• Making land bankable is a process that requires legislative changes
  • The agriculture sector is the most state funded sector in Zimbabwe albeit poor performance over the years
  • The financing part needs complete overhaul

Harare – It is reported in mainstream media that commercial banks are refusing to accept 99-year leases given to farmers by government as collateral security. In their current state, 99-year leases do not befit use as collateral as they are not bankable and the land belongs to the State.

A bankable asset is an asset one can take to a bank because it is valuable and transferable, any bank will loan money against it as if it was collateral. Collins Dictionary of Economics defines collateral security as the assets pledged by a borrower as security for a loan, for example, the title deeds of a house. In the event of the borrower defaulting on the loan, the lender can claim these assets in lieu of the sum owed.

In my understanding, making land bankable is a process not an event and this consumes a lot of time as the process requires legislative changes. Agriculture is a risk business especially in Zimbabwe as the sector rely on climatic conditions. For instance, statistics show that only between 100 000 and 120 000 hectares nationally are under irrigation against millions of hectares of arable land countrywide. Banks are for-profit institutions relying mostly on lending depositors’ money for interest income. Therefore, they should sufficiently secure collateral for those funds with secure, tradable and transferable tenure instruments.

The agriculture sector is the most state funded sector in Zimbabwe albeit poor performance over the years. Since the fast-track Land Reform Program in the early 2000s, various versions of state aid to boost productivity were given to farmers through the fiscal budget and some financed via the Reserve Bank of Zimbabwe (quasi-fiscal spending). For instance, in 2007/8, the RBZ engaged in a US$200 million Farm Mechanization Programme where farmers were given grants to import machinery and equipment such as tractors, combine harvesters and irrigation equipment. Fast forward to 2017, Command Agriculture was introduced and to date, over US$5 billion has been spent in providing farm inputs like seeds and fertilizers. Also, it is reported by the National Treasury that the bulky of the ZW$18 billion Covid-19 Stimulus and Rescue Package in 2020 went to Agric sector especially to winter wheat farmers.

Despite all this state funding year-in year-out, Zimbabwe remains a net food importer. The question is what is going amiss?

In my view, Zimbabwe is a best-case study of why Command Economy is doomed. Command system is flawed as it is always directed by politics instead of economics. Most of these government programs end up in the hands of the politically connected who willingly default on their obligations knowing that the state will then assume their debts. If the funds spent on say Command Agric were channeled into the sector through a private system (banks), agricultural activities would have been perpetually flourishing to date. Why? Because of the fear of losing their valuable properties when they default on loans, beneficiary would use borrowed funds or given inputs in the most efficient manner.

It is high time for the country to do away with corruption infested command systems in business and transform Zimbabwe into a private sector led economy. I am 100 percent confident that if authorities follow this route, Agric will roar again and take its spot of being Africa’s breadbasket.

Government assistance to farmers is not wrong as even the United States spends billions of dollars in subsidies to its farmers every year. What is flawed with Zimbabwe’s case is complete involvement by the State from planting to harvesting and consumption. I think for efficient use of taxpayers’ money, the government role should be largely to support prices (market creation) in times of severe price fluctuations since agricultural commodities follow a cobweb circle. This refers to a phenomenon where the prices witness fluctuations that are cyclical in nature usually due to faulty producer expectations.

It is my submission that if the process of making these 99-year leases bankable is expedited and agriculture viewed as a business by all participants, abolishment of corruption-linked subsidies especially command system will positively transform the economy. The move by the responsible ministry to threaten with evictions to those underperforming farmers and give the land to productive ones is another step in the right direction if implemented impartially. For far too many years, land is being underutilized in Zimbabwe.

Sustainable agriculture recovery is critical as the sector is estimated to have a potential to employ about 70 percent of the country’s population, supply about 60 percent of industrial inputs and contribute at least 40 percent in export earnings.  The financing part needs complete overhaul!

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