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Golden Sibanda Senior Business Reporter
Banks still have strong concerns around legal and technical issues regarding property rights to land and improvements done on the land under 99-year lease farms.
This comes after the Bankers Association of Zimbabwe’s legal committee met and reviewed amendments meant to transform the leases into bankable collateral that farmers can use to access loans.

Discussions are still ongoing between banks and Government on the makeup of the 99 year leases to make them bankable for purposes of funding to agriculture.

According Agriculture, Mechanisation and Irrigation Development Minister Joseph Made, the sector, which constitutes 16 percent of gross domestic product, requires in excess of $2 billion annually.

Banking sector sources said that while progress has been made in improving acceptability of 99-year leases as collateral, material concerns have remained.

The concerns around legal issues relate to separation of rights to land and improvements thereon. They also include complexities of how to deal with value of improvements if a lease is terminated.

This is despite pronouncements by Lands and Rural Resettlement Minister Douglas Mombeshora that Government met banks and agreed to amendments needed to make the leases bankable.

The minister recently said that Government, together with the banks, had looked at the 99-year lease clause by clause and that amendments had been sent to the attorney general’s office and thereafter to Cabinet for consideration prior to adoption.

“We had a meeting with the banks where we looked at the concerns they raised. This resulted in us going through clause by clause together to see where exactly their concerns were,” the minister said.

Efforts to get a comment from the Ministry of Lands and Rural Resettlement on the outcome from recent engagements on the issue, between the banks and Government, were not successful yesterday. No comment could also be obtained from banks.

But sources said property laws in Zimbabwe treated land and improvements on the land as inseparable and transferable in such combined form.

As such, treating land and the improvements on it separately presented legal challenges in that doing so would imply the need for separate title deeds.

“Banks still have concerns regarding various aspects of 99-year leases. One of the critical issues the structure is not good enough collateral.
“If a bank gives a loan, the asset (land) belongs to Government and banks cannot mortgage the land. As such, the loan cannot be secured against the land.

“The security is only created after the funds have been released to farmers. The lease can only become collateral when there has been improvement on the land, as the land belongs to Government.

“Banks cannot secure an asset that does not exist. There is no security on the land (with no improvements), the land itself belongs to the State (and the farmer owns improvements),” the source said.

Other grey areas include how compensation for improvements on the land would be treated in the event that the 99-year lease is terminated by Government.

“If Government terminates the lease, what happens to the improvements on the land (under 99-yr leases), so there are a lot of grey areas,’ the source said.

Meetings in the past few days have not yielded conclusive results on the issues and discussions will continue to reach mutually agreeable position.