adminKudzanai Gerede
FOLLOWING years of unsuccessful engagement between farmer organisations, bankers and Government ministries of Finance and Economic Development, Ministry of Lands and Rural Resettlement and Ministry of Agriculture, Mechanisation and Irrigation Development, a draft thatincorporates tradable features for A1 and A2 farmers to declare their land as collateral when seeking bank loans has finally broke the dreaded impasse.
The recent revelation of the brokered deal between Bankers Association of Zimbabwe and Government by the Minister of Finance and Economic Development, Cde Patrick Chinamasa comes at a time when farmers were failing to access finance to boost production from local banks whose stringent loan requirements were a deterrent to farmers’ borrowing.
Most commercial farmers in the country were previously communal farmers prior to the land redistribution exercise that was undertaken by Government during the first decade of the millennium and they seldom owned valuable movable assets that can be used as collateral and this was negatively affecting them when it comes to accessing finance.
The offer letters they were issued by Government for the land they possess stipulates that they can be withdrawn by the minister at any given time, hence banks were reluctant to accept land as collateral since the state was the ultimate owner of the country’s land.
The recent development comes as an air freshener for the depressed agriculture sector which is currently facing low productivity due to inadequate financial assistance by Government in key areas such as availability of farm inputs and farm mechanization among other needs.
In his 2016 national budget, the Finance and Economic Development Minister projected a 2,7 percent growth for the country defying the World Bank’s 1,5 percent projection highlighting that the economy will be buoyed by foreseen growth of the agriculture sector as a key economic pillar pending major reforms to propel productivity. Land utilisation is expected to increase for those granted permits to borrow in order to maximise returns to honour their debts.
The country’s land utilisation has dropped in recent years owing to lack of availability of finance to cater for adequate inputs which resulted in only 2,8 million hectares on the country’s farms cultivated in the 2014/15 agriculture season out of a total of 4.3 million hectares of arable land available.
In his remarks at the 72nd annual congress of the Commercial Farmers Union last year, Reserve Bank Governor, Dr John Mangudya emphasised the need to monetise the land in order to fully exploit the country’s wealth.
“The whole idea is to monetise the leases to become bankable. To ensure that we monetise the land, we get value out of land and then we can at least have more resources going to the land and then we can produce,” said Dr Mangudya.
The move will also boost financial services sector as it entails the financial inclusion of previously unbanked communal farmers.
During the land redistribution exercise some farms were put under jurisdiction of small groups of communal farmers who have never held bank accounts yet alone borrowing.
It also falls in tandem with Reserve Bank of Zimbabwe’s recently launched National Financial Inclusion Strategy (2016-2020) which seeks to increase the overall level of access to affordable and appropriate formal financial services within the country from 69 percent in 2014 to at least 90 percent by 2020 with priority vested on special interest groups which include rural and small scale agricultural communities resettled.
“This is a landmark development in the history of the resettled farmers who for years have not been able to fully utilize their land due to lack of finance,” Zimbabwe Commercial Farmers Union president, Mr Wonder Chabikwa said in an interview with The Business Post on Monday.
“If you look at our financial services sector, to lend money to farmers right now they are demanding that they want a house in an urban area as collateral. You will find most of the farmers live in the rural areas and they don’t have houses in towns and besides urban houses cannot be used as security for a farming exercise, so we welcome that move as the land, the leases are going to be bankable in order to borrow money to do our business to maximum capacity,” he added.
Analysts have highlighted that the move can now empower the farmers once granted permit by government to develop their farms as it now offers some form of security and sense of ownership of the farm which was critical in encouraging farmers not to default repayments because of the attachment to the land.
Mr Chabikwa highlighted the need for stakeholders to co-operate with farmers in making sure the move does not end up a retrogressive exercise to the gains of the agrarian reform as this was a new arrangement for resettled farmers.
“The system should be intertwined, banks should look at the viability of the farmers before issuing the loans, visit the farms and they assess the situation in the fields, we have Government arms on the ground and banks also have loan officers with agricultural knowledge so they should assist the farmers by constantly checking on them, let’s go it together,” said Mr Chabikwa.
Economic analysts have, however, come quickly to express reservations on the success of these reforms if the country’s current business environment persists. The capacity for farmers to repay loans faces several tests as there are macro economic factors at play.
First, the cost of finance remains too high despite reforms by the Reserve Bank of Zimbabwe which witnessed a marginal adjustment of interest rates in the last quarter of 2015.
Secondly, Zimbabwe’s economy is generally not competitive hence the farmers are likely to feel the pinch of high production costs against low prices on the market and lastly the prolonged dry spells experienced during the farming seasons in recent years due to climatic changes are likely to persist and will cause pose a serious threat to farmers’ guarantee of profits.
Government through the Ministry of Industry and Commerce is working on the ease of doing business reforms which among other issues dwell on revising the cost structures in various sectors to ensure local productions are competitive through their various value chains.
Online Reporter