The setting-up of the $15 million Credit for Agriculture Trade and Expansion fund by the Zimbabwe Agriculture Development Trust is a welcome development for farmers and agro-processors throughout the country.
The revolving fund, which is targeted at agricultural chain actors with the aim of stimulating productivity and incomes of small-holder farmers, is commendable.
It will have a tenor of between three to 12 months at an interest rate of 11,5% per annum. While the fund can by no means quench the demand for finance from would-be beneficiaries, it will go a long way in ensuring that there is some activity on the farms.
There is no doubt that the country’s agriculture sector touted as the backbone of the economy is underfunded and hence any new lines of credit would be most welcome.
Failure to fund agriculture is much more costly as the country would be forced to resort to importing goods and in the process incur unnecessary costs. Given the country’s limited fiscal space, there is therefore a need to ensure everything that could be generated locally should be done in order to free up finance for other critical sectors.
Of critical importance is that the funds are being availed at much lower interest rates compared to prevailing rates that are as high as 30% per annum. This should ease the burden on beneficiaries who have had to contend with expensive finance.
As demonstrated by the Grain Millers’ Association of Zimbabwe, the failure by the government to mobilise $20 million funding for winter wheat farming would result in the State forking out $100 million towards the importation of the cereal. During the first four months of the year Zimbabwe remained a net importer of goods and services. Current statistics from the Zimbabwe Stastical Agency show that the month of April recorded the highest figure for net imports followed by January while exports remain skewed towards primary products and intermediate goods which basically have low value.
It is our hope that while more support should be given to actual growers of the crops, the importance of value addition cannot be over-emphasised.
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Through value addition, the country once regarded as the breadbasket of Southern Africa can reclaim its status.
We hope that there will be no bureaucracy in the handling of funds as has happened with other financing facilities, in particular the Zimbabwe Trade Revival Facility, which will slow down the disbursement of finance.
Beneficiaries should strive by all means to repay the money so that as many companies as possible can benefit from the fund.
