HomeAnalysisFine-tuning the agricultural sector for economic revival

Fine-tuning the agricultural sector for economic revival

There is no doubt as to the centrality of the agricultural sector to Zimbabwe’s economic fortunes. It is to this end that President Emmerson Mnangagwa, in his maiden address to the nation on the occasion of his swearing in as Head of State and Government, acknowledged that the “… economic revival plan for the country will be predicated on agriculture, which is our mainstay”.

Richard Mawarire,economic analyst

Agriculture has traditionally contributed 15-18% to the country’s gross domestic product, 40% of the country’s exports trace their roots to agriculture, 70% of the country’s 14 million-strong population derives its livelihood from agriculture and 33% of the country’s formal labour force works in agriculture-related firms.

Recognising the above, it is therefore important for the country to fine-tune its agricultural policies in order to boost productivity and enhance economic growth.

This discussion will employ a recommendation approach, laying bare the possible recommendations which yield maximum productivity and hence yield the best impact on economic growth and job creation going forward.

Getting it right on title

Most A2 commercial farmers have been doing their farming activity on the strength of 99-year leases. Despite the leases being purportedly bankable and hence should ideally be acceptable as collateral by commercials in the event of a farmer borrowing to finance his operations, most banks have been reluctant to accept them.

There is a need on the part of government to issue title deeds to those commercial farmers who have a proven track record of productivity since being issued with 99-year leases.

A merit-based system, where title deeds are issued to farmers with a record of productivity, will provide farmers with a motivation to be more productive.

On the other hand, the farmer will easily access working capital loans from the banks on the back of the title deed. However, it should be noted that government, in carrying out this exercise, would need to exercise extreme caution and discretion to avoid the oversupply of titled land, which makes it unattractive as a form of collateral security.

A phased issuance of title deeds will also safeguard the property market from unscrupulous land barons, who might be bent on enticing desperate owners of titled land with cash and hold the land for speculative purposes and negatively affect the country’s productivity when the land lies fallow.

Honouring agreements

Land previously covered under bilateral trade and investment protection agreements (Bipas), which was mistakenly acquired ought to be restored to its owners.

The move will ensure there is improved investor confidence and support from foreign capital markets since the failure by the previous regime to uphold investment agreements was a major concern for most foreign investors.

Also of significance is the restoration of all land that was also erroneously acquired during the fast-track land resettlement programme when the land was covered under certificates of no further interest from the government.

Subsistence farming

One of the missed opportunities of our time was the Agricultural Mechanisation Programme in 2008 under the auspices of the Agricultural Sector Productivity Enhancement Facility (Aspef).

Under this programme, A2 commercial farmers received farming and irrigation equipment, among an array of mechanisation incentives from government. The programme, however, fell flat in terms of its ability to yield maximum impact and aid in enhancing productivity.

A more practical approach would be for the agricultural equipment and tractors to be entrusted under the administration of the District Development Fund (DDF). Under the administration of the DDF, community subsistence farmers can be arranged into community tillage groups of, say, 10 households, and allocated with specific agricultural equipment like tractors, disc harrows, irrigation pipes etc.

The same tillage groups should be allocated a dedicated extension worker who supervises them. The above initiative will help transform rural subsistence farming, which has predominantly benefited from the Presidential Inputs Support Scheme and yet produced very little, owing to backward farming methods and the unavailability of modern agricultural equipment which boosts production.

Liberalising prices

Like any other sector of the economy, agriculture should be self-determining. In other words, government should not have any part to play in the determination of the prices of agricultural produce. That should be left to market forces of demand and supply.

A case in point where controlled pricing has not worked well is that of grain crops by the Grain Marketing Board. At US$390 per tonne, the price of maize has proved not to be in line with global market prices, making the exporting of maize impossible, hence prejudicing the country of opportunities to earn foreign currency from the maize it produces in excess.

Oftenly the pricing mechanism has left local agricultural producers in an awkward situation, where it has been more commercially viable for them to import as opposed to buying locally-produced goods. This has resulted in increased pressure on the country’s limited foreign currency.

Above-normal prices for agricultural commodities have also worsened government’s fiscal deficit as oftentimes the government has had to intervene to source funds from private markets for the purchase of excess grain.

Hybrid agric funding

Local banks have done commendably well over the past few years in funding agriculture, especially with the special maize import substitution programme, also known as Command Agriculture.

There is need for banks to introduce a hybrid agricultural funding mechanism where the financial institutions subscribe to agriculture-specific borrowing instruments.

On top of that, the local banks can scout for syndicated lending partners in foreign capital markets, who will then advance local banks with the equivalent of what a bank would have committed to lend on the domestic market.

This arrangement will assist farmers in accessing cheaper working capital since foreign financial institutions levy competitive interest rates compared to local interest rates.

The foreign component of the loan facility will also assist banks in availing foreign currency support to those farmers who require foreign currency to secure key inputs and raw materials for their farming operations.

Budget allocations

Support from government has remained high, albeit falling short of the African Union-prescribed budget allocation of 10% as per the Maputo Declaration. In the 2018 proposed National Budget, allocation to agriculture was slightly improved at 9% which is a 2% improvement from 7% allocated in 2016.

However, for government to yield optimum economic growth, there is need for an improved allocation to agriculture and for inputs to be availed on time to ensure the farmer’s production cycle is not affected.

Our agricultural sector has what it takes to be the fulcrum of a sustained period of economic growth if the right choices and decisions are made and when there is goodwill to deliver.

Let the good times roll.

Mawarire is head of the economic research cluster of the Young People’s Dialogue (YPD), a think-tank of young professionals passionate about their country, Zimbabwe. He can be contacted on mawarirer@gmail.com

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