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US$60m govt debt leaves seed producers on the brink

The debt, which was incurred for seed supplied in the 2022/23 and 2023/24 agricultural seasons, has left companies groping for financial assistance from banks and investors to no avail.

OVER US$60 million debt incurred by the government has left 11 seed companies and growers in the cold as banks threaten to withdraw financial support from the sector, the Zimbabwe Seed Association (ZAS) has revealed.

The 11 seed producers are Arda, Easi Seeds, Farmbiz Genetics, Intaba Trading, Klein Karoo Seed Marketing, Prime Seeds/Seed Co Vegetables, Quton, Reapers, Seed Co, Tocek and Zimbabwe Technology Solutions.

The debt, which was incurred for seed supplied in the 2022/23 and 2023/24 agricultural seasons, has left companies groping for financial assistance from banks and investors to no avail.

Zimbabwe is facing an imminent drought caused by the El Niño spell.

The debt revelations come at a time when the government is struggling to honour its promise to pay United States dollars for wheat delivered to the Grain Marketing Board (GMB) following a successful 2021/22 winter cropping season.

The delay in paying the US dollar component has caused anxiety among farmers ahead of this year’s winter wheat season.

The GMB has so far paid the Zimdollar component worth ZWL$37,8 billion (about US$42 million), officials said this week.

According to a ZSA memorandum dated December 18, 2023 in the possession of NewsDay Business, all companies that responded indicated that they are heavily borrowed and are failing to timely service the bank loans.

“Some members have reported that they have defaulted on bank loans. Relationships with banks are now at their lowest level, seed companies cannot be trusted and hence are failing to access favourable credit facilities including the productive sector facility,” ZSA said.

“Those able to persuade banks for additional loan facilities are getting very high interest rates, which is very costly.”

“Companies have failed to access forex to timely import seed necessary to close supply gaps and this includes hybrid seed of sunflower and sorghums as well as parental seed which will help localised certified seed production.

“In the past few days, we submitted a request of US$15 528 334,58 from six ZSA members and so far, got no response.”

ZSA said the ongoing financial distress was unsustainable and would result in the scaling down of operations, closing of seed companies and Zimbabwe would soon lose its status of having a well-developed seed sector which has over the years ensured national seed security.

ZSA said the financial strain had led to nearly all companies subcontracted to the government’s Presidential input programme failing to fully pay growers for seed delivered.

“Some have experienced side marketing since they had no funds to purchase seed on time. Furthermore, seed growers are demanding payment in US dollars as is being done in other value chains, for example maize and wheat delivered to GMB, horticulture sector.”

ZSA members have since indicated that they do not have access to forex to pay growers given that the major customer, the government, is paying in local currency at the prevailing bank rate.

 “ZSA members are requesting the government to expedite payments of all outstanding debt as a matter of urgency using a viable exchange rate. The proposal to pay part of this debt in forex, as is being done for grain deliveries to GMB, still stands,” ZSA said.

“Given the pivotal position of the seed sector to agricultural production and productivity, ZSA is appealing to the government to facilitate recovery of this sector from the current financial distress by putting together supportive financial programmes such as a ring-fenced agro-based low interest working capital facility, consideration of tax breaks and some such programmes.”

ZSA said while it remained committed to providing national seed security, the government should act given the El Niño-induced drought and vagaries of climate change.

Recently, the government failed to meet the 10% allocation of the 2003 Maputo Declaration in which African nations committed a percentage of their national budgets to agriculture in their fiscal allocations.

Earlier this year, Zimbabwe seed producers complained that their operations have been affected by high interest rates and lack of access to funding.

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