Govt guarantees loans to agric sector

01 Nov, 2019 - 00:11 0 Views
Govt guarantees loans to agric sector Minister Ncube

eBusiness Weekly

Golden Sibanda in Victoria Falls
Government has reiterated its pledge to guarantee all loans that banks will extend to commercial farmers under the revamped Smart Agriculture Concept, previously known as Command Agriculture, to give lenders confidence to financially support the sector without being restrained by concerns of the risk of defaults, an official has said.

The loan facilities will, however, be mainly available to farmers with a proven track record of producing and repaying their loans to the Government when the State agriculture financing programme was still running as Command Agriculture.

Finance and Economic Development Minister Professor Mthuli Ncube, said this while addressing Members of Parliament during the 2020 National Budget Seminar at Elephant Hills in the resort town of Victoria Falls yesterday.

Last week, Minister Ncube told a post Cabinet meeting that the Smart Agriculture Concept was a transition to changing model and not necessarily scrapping of Command Agriculture.

“From now on and for the record, Command Agriculture will be known as Smart Agriculture.”

He, however, said Government still had a role to play as banks were still not comfortable with 99-year leases.

“We think that Government still has a role to play. I will tell you why — the issue of the 99-year leases. How do we get around that if banks are still not comfortable to extend credits at the back of the 99-year leases? Then as Government we need to step in and complete that incomplete market. That is what we are trying to do and banks and farmers are welcoming it,” he said.

The 2020 National Budget seminar was held to discuss key socio-economic issues ahead of the Budget presentation on November 14, 2019.

While Command Agriculture-barring natural disasters such as drought and the destructive fall armyworm — helped in increasing crop production for import substitution, especially maize, the programme has been marred by low levels of repayments.

“We have moved on to Smart Agriculture in terms of the commercial part of our agriculture; the other part is Presidential Inputs Scheme.

“This is a major step where we have crowded in the private sector as a partner to Government in financing agriculture.

“We have issued guarantees to banks for any losses from farmers who borrow, but of course they (Banks) must show effort, a good effort that they tried to collect the money, but we have given them guarantees to extend credit without difficulty,” Minister Ncube said.

The coming in of private sector, through the participation of banks, will relieve the Government significant pressure to earmark billions of dollars towards supporting the strategic sector of agriculture.

Agriculture accounts for 12-16 percent of Zimbabwe’s gross domestic product (GDP), employs hundreds of thousands of people across the country and generates nearly half of the country’s annual export earnings, making it strategically important.

“So, as a farmer coming under the old Command Agriculture, which is now Smart Agriculture, the banks should not ask for collateral from you, because the collateral is coming through the guarantee that the Government has extended to the banks.

“So we are excited about this approach, that is what it should be like, and banks are equally excited because suddenly they are able to lend to agriculture and sleep well at night because before that there was the issue of 99-year leases.

“The guarantee is assisting us to overcome the issue of 99-year leases,” he said.

Over the years, following the completion of the land reform programme which started at the turn of the millennium, banks refused to extend credit to farmers arguing they could not be accepted as collateral because it belonged to the State and was therefore not transferable.

Following Government’s successful completion of the land reform programme, resettled black farmers were allocated swathes of prime farming land previously in the hands of the minority whites.

But the new farmers, despite agriculture being the backbone of the Zimbabwe economy, have struggled to produce or boost production due to lack of funding to procure adequate inputs such as seed, fertiliser and chemicals as well as acquire sophisticated agricultural equipment.

The low agricultural productivity, because the sector is interdependent with industry, has had significant impact on the performance of the economy and food security in the country.

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