THE government has suspended talks with banks over the bankability of 99-year leases at a time when tobacco farmers are facing financial challenges.
The state issued 99-year leases from 2006 to resettled farmers after the land redistribution exercise that began in 2000.
Tobacco, which is one of the country’s biggest foreign currency earners, is now 95% under contract farming and only 5% under the auction system.
This was caused by lack of bankable title deeds to access funding from banks.
While tobacco authorities agree that contract farming is a noble idea, farmers have complained of being short-changed by contractors.
In 2021, bankers dismissed 99-year leases as worthless. The government then said it was looking at offering full and partial guarantees to banks for acceptance of the farm leases.
However, banks are of the view that the process of redeeming land as collateral was unclear.
Banking sources this week said the government was prioritising production and farming schemes such as Pfumvudza.
Alleged looting of farming inputs has also been reported under Pfumvudza.
Banks have flatly refused to accept the 99-year leases as collateral because land still belongs to the state.
“That conversation was suspended because the government wants to start establishing food security rather than spend time on negotiations that are taking long to resolve the matter. As long as AFC is not capitalised, the negotiations remain key. The banks’ position has not changed,” the source said.
To lessen the burden of funding from farmers, the government last year launched a land bank under Agricultural Finance Corporation (AFC) where farmers are expected to get loans by producing offer letters.
But six months later, AFC is yet to be capitalised and central bank governor John Mangudya in his monetary policy statement (MPS) said the bank had been given up to December 31, 2021 to capitalise.
Agriculture minister Anxious Masuka could not be reached for comment as he did not respond to questions sent via WhatsApp and SMS.
Bankers Association of Zimbabwe (Baz) chief executive Fanwell Mutogo could neither confirm nor deny the talks’ stalemate. He said the bankers’ position was unchanged.
Tobacco Industry and Marketing Board (TIMB) chief executive Meanwell Gudu said farmers should be given an option to self-finance.
“Yes, it’s true that 95% of tobacco farming is now under contract farming while 5% is under auction. It’s like that because many of our farmers do not have bankable title deeds so they are not able to self-finance and have to rely on contracts,” Gudu said.
“A farmer should be given options and all things being equal, they would want to self-finance and enjoy the independence of choosing who to sell his/her produce. However, many farmers are left with no option but to get funding from the contractor. Contracting has its advantages and disadvantages.
“If you look at it globally, there are only three countries that are still auctioning tobacco, that is, Zimbabwe, Malawi, and India. India is 100% auctions because the farmer can borrow. The world is moving towards contract farming because there are certain advantages that come with it.”