have been some liquidity challenges that have arisen as a result of that debt not being cleared.
However, it does not worry us that much as we have never written off government debt.
We know that there will be some payment challenges but eventually, they do clear their debt.
Nzwere said that the US$13.31 million debt owed by the Zimbabwean government has plunged the company into a severe liquidity crisis.
To cover the funding gap, Seed Co has been forced to borrow extensively from banks, incurring significant bank charges that eat into the company’s profits. He said:
The big challenge that it creates for us is we then have to go to the banks to borrow to cover that gap and that results in finance charges which then eat into the profit.
I do not know why the government would delay payments. But we engaged them, and we have been receiving some payments.
It is just that we would like the payments to be cleared a lot quicker to save on interest so that we do not go to the banks to borrow. But, you know, the government has got many priorities.
In a presentation delivered during Seed Co’s annual general meeting (AGM), revealed that the Zimbabwean government had cleared around 43% of the initial US$23.4 million debt owed to the company.
This reduced the outstanding balance to approximately US$13.31 million.
Nzwere expressed optimism that the remaining debt would be fully settled before the commencement of the next farming season. He said:
We have been seeing payments coming through. What they (government) can do is give you a definite plan to say we will pay you so much by such and such a date, but we have been seeing payments coming through.
Nzwere said local demand for seed in Zimbabwe was severely affected by the El Niño-induced drought.
In response, the company is planning to increase its focus on foreign markets to generate foreign currency (forex) through export revenues.
Nzwere revealed that Seed Co is currently exporting seed to various East African countries, including Kenya, Tanzania, Uganda, Sudan, Burundi, and Rwanda.
Seed Co operates in a total of 35 African countries, with direct operations in Angola, Botswana, the Democratic Republic of Congo, Ethiopia, Kenya, Malawi, Mozambique, Nigeria, Tanzania, Rwanda, Uganda, Zambia, and Zimbabwe.
Source Link : https://www.pindula.co.zw/2024/07/07/government-owes-seed-co-us13-31-million/
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