HomeOpinionUS$1bn agric loan facility: Ball now in govt’s court

US$1bn agric loan facility: Ball now in govt’s court

Our Zimbabwean banks recently unveiled a US$1 billion credit facility for farmers for the 2015/16 farming season. However, the farmers cried foul this week, claiming that the terms attached to the credit facility were prohibitive and unfriendly. Who is to blame here and what can be done?

Peter Gambara Agric economist

Banks have always made it very clear that the money they lend belongs to either shareholders or depositors. Bankers are therefore there to safeguard that money on behalf of the owners. If they fail to do so, they will have failed in their work and will be fired or sometimes the bank folds and all those bank workers will lose their jobs. It is therefore prudent that when banks lend money to anyone, not just farmers, but anyone including manufacturers, industrialists or even individuals, they demand a fallback position in case the borrower fails to pay back.

The tradition with respect to farming has always been that banks would demand the farm title deeds. But with the advent of the land reform programme, resettled farmers were given permits in the case of A1 farmers and offer letters in the case of A2 farmers. The A2 farmers were supposed to eventually get 99-year leases. Bankers then advised government that they can accept these 99-year leases, but only if they are transferable so that should the borrower fail to repay, they are able to sell the 99-year lease on the market. Government then promised to work in collaboration with the Bankers Association of Zimbabwe (Baz) to come up with bankable leases. This promise has stood for many years now and still no bankable leases have been produced.


Less than 200 99-year leases have been issued to date. In the absence of such leases, bankers have no option but to demand some other form of collateral, hence their demand for title deeds of town houses orfactories. Surely, one cannot blame them, they have mobilised the money and made it available well in time for the farming season. It is government that has been found wanting by failing to make sure that farmers can use their land as collateral.

Alternatively, bankers have said they can fund farmers who grow crops on which they can place stop orders. Farmer leaders this week bemoaned the fact that only tobacco has a functional stop order facility. Again, one would ask whose fault is that. The blame rests squarely with the government and the farmers themselves. Most farmers grow maize and traditionally have always sold it to the Grain Marketing Board (GMB). The GMB has the widest network of depots where farmers can sell their maize.

The other maize markets are located in towns and cities; farmers have to transport their produce all the way into town and it is common cause that most farmers do not want to associate themselves with complicated systems where they have to move from one buyer to another looking for the best price.

However farmers now can no longer trust GMB, simply because GMB has continuously failed to pay them on time for delivered produce. Most farmers have waited for long periods to be paid and some farmers are still owed money for maize and wheat delivered to GMB in 2007/2008 when the Reserve Bank of Zimbabwe had virtually assumed fiscal responsibilities.

Government has taken time to approve the RBZ Debt Assumption Bill which provides funding to pay those farmers who delivered their produce to GMB, some seven years ago and no one seems bothered it has taken that long to pay those farmers. The collapse of the GMB stop order system is purely the responsibility of government — it has failed to provide the money to GMB so farmers can be paid on time.

Finance minister Patrick Chinamasa is doing a commendable job engaging institutions like the International Monetary Fund, World Bank and African Development Bank, but very little effort is being directed towards making sure farmers who are owed money by government for over seven years are paid their dues. Who doesn’t know that charity begins at home?

There are other private sector players like oil expressers, grain millers and stockfeed manufacturers who can contract farmers to grow maize and soyabeans. However they can only commit their resources if the conditions are right.

Most A2 farmers fail to pay contractors after they have been provided with inputs under contract growing arrangements. Farmers unions should perhaps take the major blame here, they have failed to whip their members into line to make sure they are reliable in terms of paying back loans or contract obligations.

The government was advised to re-introduce the commodity exchange market and warehouse receipt system (WRS) long back, but despite numerous study tours and meetings to re-introduce it, the infighting between the ministries of agriculture and of industry and commerce over who should control it, have led to its still birth. The farmers are also partly to blame for the failure of the commodity exchange market to take off as they were supposed to be the major shareholders, but they failed to raise the funding required to kick-start it.

The question that arises, therefore, is what should be done?

Firstly, government should take the concerns of Baz seriously over the non-bankable 99-year leases and A1 permits. It doesn’t take ages to incorporate the changes needed/suggested to make the leases bankable. Let the rural land be used as collateral in the farming sector, otherwise it stands out as dead capital.

Secondly, farmers should be challenged to regroup and come together and form one strong farmers union that has control over its members and organise their members into groups that can be used to borrow from banks. Group lending that was popularised by the Agricultural Finance Corporation during the 1980s triumphed due to the peer pressure among group members. Farmers should stop the blame game and control their members to make them good borrowers.

Thirdly, government should re-instil confidence in the GMB stop order system by making sure that the Minister of Finance has budgeted for maize purchases by GMB in his 2016 budget and that the money is given to GMB at the start of the marketing season so farmers can get paid promptly upon delivery of their produce.

Fourthly, it is high time government realises that it cannot turn around the economy alone, it needs the support of the private sector like the banks, manufacturers, grain millers, etc. Government should be the one taking the initiative to invite the private sector to a round table to explore areas where private sector can contribute to the turnaround, like contracting farmers and what needs to be done to re-instil confidence among these players. Experiences in the cotton sector paint a bad picture of the extent to which farmers can be relied upon to pay back loans provided under contract growing agreements.

Fifthly, work on the commodity exchange market and WRS has already been extensively done and all the paperwork to launch them is ready. Cabinet should just resolve under which ministry it should fall and the Ministry of Finance should provide the initial seed money in the 2016 budget to launch it. There is no good reason why the commodity exchange market and WRS should not be operational by the start of the next marketing season on April 1.

Horticultural production as well as broiler production are a major sources of revenue for our farmers. However they are increasingly threatened by unnecessary imports from South Africa and other countries. Farmers always wonder why the Ministry of Agriculture issues permits for the importation of tomatoes, carrots, apples, water melons, to mention but a few, which local farmers can grow with easy. There seems to be lack of co-ordination between ministry officials and local farmer representatives on how much is being produced locally and hence if there is any need for these imports at all.

Lastly, a lot has been said about combating corruption lately, but despite numerous calls by farmers that there is massive corruption, for example, in the tobacco auction floors such as fixing of prices, no action has been taken. If those responsible for running the auction floors cannot see the corruption, maybe it is high time we have a change of leadership.

Tobacco prices on the auction floors were ridiculously low this past season, resultantly only a few farmers will be able to comfortably go back to growing tobacco this season. Corruption at the auction floors should be investigated and wiped out before the next marketing season so that farmers can regain the confidence in the auction system.

The 10-point plan as enunciated by President Robert Mugabe is very clear on the need to resuscitate the agricultural sector. This can only happen if the responsible government ministers and officials do their part in putting in place the necessary policy changes that will kick-start the sector. The banks have availed US$1 billion for the next cropping season, therefore government should ensure that it has done its bit by making sure farmers have easy access to that facility.

Gambara is an agricultural economist/consultant based in Harare.

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