AFC can now build on land reform success

WE have now shown that given adequate access to inputs on time Zimbabwe’s farmers can produce large harvests, especially when they have had skills upgraded and have adequate access to advice and support.

We have also found that it is possible to exclude the fake farmers from financing, those with land that they have no intention of using and simply want to divert their financing or inputs.

And, in perhaps the largest supplementary reform, we have managed to get the message across that pre-season financing in cash or in kind, the provision of inputs, is a loan to be paid back from the proceeds of the resulting harvest.

The Second Republic, with its triple emphasis on training and supporting farmers, giving them access to basic finance, and enforcing normal banking-style discipline over loan management, has created the necessary conditions to move forward.

The main problem with the schemes that have been developed, modified and fine-tuned over the last three seasons, is that they were ad hoc, dependent on the grace and favour of the Government and the competency of the Treasury to find the required finance without wrecking the fiscal reforms that have finally launched Zimbabwe into viable economic expansion.

Having put the required elements together, found what works and how it works, there is an obvious need to start formalising agricultural-financing systems and start the process of moving them from annual Cabinet decisions and putting them on a permanent and long term institutional basis.

That in turn will allow expansion of the system, and allow ways of creating long-term financing for capital development of farms, access in a fiscally and practically viable way for machinery and equipment, and insuring against the sort of natural disaster, from a hailstorm to a cyclone, that can strike any farmer.

This the Second Republic has done with the recreation of a newstyle Agricultural Finance Corporation, now a holding entity with four operational subsidiaries that include the AFC Land Bank, AFC Leasing and AFC Insurance.

It was built on the old Agribank, a noble experiment that never really worked as intended for a variety of reasons, largely and regrettably because of the old First Republic financial indiscipline, and survived by basically transforming itself into an ordinary commercial bank and limiting its outreach operations into farming finance.

The fairly complex structuring process for the new and inherently viable successor entity has been completed and the new operation was launched by President Mnangagwa last week.

It now has to start building from its low inherited base, probably acting as the administrator of the annual Government funding while it builds up its own capital resources.

But having professional administration of Government, farm finance is a giant step forward in the formalising process, with farmers dealing with bankers rather than civil servants, and all that entails when it comes to record keeping and even the needed mindsets, already being created, that farming is a business rather than an occupation, regardless of whether you farm 5ha or 500ha.

The need for more complex systems is obvious. For example, the Government has signed several deals to make the required machinery and equipment all farmers need, at some stage, available and these can be expanded. The problem though, in getting this machinery to farmers, is two-fold.

First most farmers do not have ready cash to buy a decent tractor, an investment that might last a decade yet needs upfront payment. The second is that many farmers do not need such equipment 24/7 for a whole year.

They might well need a combine harvester, but for one week or less for example. The obvious solution is renting stuff when it is wanted, or long-term financing when it makes sense to keep it on a farm. But who is willing to offer these services, at a fair price? We now have the AFC with a subsidiary that can start doing this.

A second example could well be a group of several dozen neighbouring A2 farmers in a particular area might want to put together a viable dairy business, each farmer owning their own cows, but centralising the required capital equipment up to and including the cooled holding tanks and the expensive cooler truck that gets the milk to the final processing company.

Who will lend and at what interest rate? Well there is now an AFC Land Bank that can take such schemes on board, help with all the legal ins and outs, have it checked for viability and keep a beady banker’s eye on the resulting operation.

It can even work with the leasing arm if that is the best option for some of the equipment.

In some ways this is what the old settler farmers had to make a success of their large estates. They were not stupid.

But the old Land Bank and the old AFC that they set up were very limited, first dealing with large estates and secondly helping just a few thousand farmers and excluding the other 2 million plus.

And they were not really original; they adopted systems that worked elsewhere.

The new AFC and its operational arms will not just need something more inclusive, far more inclusive, but will need something a lot better as well as more complex to deal with the needs of all Zimbabwean farmers in the third decade of the 21st century.

It will not just need to have close contact with the financial arms of Government, but also have an exceptionally close working relationship with the Ministry of Lands, Agriculture, Fisheries, Water and Rural Resettlement, and especially with Agritex, the people on the ground who deal with farmers, yet retain that banker independence.

The new AFC has been set up at the earliest possible point. Such systems need the low inflation, farmer discipline and all the other benefits from the Second Republic’s huge overhaul of fiscal and monetary policies and, regrettably, its total intolerance of corruption and willingness to exclude all cheats, and there were many in farm finance, from all benefits.

But from that solid base it is the right entity and the right time to formalise what has been accomplished in three seasons and then build on that base something that can drive agriculture finance forward in a way that will benefit millions of serious farmers and thus the nation as a whole.