‘99-year leases work in progress’ Dr Mombeshora

Business Reporter
THE Bankers Association of Zimbabwe says there are a number of outstanding issues which need to be addressed around the 99-year leases before the land titles become bankable.

This follows earlier pronouncements by Lands and Rural Resettlements Minister Dr Douglas Mombeshora that Government had addressed the sticking issues banks had raised over the 99-year leases.

The minister’s remarks had brought joy among cash-strapped farmers who have to battle each year to obtain affordable bank loans to support their activities on the farms.

BAZ said while a lot of work had gone into making the leases “collateral friendly”, there are still areas to be resolved between Government and BAZ to make them bankable.

“Naturally banks have made submissions and representations to the relevant authorities,” BAZ executive director Mr Sij Biyam said.

The banks’ lobby group would not be drawn into discussing the final details of the outstanding issues before the “Government has fully considered those areas of concern”.

Zimbabwe’s economy is an agro-based economy; agriculture constitutes about 16 percent of the economy, and requires roughly $2 billion a year to fund farmers’ activities.

BAZ said that collateral on its own was not the single reason banks will not lend a borrower funds, as there were many important considerations in making a decision to lend.

These include viability and strength of the underlying business proposal, soundness of the market where the product will be sold to repay the loan, commitment of the individual to the project and quality of managerial oversight and good repayment profile.

After BAZ’s legal committee sat to review amendments Government had taken on board to make leases bankable, banks said material legal and technical concerns remained.

These include legal issues around how to separate value of land and improvements on it and complexities on how to establish the value of improvements if a lease is terminated.

Banking sector sources said the legal and technical issues banks raised stemmed from the conception that Zimbabwe’s property laws treat land and improvements as inseparable.

As such, treating land and developments separately presented the legal challenge that doing so would require separate title deeds, a complex and unprecedented phenomenon here.

Legal minds in banks claim the financial institutions cannot release funding to farmers on the basis of land, a State property, as improvements can only be done after farmers have received loans.

“Banks can not secure an asset that does not exist.

“There is no security on land (with no improvements).

“The land belongs to the State (and improvements to farmers,” a source said.

Concerns also revolve around how the value of only the improvements would be calculated if Government terminated a lease, as traditionally, the two have been inseparable.

The banks insist concerns remained although Minister Mombeshora earlier said he had met and agreed with them on the amendments they proposed to make leases bankable.

Minister Mombeshora said last year that they had met with financial institutions and gone through the lease agreements clause by clause to establish the issues banks had raised.

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