Zim needs sustainable agric financing model
ALTHOUGH agriculture is the mainstay of Zimbabwe’s economy, harsh weather patterns coupled with some negative operational challenges blighting the sector have resulted in the country failing to produce enough to meet local demand.
The country had over the past two decades became a net importer of food as the agricultural sector failed to produce enough to meet or exceed local demand.
Industries relying on the agriculture sector for raw materials suffered heavily and are only up and running after resorting to imported raw materials, which require foreign currency.
This has resulted in company closures and unemployment.
With this in mind, Government came up with the Command Agriculture programme in a bid to increase agricultural production and reduce the country’s dependence on imports.
The programme was an instant success and has been expanded to include crops such as wheat, cotton, soya beans as well as livestock and fishery.
But can Government sustain this model of production given that some farmers that benefitted from the scheme have not paid back the loans?
Does this not put the future of the programme on the line given that private sector financiers that partnered government cannot continue to pump money into a programme without returns on their investment?
Some farmers were side marketing their produce to avoid paying back their loans.
The Transitional Stabilisation Programme (TSP) proffers solutions to sustainable financing of the agriculture sector.
“The returns from investment in agriculture extend to gains arising out of increased agricultural production, agro-processing, and much higher immediate generation of the much needed scarce foreign exchange.Vision 2030’s quest for full, efficient and sustainable utilisation of land requires interventions to overcome some of the risks related to sustainable funding of agriculture, and reducing dependency on rain-fed agriculture, and vulnerability to periodic droughts,” reads the TSP.
It recognises the need for greater involvement and participation of the private sector with regards to financing and contract farming arrangements that also provide skills support and extension for various agricultural commodities.
It envisages greater involvement of the domestic financial system in underpinning financing of agriculture to complement the Command Agriculture scheme.
However, since Government has no capacity to continue supporting the scheme, it will gradually reduce such initiatives to pave way for the private sector to come in full swing.
Lands, Agriculture, Water, Climate and Rural Resettlement Minister Perrance Shiri concurs that the current funding model was not sustainable as Government has no money to continue funding farmers through Command Agriculture.
He recently said financial institutions will have to come and play their part in financing agriculture.
Minister Shiri said contract farming and out grower schemes were the way to go.
“Going forward, the financial institutions should play their role of financing the agriculture sector. We also have the contract farming system and the out grower schemes whereby the various companies which consume raw materials produced by agriculture, should go out and finance the production of those raw materials. If they don’t do that they will perish. It is in their best interest to work closely with those farmers so that we produce the much needed agricultural products,” he said.
Financing the command agriculture programme has been one of the key drivers of the budget deficit, hence the move to review the financing mechanism with a view to share the burden between Government and the private sector is welcome.
Both the TSP and the 2019 National Budget call for the participation of industry in outgrower schemes as well as the introduction of bankable 99-year leases to ensure that farmers can access loans from financial institutions with land as collateral.
“The introduction of acceptable 99-Year Leases now provides scope for increased private sector financing of a larger segment of A1 and A2 farmers. The Budget, will, therefore, avail more resources (US$5.3 million) to facilitate more surveys which are required for granting of leases. Equally, participation by industry outgrower schemes will increase financing resources further,” said Minister Ncube in his budget presentation.
Ring-fencing agriculture financing models to ensure that farmers pay back loans is also a good initiative that Government has proposed. This will help boost private sector confidence in agriculture programmes.
“To address this challenge, Government is revamping the whole financing system through the following, among others: Instituting accounting procedures to be used in the accounting for inputs delivered under the various Agricultural Inputs support facilities; adopting and implementing procurement mechanisms that will guarantee value for money; establishing electronic farmer data management system at district level for all farmers that participated under the Command Agriculture,” Minister Ncube said.
He said a self-financing Agriculture Revolving Fund for on lending to farmers was also being pursued, in addition to strengthening the inputs control and distribution systems, as well as programme monitoring mechanisms, at every stage of inputs supply and distribution chain.
With all these measures in place, Zimbabwe is well on its way to improving agriculture’s contribution to Gross Domestic Product as well as the country’s food self-sufficiency without over-burdening the fiscus.
It will only take the will on Government’s part to implement them and goodwill on private sector’s part to play its part.