Government must restore the financial value of agricultural land by developing a robust market for agricultural land which will release a mortgage market, triggering a natural capital gain in the value of all land-based investments, the Commercial Farmers Union of Zimbabwe (CFU) has said.
Report by Fidelity Mhlanga
In a working paper, the CFU said in line with recent growth trends in surrounding African countries, it was crucial for government to engender an attractive investment climate for international and local investors to finance the agricultural sector.
The CFU said the current policy framework adopted in the wake of the agrarian reform programme was militating against agricultural sector viability, exposing all farmers to a myriad of problems ranging from poor access to affordable finance and isolation from international financial markets, with virtually no access to collateral value.
In addition, the loss of farm investment security and transferability of title have resulted in fewer wealth creation opportunities, poor technology and less access to commodity markets.
“It is imperative to establish a credible and well financed Land Bank to fund agricultural sector working capital requirements at affordable interest rates. This will establish confidence and incentives on the part of both financiers and farmers for long term developments and capital expenditures,” said CFU.
In his speech marking the opening of the 2013 Tobacco marketing season, Youth Empowerment and Indigenisation minister Saviour Kasukuwere said banks were channelling peanuts towards agriculture as financial assistance to farmers has dwindled from 74% to 17%, forcing them to use meagre resources to finance expensive inputs.
The Zimbabwean banking sector remains largely crippled by lack of liquidity and a legal framework in the agricultural sector which hampers the use of land and agricultural developments as collateral security for loans or equity as investment in agriculture is regarded as high risk.
This is because farmers do not have established track records with lending institutions and a credible credit bureau is not in place, said the CFU.
“For farmers this means that the cost of capital is extremely high, making the production of agricultural commodities in Zimbabwe uncompetitive. This proposal seeks to trigger the potential of local lending institutions by creating an enabling environment for them to lend confidently into the agricultural sector at competitive interest rates,” CFU added.
The establishment of a land market will inevitably lead to cross sectoral recovery and boost revenue inflows to the government of Zimbabwe.
“Greater production in the economy means more jobs and in turn less social dependency and more taxes. The Government of Zimbabwe will in time be in a position to pay for redemption on the bonds and pay interest on them,” the CFU said.