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In the Agricultural and Rural Development Authority (Arda) we have a sleeping giant, which has to wake up, now. Arda is a massive public asset, with virtually limitless agricultural and processing potential, but sadly, has been idle for some time.
The state-owned agro-industrial company owns 22 farms strategically spread across the country. The estates measure a total of 98,000 hectares and 19,000ha of them are irrigable. At its peak, Arda was represented right through the agriculture value chain from growing to value addition and marketing of milk, rice, beef and horticulture, among other produce. Many will remember the beverage called Katiyo Tea that was grown, processed and packed at Arda’s Katiyo Estates in Honde Valley.
But effectively no agriculture is happening at the properties at this stage save for two — Middle Sabi and Chisumbanje in Chipinge — due to lack of finance, old infrastructure and equipment, vandalism and mismanagement.
It’s good that the model that has seen Middle Sabi and Chisumbanje estates shine is the one that government wants implemented on the other 20 properties. At Middle Sabi and Chisumbanje, government through Arda has a purely business agreement with a private company, Macdom and Rating Investment to form Green Fuel. About $300 million has been invested at both farms since 2009 to grow sugarcane and process it into ethanol that is being blended with petrol and is available at every fuel station countrywide. Up to 5,000 jobs have been created at the two farms, the country has reduced its fuel import bill by around 15 percent and the plant at Chisumbanje is producing some of the electricity the country is using.
This is the example we hope for after government invited bids in February from investors to partner it to make fuller use of Arda farms through Public, Private Partnerships (PPPs).
Arda chairman, Basil Nyabadza this week said 40 bids have been submitted and the parastatal is examining business plans for dairy, livestock, maize, soya bean, timber, potatoes, apple and macadamia nut production to take place at the estates.
Arda has the fundamental asset in place, which is the land, but what is lacking is money and equipment to revive the farms. That money should now come from the new investors queueing to snap up parts of the 98,000ha gem.
With private investors now involved, there would be a commitment to run the Arda farms on a commercial basis. Managers would be expected to be profit-driven and would be assessed on the basis of the business they generate for shareholders. This is a recipe for success.
Inviting the bids in February, Arda made it clear that bidders had to be adequately capitalised to provide working capital as well as money for capital investment. It also made it clear that the preferred shareholding structure would be 51/49 in favour of Arda.
The fact that the investors should have enough money to invest in new machinery, equipment and infrastructure suggests the tenure of the agreements would be necessarily long to enable investors to put the structures and capital equipment in place, lift the farms from the base to a stage where they are viable and able to make a profit. This takes a lot of time, at least 10 years.
The 51/49 shareholding ratio is good and is consistent with our indigenisation strategy. However, Arda did not say that ownership structure is cast in stone, which is why the tender notices have the term “preferably”. Arda is going to set the terms, yes, but would be flexible where flexibility is necessary.
It is however, important for government to conduct thorough due diligence of all bidders to establish their seriousness, track records and financial capability to get Arda working again. We have had challenges with some government partners in diamond mining, for example, where the investors only proved their capability by word of mouth yet they had no money. In our desperation, we believed them and what followed was a disaster. Therefore, only serious and financially strong investors must win in Arda.
Arda must regain its old status as an important food producer, employer, and its farms once again becoming centres of best practice in agriculture. Middle Sabi and Chisumbanje have shown what PPPs can do to transform idle farmland into world class operations that benefit local communities and the nation at large. New investors and government have a simple task of following that example in the next, wider phase of reviving Arda.
Online Reporter