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Lloyd Gumbo Herald Reporter
FARMERS and agricultural economists say it is not sustainable for Government to fund commercial agriculture insisting that financial institutions hold the ultimate solution to challenges in this sector.
“The domestic strategy lies in the hands of the public and private sectors and development partners who must work together in this endeavour,” said agri-business development expert Mr Midway Bhunu. “Agro-processing companies that rely on agriculture for production have a role to play on the agriculture value chain by financing critical stages on the chain.

“Contract farming is another strategy although there are challenges in that area as a result of the current recession and limited credit lines for companies.”

Bankers Association of Zimbabwe chief executive, Mr Sijabuliso Biyam said banks were ready to give loans to farmers as long as they proved that they would pay back.

“We are funding agriculture but naturally when they want to use their leases as collateral then that’s where the snag is. Sometimes we don’t insist on collateral but rely on the farmer’s behaviour with the bank. We don’t have a problem with people who have a good track record. We also encourage farmers to apply for loans when they grow crops that have a ready market for instance tobacco. We are alive to the fact that without banks supporting agriculture then farmers can’t get money from anywhere. We encourage them to pay back whenever they are given loans so that they can be given again,” said Mr Biyam.

Mr Bhunu said government to government loan agreements was another strategy adding that there were a number of countries that were interested and ready to support the sector.

“The other critical strategy is financing of the marketing stage which involves issues to do with value addition. We need to create demand for agricultural products locally and in the region. This is important because at least whatever farmers produce, it will have a market. Hub financing is another strategy where financial institutions identify a particular farmer with collateral to apply for loans on behalf of a group of farmers. We want agriculture to be treated with a value chain approach. Without these things, I don’t see us going anywhere,” said Mr Bhunu.

A senior consultant with Buckles Bury Consultancy, a farmer training entity Mr Tawedzegwa Musitini said it was important for farmers to be trained and monitored when they get loans from banks. “The challenge is that at the moment, farmers are just getting money with out training and monitoring. Farmers must consider agriculture as a business so that when they borrow money from the banks they know that they have to produce so that they can return the money. They can still go to the banks and prove beyond doubt that they will return the money even if they don’t have collateral. My understanding is that banks do not insist on collateral as long as you demonstrate that you can produce. We are coming from an environment where agriculture was less profitable than selling inputs every time farmers got them be it through Government or any other agency,” said Mr Musitini.

Zimbabwe Commercial Farmers Union past president Mr Donald Khumalo said it was important for Government to pay farmers on time when they deliver their produce to the Grain Marketing Board. “The challenge at the moment is that there is no trust between the private sector, Government and the farmers, he said.

Zimbabwe National Farmers Union vice president Mr Garikai Msika said contract farming was the way forward.
“Now that we have a statutory instrument on grains and oil seeds, contractors should then come on board and fund the sector. The issue of collateral is a big problem because an A2 farmer requires between US$200 000 and US$700 000 of which no one can raise that much in collateral, said Mr Msika.

He added: “In that scenario, contract farming becomes the most viable strategy where financial institutions give loans to contractors who in turn provide inputs for farmers. That arrangement is better because interaction and supervision between a contractor and farmers is better than a financial institution and farmers. We know we have farmers who owe banks but there is no way farmers can repay the money as long as they are not growing anything at the farms as long as they don’t have capital.”

He said the statutory instrument protected both the contractor and farmers.
However, the private sector argued that the regulations did not address all the loopholes they raised when they pushed for promulgation of the law.

Mr Bhunu said in other countries Governments subsidise inputs making it possible for farmers to afford them.
“In countries like Malawi and Zambia Government subsidises farmers though it is a cost. For instance in Malawi the Government encourages farmers to use a lot of fertiliser so they subsidise the fertilizer. As a result they record high yields.

“In countries like Brazil they have direct borrowing from banks because the money is cheap. In our case we are constrained by two things. The money is not available and when available it is expensive,” said Mr Bhunu.

Mr Prince Kuipa, chief economist with the Zimbabwe Farmers Union said banks were the source of funding for agriculture. “The reason is because their land has value because they have title deeds so they can just walk into a bank and get a loan against the piece of land,” he said. “You can’t finance agriculture from anything else when land has no value. Banks cannot just give loans without collateral. They use value of the land. That is the system the world over,” said Mr Kuipa.