Eric Bloch: Ending agriculture’s financial crisis

SPEAKING at last week’s opening of the 100th Harare Agriculture Show, President Robert Mugabe said that “financial support for the agricultural sector remains a sore challenge, with limited resources being availed as costly agricultural loans”. He continued: “Thus, the need for properly planned agricultural financing still calls on all of us to put our heads together and come up with appropriate strategies and solutions.”

The reality is that the creation of viable financing for agriculture is almost entirely in the hands of government.  That does not imply that government must provide the funding (in its bankrupt state it would be unable to do so).  But the creation of an enabling environment, which would make ready access to funding for agriculture possible, lies firmly and squarely in government’s hands, and it should not seek to abdicate its responsibility to do so by striving to place the onus upon others. If government would urgently and constructively modify the disastrous agricultural and economic policies which it had myopically pursued for most of the past decade, the financing required to ensure a virile agricultural sector would progressively become readily available.
First and foremost, government needs to adjust its land reform programme and attendant policies for, more than any other factor, those policies are the greatest constraint upon accessing  funding for agriculture.  As if it did not suffice for the state to destructively expropriate all land in contemptuous disregard for property rights (in many instances for commitments under Bilateral Investment Promotion and Protection Agreements), it then speciously claimed to issue 99-year leases to “new farmers”.  However, whilst several thousands received and accepted 99-year lease offer letters, to date only an estimated 128 farmers have actually received written leases, although great numbers have settled on the offered land.  Moreover, although the issued leases are stated to last for 99 years, government retains a right to terminate them upon three months’ notice.  Thus most of the farmers have no written assurances of continuing occupancy and usage of the land, and the few that do are at risk of losing that occupancy and usage at short notice.
This negative state is markedly worsened by the fact that the rights of occupancy and usage, whether documented by leases or not, are non-transferable.  As a result, the farmers cannot avail themselves of their land as collateral security to support borrowings of the working capital that is a prerequisite for the productive usage of the land.  This is catastrophic as, on the one hand, lenders invariably require security for funds advanced, and very few of the “new farmers” have any resources which they can utilise as security.  If government wishes its land reform to succeed, it must forthwith issue leases to all that it has accorded usage of the land, which leases must endure for 99 years under all circumstances other than in the event of non-remedied defaults by the occupant.
In addition, the leases should be freely transferable and negotiable, save and except for restriction that the recipient must not already be a farm lessor (pursuant to the principle of “one man, one farm”!).  If leases are properly documented, of genuine 99-year tenure and capable of cession and transfer, they become tangible collateral to support borrowings. This gives the new farmers some opportunity to obtain desperately needed capital to fund inputs, operating costs and, in some instances, essential farm development and acquisition of equipment and implements.
While addressing the capital needs of the farmers, government must make it possible for the financial sector to obtain the funding required to service those needs.  Zimbabwe’s money markets are catastrophically lacking in resources.  To a major extent, the magnitude of non-availability of funds in the banks, building societies and other financial institutions is due to the constrained state of the economy, and is intensified by a wideranging (although mainly unjustified) concern amongst the populace as to security of funds placed with those institutions.  As a result many businesses and individuals are holding funds in their businesses and homes.  However, to an even greater extent, the lack of money market funding is due to the miniscule extent of international lines of credit, matched by an insufficiency in foreign investment, and by the relatively minimal extent of Zimbabwean export proceeds generation.
The near-total absence of international lines of credit, and the low levels of foreign investment are almost wholly because of the perceptions, beyond Zimbabwe’s borders, that security of loans and investments is limited.  That sense of insecurity is founded upon pronounced concerns that there is ongoing political instability, that the economy is not only adversely affected by destructive government policies, but also by grievous inadequacies in utility service delivery by parastatals and local authorities.  Investment security is endangered by legislation prescribing mandatory disinvestment to an extent of forfeiture of investment control.  In addition, there are fears of government recourse, yet again, to excessive economic regulation and control. 
Revitalisation of the money market and hence creation of access to much-needed working capital for mining, manufacturing, tourism and  the distributive and service sectors necessitates that all outstanding issues of the GPA be unreservedly implemented. Concurrently, the indigenisation and economic empowerment legislation requires substantive amendment, according investors with a credible sense of investment security.  In addition, government must speedily and vigorously pursue its recently reiterated privatisation intent, wholly or partially, of parastatals, so as to access working capital and technological skills critical for the revitalisation of the parastatals.
Of equal urgency is that government ceases its endless berating of Western countries, restoring harmonious interactions and relationships with those countries.  This will   facilitate access to much-needed developmental aid.  Linked to that repair of the impaired relationship of Zimbabwe with the international community is the need for Zimbabwe to acknowledge liabilities in terms of Bippas. 
Government must also swallow its misplaced pride, seeking debt relief and rescheduling under the Heavily Indebted Poor Countries conventions, in order to address its cripplingly accumulated debt of more than US$5,7 billion, thereby restoring access to funding from the Bretton Woods institutions including the International Monetary Fund and the World Bank.