99-year lease is strate­gic

Chronicle (Zimbabwe) - - Business Chronicle - Mor­ris Mpala

GIVEN the new de­vel­op­ments on the SI 64 of 2016(im­ports re­stric­tions) this calls for a speedy tri­par­tite meet­ing be­tween the farm­ers, Gov­ern­ment and fi­nan­cial in­sti­tu­tions

If the mo­ti­va­tion of the (in) fa­mous SI 64 of 2016 is to in­crease pro­duc­tion then let the bank­a­bil­ity of these leases be at the fore. Pro­duc­tion with­out farm­ing is non­sen­si­cal.

The SI 64 trades del­i­cately on so­cio-po­lit­i­cale­co­nomic is­sues.

The Gov­ern­ment has a dilemma be­tween in­for­mal pop­u­lace and pro­duc­tive sec­tor. With the in­tro­duc­tion of SI 64 one hopes it doesn’t cre­ate des­ti­tutes, smug­gling syn­di­cates, oligopolis­tic car­tels and high prices by lo­cal pro­duc­ers but tempts cost ef­fec­tive pro­duc­tion lev­els, cre­ates jobs and sus­tains com­mu­ni­ties in the long run.

First and fore­most an au­dit on farm in­fra­struc­ture is re­quired to as­cer­tain cur­rent bal­ance sheets on these farms and any fur­ther im­prove­ments that will be made for fu­ture com­pen­sa­tions if push comes to shove. A data base cre­ated with a com­pre­hen­sive in­ven­tory will form the ba­sis of risk man­age­ment.

Then fol­lows in­surance on prop­erty and a prop­erty regis­ter cre­ated in­clud­ing the ben­e­fi­cia­ries in­clud­ing life as­sur­ance poli­cies to mit­i­gate risks.

Mind change is re­quired be­cause farm­ing is a busi­ness not a pas­time. Own­ing land as a fash­ion state­ment has to be dis­cour­aged. In ad­di­tion, ben­e­fi­cia­ries need to de­velop the land, free­bies should be done away with. It’s a busi­ness with a model on prof­itabil­ity, sus­tain­abil­ity and pre­serv­ing the scarce strate­gic re­source.

Ren­tals on these cre­ate an un­der­ly­ing corner­stone. Based on the ‘use it or lose it’ prin­ci­ple. We can’t be ab­sent farm­ers or all be en­trepreneurs. Many are called but few are cho­sen let the will­ing and able few do it and oth­ers look else­where for busi­ness op­por­tu­ni­ties.

Pooled lease ren­tals should act as se­cu­rity should a ben­e­fi­ciary fail to hon­our their fi­nan­cial obli­ga­tions or if com­pen­sa­tion for im­prove­ments is re­quired.

Ren­tals have to be kept or shared among par­tic­i­pat­ing banks pro­por­tion­ally (as de­posits) and aid fund­ing to farm­ers. For ev­ery fund­ing done the bank re­ceives a cer­tain amount from the pooled ren­tals as an in­cen­tive (as mere de­posits) on a pro rata ba­sis.

We need tech­nocrats to give cor­rect fig­ures for ren­tals, cost of ac­cep­tance to of­fer let­ters, in­surance and as­sur­ance, train­ings, com­pen­sa­tion and cost and tenor of fund­ing for agri­cul­ture.

Those that can’t pro­duce lose the land to the Gov­ern­ment and it goes back into the land bank reg­istry. The Gov­ern­ment then re-al­lo­cates the re­pos­sessed land and com­pen­sates where ap­pli­ca­ble.

Those ben­e­fi­cia­ries that can’t re­pay their loans have to lose their ti­tle deeds to the re­spec­tive banks. Then the Gov­ern­ment com­pen­sates the bank in ques­tion and land is re­pos­sessed by Gov­ern­ment for on­ward al­lo­ca­tion to new ben­e­fi­cia­ries to bal­ance land pol­i­tics.

All new farm­ers have to un­dergo a nor­mal credit vet­ting sys­tem to de­ter peren­nial fund­ing de­fault­ers from ac­cess­ing not just land but also fi­nance given their past credit his­tory.

In case of death, ben­e­fit should be ne­go­ti­ated to nom­i­nated ben­e­fi­cia­ries or given back to the Gov­ern­ment land bank for re­dis­tri­bu­tion.

The above prin­ci­ple gives value back to the land and once value is re­stored that is the al­pha of land eco­nom­ics. While com­mu­nal lands need to be mon­e­tised to un­lock vast po­ten­tial.

Food se­cu­rity you just pro­duce to sat­isfy your hunger that is pro­duce out of ne­ces­sity.

Food in­tegrity which deter­mines what we pro­duce, how, when and which qual­ity and quan­tity of food we need and for which mar­kets might re­duce GMO pro­duc­tions.

The Gov­ern­ment has to limit its role to reg­u­la­tory and ad­vi­sory thus cre­at­ing a con­ducive en­vi­ron­ment for pro­duc­tion to kick start in earnest for ex­am­ple ex­port in­cen­tives, guar­an­tees, dis­tri­bu­tion, ease of do­ing busi­ness, util­i­ties cost­ing and sup­ply, in­fra­struc­ture, La Niña threats, com­pen­sa­tion, as­set reg­istry, credit reg­istry, de­mar­ca­tions, ready pay­ing mar­kets etc.

The Gov­ern­ment must es­tab­lish re­search and de­vel­op­ment, real time data (facts and fig­ures) to in­flu­ence pol­icy for­mu­la­tion and an ac­tive hands on ap­proach to agri­cul­ture that re­sponds real time and in­flu­enced by tan­gi­ble ev­i­dence on the ground. All else should be left to strate­gic stake­hold­ers the bankers, pri­vate sec­tor and in­di­vid­ual farm­ers to thrash a long term vi­able so­lu­tion in a win-win ap­proach to all.

This land we are talk­ing about is a fi­nite re­source, an emo­tional and po­lit­i­cal sub­ject but above all an eco­nom­i­cal is­sue that needs frank and fac­tual dis­cus­sion.

Any out­stand­ing is­sues have to be brought to fi­nal­ity forth­with from re­dis­tri­bu­tion, own­er­ship, skills trans­fer, knowl­edge bank, com­pen­sa­tion to fund­ing mech­a­nism. Cash talk kills no friend­ship we ex­pect the ne­go­ti­at­ing tri­par­tite ta­ble to be a con­cise, can­did and eco­nomic dis­cus­sion as it de­fines a fi­nan­cial rev­o­lu­tion that has a bear­ing on the econ­omy at large .

To cap it all it is a gen­er­a­tional legacy that will be cher­ished by fu­ture gen­er­a­tions there­fore we can­not af­ford trial and er­rors or get­ting it wrong al­to­gether.

Once the above has been done let’s put land back onto the mar­ket. Let’s pay for land and let it be sold to will­ing buyer, first come first serve ba­sis depend­ing on one’s abil­ity to sus­tain the op­er­a­tions.

Happy 2016/17 farm­ing. If you haven’t started prepa­ra­tions you are late triple your ef­forts now!!

IF YOU LIVE IN BYO PLEASE CON­SERVE WA­TER. IF YOU LIVE IN ZIM­BABWE PLEASE USE ELEC­TRIC­ITY SPAR­INGLY: SOS (SWITCH OFF SWITCHES).IF YOU LIVE ON PLANET EARTH PLEASE PRE­SERVE THE EN­VI­RON­MENT

Mor­ris Mpala is the man­ag­ing direc­tor of MoB Cap­i­tal, a thriv­ing Bulawayo-head­quar­tered mi­cro­fi­nance in­sti­tu­tion with foot­print across the coun­try.

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