Government has given the Agriculture Development Bank (Agribank) permission to establish a special purpose (SPV) to lease and manage agriculture implements as part of measures to boost farm production and efficiency.
This was revealed by Agribank chief executive, Elfas Chimbera, at the State agriculture bank’s annual general meeting (AGM) in Harare yesterday. He said the SPV, while principally meant to manage and lease out combine harvesters, will also hire out other key implements such as ploughs and tractors.
The government last year appointed the bank to manage, the US$52 million Belarus equipment facility as well as the US$50 million John Deree Tractors Facility for farm mechanisation.
The bank was also appointed to manage the Pedstock Centre Pivots Facility for the identification and management of phase two beneficiaries amounting to US$10,5 million and includes 80 centre pivots.
Chimbera said the initial plan had been management and leasing of capital intensive large scale farm equipment such as the combines, before a decision was taken to extend the scope of the SPV to include other key equipment farmers may not have.
He said there was realisation that farmers may not have the resource to acquire strategically important equipment like combines or the capital to maintain them in healthy and perfect condition for optimal functionality. Further, Chimbera said the bank had noted that it made little sense to give the equipment to individual farmers.
Chimbera said the equipment will help farmers achieve economies of scale. Agribank will, however, lease the equipment to farmers at affordable but competitive prices while making enough income to sustain the SPV independently.
“Government approved the establishment of a Special Purpose Vehicle for management and leasing of Combine Harvesters on behalf of the Government, something that will help drive agriculture recovery.
“The SPV will own and manage this equipment on behalf of Government. There are about 13 or so of these and some have already come from Belarus, but will also include others from under the John Deere facility,” Chimbera said.
The equipment will be leased out at reasonable fees to clusters of farmers located in the main farming areas of Zimbabwe. The process of establishing the SPV is reportedly now at an advanced stage and ready to start operations by beginning of the 2020/2021 farming season.
Meanwhile, Agribank said its board had approved a dividend of $15,652 million to Government for 2019, while it has had a perfect start to 2020 despite challenges from a difficult environment with a profit of $72 million in the quarter to May 2020, which was 30 percent above target.
The bank was also happy that it has managed to keep non-performing loans (NPLs) at remarkably low threshold of about 4 percent, which is below the regulatory target of 5 percent.
However, Chimbera said the bank recognised the tough operating environment that includes high inflation, exchange rate volatility and challenges presented by Covid-19, which will require the bank to reassess its operations to realign it with dynamics in the economy.
He said the bank will also look at its shareholder funds, with an eye on preserving shareholder value and benchmarking the bank’s tier 1 capitalisation with the regulatory threshold of US$13 million by end of this year. Chimbera said the bank will also look out for opportunities regardless of the many challenges confronting Zimbabwe.
The Agribank boss also expressed gratitude towards the Government and Reserve Bank of Zimbabwe after receiving $200 million under the bank’s Medium Term Accommodation (MBA) facility for productive sectors, with the bulk of the funds going to support winter wheat production.