Golden Sibanda and Tawanda Musarurwa
Zimbabwe’s 99 year leases issued to farmers after land reform remain largely “invalid” for borrowing from local banks, according to the country’s two biggest farmer organisations.
White-farmer dominated Commercial Farmers Union (CFU), with over 200 members, and Zimbabwe Farmers Union (ZFU), with 1,3 million members, indigenous farmers, said the 99 year leases were largely “nothing more than an improved version of Government’s land offer letters”.
But Minister of Lands, Agriculture and Rural Resettlement Perence Shiri said he was unaware that farmers were facing challenges using the leases as collateral to obtain loans, saying government was prepared to investigate the reasons.
The lease is a legally binding agreement between the Ministry, which is the lessor, and the farmer; who is the lessee.
The land title, the farmers’ organisations claim, is not bankable instrument for purposes of borrowing from banks.
When deficiencies of the leases were pointed out previously, cosmetic alterations were done to the lease sometime last year, amid claims outstanding issues had been resolved.
“That has not been brought to our attention,” said Shiri. “We will be more than prepared to meet farmers organisations (so that they can) highlight the challenges; we can then engage the banks.”
Under pressure over their reluctance to fund agriculture, banks insisted they were ready to fund farmers, provided they submitted viable business proposals for bank loans.
ZFU president, Paul Zakaria, in an interview with Business Weekly this week said no single farmer had been able to secure loans for agriculture from banks against the leases.
“It is all talk. No farmer has taken a 99 year lease to the bank and got it accepted,” he said.
But the Bankers Association recently said after an engagement with Government, an agreement had been reached for banks to accept the 99 year leases as collateral.
“We are waiting for those leases so that we can incorporate the document in the formal credit assessment process. The issue is really on the part of government, they need to speed up …rollout of the instrument so that farmers are…able to approach banks to get access to loans” BAZ spokesman Clive Mphambela said.
He also pointed out that while Government had passed the Immovable Properties Act, to facilitate borrowing using movable assets, the laws had not yet been syncronised to be used simultaneously with the farm leases as collateral for bank loans.
Zakaria, however, bemoaned the lack of adequate funding for agriculture, through properly defined Government policy and funding structures, despite widespread acknowledgement the sector is of strategic importance.
The agriculture sector used to supply over 60 percent of inputs needed by manufacturers while consuming about 40 percent of manufacturing output.
It is one of Zimbabwe’s main strategic sectors, accounting for over 16 percent of Zimbabwe’s gross domestic product (GDP) while being the single largest forex earner.
“Banks will not give loans against 99 year leases until the leases become instruments that are bankable. I challenge any bank that says it has funded farmers against the 99 year leases to produce the evidence. Nothing of that sort has ever happened,” Zakaria said.
The ZFU president said that 99 year leases did not give banks comfort to lend against them, as banks did not regard the land titles as bankable instruments.
Banks reluctant to give in
This is largely because the leases make it overly clear land remains an asset of the State, making it impossible for banks to seize them in the event a farmer defaulting.
“99 year leases do not give comfort to the banks because of the fact that the land belongs to the State. The banks cite the non-bankability of the 99 year leases,” he said. “As such, you cannot attach any value to the 99 year leases. Banks are not giving out their own money, it is your money, it is the depositors’ money,” Zakaria said.
“Banks are supposed to protect the depositors’ funds. The instrument (99 year lease) should be secure enough for the banks to land against them,” Zakaria added.
CFU’s sentiment on 99yr leases
Tradability of agricultural land is a critical factor in ensuring its effective use, Commercial Farmers Union (CFU) vice president Andrew Pascoe has said.
Pascoe said 99-year leases should have the same tradability as previous title deeds for commercial farms, to make them negotiable on the land market.
He said that constrained financing was currently the “single biggest factor” facing Zimbabwe’s agriculture sector and efforts to optimize productivity.
“Without doubt agriculture is based on the land. Historically, the success of commercial agriculture and at the same time parts of communal agriculture was based on that security of tenure that we as commercial farmers had from our title deeds.
“There were certain rights that were associated with the title deeds, which have not been passed on to the beneficiaries of the land reform programme.
“We had the right of use of that land, the right to trade that land, there was a market. Until there is a mechanism for those rights to be passed on to the beneficiaries of the land reform programme it is very difficult for agriculture to rise where it should be,” said Pascoe.
He was speaking at an African Development Bank (AfDB) engagement with the private sector recently.
Ironically, while announcing the 2018 Monetary Policy, Reserve Bank of Zimbabwe (RBZ) governor Dr John Mangudya, said banks were now ready to lend to farmers against 99-year leases.
“In line with the current economic dispensation’s aspiration to transform agriculture into viable business proposition and taking into account the significant improvements made by Government on the 99-year leases to enhance the security of tenure of the lease and making it bankable and transferable, the bank has agreed with banking institutions for them to accept the 99-year leases as security for accessing credit from financial institutions in line with the provisions of the leases.”
But their this is being hindered by the leases non-tradability on the land market, critical for banks to exchange the land title to recover defaulted loans.
The CFU vice president said all things being equal local banks should be able to sell these lease on the market in the event that holders defaulted on loans.
“There are things that we can do to help us in the short-term, but for the long-term sustainable development of agriculture there has to be that assurance that whoever borrows money and puts it into infrastructure, he is going to be able to reap the benefits of it; that the lending institution is going to be secure in the knowledge that if the person, for whatever reason, doesn’t manage to pay, they will be able to recover the money that they would have loaned.
“From a farmer’s point of view – and that’s across the board – land has to become productive it has got to have a value and that is a challenge, and we look forward to some strong policy decisions coming post-elections so that all those on the land can go forward with confidence that they can develop and their investments will be secure.
“That is the single biggest factor in restoring the land and agriculture back to its productive state. The other things follow from the fact that you have land that you can trade and has value.”