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NewsDay

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Zimbabwe government’s new beginning for agricultural financing?

Opinion & Analysis
Minister of Agriculture, Mechanisation and Irrigation Development Joseph Made was recently in the news talking about preparations for the 2013-2014 summer

Minister of Agriculture, Mechanisation and Irrigation Development Joseph Made was recently in the news talking about preparations for the 2013-2014 summer cropping season and outlining plans for the broad future of agriculture in Zimbabwe.

Financial Sector Spotlight with Omen Muza

This instalment reviews some aspects of his pronouncements which appear to signal a new beginning for agricultural financing, on the back of which we could begin to see some growth in the sector.

Farming is a business

It is important — necessary in fact — for the government to keep reinforcing the message that farming is a business just like any other. If sustained, this can be the bedrock on which to improve other aspects of farmers’ basic business etiquette such as respecting contracts and repaying debts.

“It (farming) has to be a proper business,” Made said, noting though that the government would continue to support smallholder farmers.

The admission that “government does not have the resources to support A2 farmers”, hence it can only seek to “influence through the Finance ministry to tell the banks to lend them money,” appears to signal a more practical, less populist approach to agricultural financing.

Success of tobacco financing model

The government acknowledges the success of the tobacco financing model and is aware that if replicated for other commodities, bank financing of agriculture would be more forthcoming.

In order to benefit from an orderly system akin to the tobacco financing model, the government knows what must be done — create the necessary legal and operational framework in which such a system can be sustainable and be prepared to defend it from abusers.

The return of marketing boards

The Cabinet has apparently directed the Agriculture ministry to resuscitate marketing boards starting immediately with the Cotton Marketing Board (CMB) given the alarming decline in cotton production.

While efforts to halt the decline in cotton output are laudable, one hopes that the decision to resuscitate the CMB and other marketing boards is a well-considered one, founded on evidence-based decision-making, and not on some whimsical, ill-defined premise.

This decision and its urgency immediately raises questions whether the reasons marketing boards were initially dismantled are no longer valid.

The real worth of 99-year leases

As things stand, it would appear that 99-year leases are not worth very much for lending purposes, which probably explains why banks are not keen to accept them as collateral in their present form.

Even the government which issues them admits that banks would struggle to realise the underlying value of the leases should they chose to accept them as security for loans.

Made argues that the viability of proposals is, therefore, more important than the security that can be provided by the leases.

No more free lunch

After years of spoon-feeding farmers on an unsustainable diet of cheap inputs, some of which eventually ended up on the black market in places such as Mbare, the government is once again bailing out farmers for the 2013/2014 season. Each household will get a $97 package.

Faced with a dwindling resource envelope, the government has finally seen the light and announced that this is the last time inputs will be given in this manner and it will instead now focus on subsidising industry in order to bring down the cost of inputs.

Emphasis on productivity

“We want A2 farmers to succeed like what is happening in tobacco. We do not want to be the laughing stock, that we took the land but we are not producing anything,” Made said.

It’s about time Honourable Minister!

It’s hard enough being the laughing stock, but we have now also become laughing stock that is hungry and malnourished.