HomeOpinion & AnalysisColumnistsLivestock financing in need of a ‘game changer’

Livestock financing in need of a ‘game changer’

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Announcing the new Agricultural Research Council Board on September 19 2011, Agriculture, Mechanisation and Irrigation Development minister Joseph Made emphasised the need for the board to pay more attention to livestock issues which have over the years been neglected due to overemphasis on crop production.

On a separate occasion, he also indicated that in the next 20 years, livestock production was expected to increase to 25 million herd of cattle from around five million.

That is a big number, when viewed against the backdrop of constrained agricultural financing resources.

Current estimates put the value of the cattle industry, excluding piggery and poultry, at around $2,5 billion based on a generous estimated price of $500 per beast.

The industry could be worth $12,5 billion in the next two decades, almost twice the country’s current gross domestic product.

That is a quantum leap. To achieve this potential, a “game changer” will certainly be required, considering the current state of the industry and its challenges.

Even at these projected levels, Zimbabwe will still be way below Africa’s top livestock producer Ethiopia, which is home to Africa’s largest livestock population and is the continent’s top livestock exporter.

As of 2008, Ethiopia had 49 million cattle, almost 50 million sheep and goats and 35 million chickens.

The strategic intent to grow the livestock sector is evident in Zimbabwe, but is the policy intent as clear?

For that, we have to turn to the Medium-Term Policy (MTP), the framework upon which other short-term policies are anchored. The MTP acknowledges the decline in the national herd to five million from 6,18 million in 2000 and says: “Strategic policy interventions . . . will focus on beef, dairy and small stock” through various interventions.

Most importantly, the MTP acknowledges that most livestock is now in the small-scale sector, instead of the large-scale commercial sector which dominated production of livestock products in the 1990s.

Accordingly, any new financing initiative has to recognise this new reality on the ground in order to be sustainable.

Despite lack of fiscal space, the 2011 National Budget framework “prioritised livestock development targeting breeding and management, training of livestock farmers and strengthening of veterinary services.”

Accordingly, this saw an amount of $7 million being set aside to support livestock production in all categories from beef cattle to poultry, according to the MTP fiscal policy of July 2011.

Despite its obvious appreciation of the importance of the livestock sector for the country’s growth aspirations, hence the resultant policy alignment, the government can only do so much in its quest to finance the revival of the livestock industry in Zimbabwe, given the well-sung song of limited financial resources.

The private sector — in particular the banking sector — has a big role to play in nurturing the growth momentum of the livestock sector. What are some of the notable private sector initiatives seen in recent times in that regard, tentative as they may seem?

TN Bank recently signalled the intention to launch a livestock banking product in the first quarter of 2012 to tap into the unbanked rural market where most of the smallholder farmers live.

Under this initiative, those who deposit their cattle with the bank would be issued with certificates of deposit or receipts in exchange for their livestock.

The value of the cattle would be ascertained while
the issued certificate of deposit (CD) would become part of a pool of security.

The bearer of the receipt or CD would be able to redeem it with the bank and get the monetary value of the equivalent of the live beast at a later date.

If it takes off, this initiative will go a long way in unlocking the collateral and liquidity value of livestock, which like land, is currently — to all intents and purposes — a dead asset.

In early 2011, a similar intention was expressed for the launch of the Global Livestock Bank (GLB) that would extend loans to farmers to breed livestock.

“Farmers will access loans to cover all the costs of rearing cattle such as vaccines and feeds among others. We will insure the cattle and also look after their savings,” said Innocent Naka GBL chief executive officer.

GLB, which had by then reportedly started registering farmers in Gwanda into their programme, would hedge farmers against being fleeced by cattle dealers, as it would price livestock in line with market forces. Not much has been heard from them ever since.

Recently, the Cattle Ownership Society came on board and is telling a market that waits with bated breath that it “has developed an exciting way to make you rich through cattle ownership. If you are a member, you can receive up to 100 cattle per year”.

Jupiter Insurance Company (Pvt) Limited has over the years become one of the companies that are synonymous with livestock insurance, in particular to smallholder farmers.

It offers a livestock comprehensive insurance amongst other products and actively works with farmers’ organisations such as ZFU, ZCFU, CFU and the government to adopt a policy that would see all cattle in Zimbabwe being insured in order to protect farmers from losses.

In closing, as we seek to grow the livestock industry in line with new strategic imperatives, I found it ironic that others are seeking to do exactly the opposite.

For instance, the Ethiopian government is, according to a recent report, being urged to address — on an urgent basis — the need for new means for rural Ethiopians to store wealth apart from livestock and work toward a consensus on the destocking of ruminant herds — before climate change becomes more intense.

Are any of the highlighted initiatives the game changer that livestock farmers have been waiting for? Weigh in with your insights on omen.muza@gmail.com.

Omen N Muza is a banker and managing director of TFC Capital (Zimbabwe) (Pvt) Ltd who writes in his personal capacity.

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