Golden Sibanda Senior Business Reporter
LANDS and Rural Resettlement Minister Douglas Mombeshora is not happy about protracted discussions with financial institutions over the bankability of the Government’s 99-year leases.
Minister Mombeshora said the 99-year leases were first issued in 2004 but up until now there is no agreement between banks and Government on the document’s bankability.
“I am not happy (about the pace of discussions and the time it has taken). The 99-year leases have been in existence since 2004 but we are now in 2015 and still talking,” he said.
Minister Mombeshora said discussions with banks were, however, still ongoing.
Bankers Association of Zimbabwe president Mr Sam Malaba recently told The Herald that BAZ’s legal committee was still scrutinising the leases to see if they are acceptable.
Sharp differences have remained between the Government and banks over acceptability of 99-year leases as collateral farmers could use to obtain loans from the banks.
The banks’ concerns have largely been the lack of transferability of the land tenure documents, with the Government insisting that the all land belongs to the State.
Banking sector sources said banks were however not agreeable to that as they argue that transferability is a key feature of any credible collateral for purposes of bank loans.
They also argue that Zimbabwe’s property laws do not distinguish between the value of farm land and developments or superstructure, as their value is normally combined.
The sources said banks contend that trying to separate the value of development from the land itself would present unfathomable technical challenges around the leases.
Yet is believed the leases would, if accepted as collateral for bank loans to farmers, unlock the significant amount of money required to drive agriculture, a key anchor of the economy.
But most banks demand “good” collateral to provide funding, which most resettled farmers do not have, crippling production in one of Zimbabwe’s most strategic economic sector.
According to Finance and Economic Development Minister, agriculture requires over $2 billion annually, yet the sector is currently only able to secure an average of $1 billion.
This is despite the fact that agriculture employs over 60 percent of the population, supplies 60 percent of raw materials to industry and accounts for about 40 percent of export earnings. Further, agriculture constitutes about 17 percent of gross domestic product.
Most farmers, especially resettled A2 commercial farmers, require funding to support production and farming activities, including installing irrigation and restocking their herds.
Previous and predominantly white former commercial farmers relied on strong funding from banks, as they had the security banks required to provide them with funding.