Zim needs sus­tain­able agric fi­nanc­ing model

The Manica Post - - Business News - Rumbidzayi Zinyuke Se­nior Busi­ness Re­porter

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.

Prof Ncube

Newspapers in English

Newspapers from Zimbabwe

© PressReader. All rights reserved.