Government has met private sector Command Agriculture Scheme loan repayment obligations after farmers paid over 60 percent of the money, with the balance being covered by Treasury. This has incentivised the companies to pledge more support for the agriculture sector in upcoming farming seasons.
Of the two categories of Command Agriculture loans, which are Command Agriculture Revolving Fund and Command Inputs loan, farmers have repaid over 60%.
Under the Command Revolving Fund, from the target of US$72 million, farmers have already repaid US$50 million and out of $56 million for input loans, over US$43 million has been paid so far.
And from the total of over US$200 million lent to farmers, over US$120 million has been paid back.
The healthy recovery rate comes at a time when the private sector was not willing to finance agriculture due to poor retrieval rate and now that all their obligations have been met, they have changed the narrative.
Due to strict and consistent monitoring under Command Agriculture, the recovery rates of agriculture loans has improved, and consequently banks are now very willing to fund the sector.
Finance and Economic Planning Minister Patrick Chinamasa, recently told The Sunday Mail Business that, “Command Agriculture has operated a model where the private sector put their money upfront and give us a term sheet, then we agree that they are going to distribute the inputs to farmers on a recovery basis.
“In other words, we are undertaking and guaranteeing the credibility of the farmers we give to them on a recovery basis. The inputs go to the farmers, they produce and sell and on the basis of a stop-order system, the money is recovered.”
Government comes in to guarantee payments in cases where there are obligations to the private sector.”
He said: “In all categories farmers have managed to repay over 60 percent of the loans, be it revolving funds or inputs, farmers have paid up and we are still recovering a great deal of money. But for the sake of progress, we have managed to pay up all companies we have borrowed from and we are now collecting our money from the farmers when they deliver grain to the Grain Marketing Board.
“So, for me – who is interested to pump up agricultural production – this is a cost that I am quite happy to meet as Treasury.”
Minister Chinamasa said: “Commercial banks, because of the non-performing loans, are wary of lending to farmers. That is where we came in and the irony of it is that the private sector, who are involved in this, are getting the money from the commercial banks at 4 percent, whereas if individuals went to the commercial bank, they will be charged 12 percent to 18 percent.”
Minister Chinamasa said a positive culture of honouring loan obligations was emerging among farmers who benefited from the Command Agriculture Programme.
Out of the 50 000 farmers contracted to produce maize under Command Agriculture, 33 percent fully paid their loan obligations, with 22 percent having partially paid their obligations, while recoveries from others are being made as they deliver to the GMB.
Government has instituted measures to ensure recoveries from the farmers, with monitoring teams already deployed to follow up on those who were being made to acknowledge their debts for repayment next season.
To encourage farmers to continue paying back their debt obligations, all fully paid up farmers were being prioritised in accessing inputs under the 2018/19 Command Agriculture programme.
President Mnangagwa is on record warning those who abuse Command Agriculture inputs that Government will deal with them accordingly.
Command Agriculture, a brainchild of the Government, has rescued thousands of farmers who would have failed to productively use their land owing to funding challenges.
Under the programme, farmers receive inputs for free, but are expected to deliver five tonnes of maize each to the GMB.
In the 2017/2018 summer cropping season, the private sector scrambled to fund the command project as they were now sure that their money was going to be recovered.
Lands, Agriculture and Rural Resettlement Deputy Minister Davison Marapira said: “Most milling companies have joined in the Command Agriculture programme this year due to its high success rate in terms of loan recovery rate and they have pledged hundreds of millions of dollars towards that cause.
“We hope we will continue to have that relationship with the private sector on national programmes like these.”
Local banks have set aside over US$1, 1 billion to support the 2017/18 agricultural season with individual farmers and suppliers expected to access the funds.
Given the success of the Command Agriculture Scheme and the issuance of 99-year leases, banks are willing to parcel out some loans to farmers.
A market watcher close to Bankers Association of Zimbabwe said, “Banks are very supportive of agricultural activities in the country and clearly understand that increased agricultural production is dependent on availability of adequate financing for the sector.
“Despite the willingness of banks to finance the agricultural sector, there were still a number of impediments which include lack of an effective farmers’ stop-order system to ring-fence encumbered sales of produce by farmers to deal with the problem of side marketing.
“But with the high recovery rate, more banks are very willing to participate in the Command programme.”
Agribank has disbursed US$100 million to the farmers, CBZ has disbursed US$80 million while FBC has released US$20 million, among other financial institutions.
Sakunda, GMAZ, Southern Region Trading Company, National Foods and PHI Commodities financed the Command Agriculture this year.