Banks have reservations around the acceptability of 99-year leases as collateral with concern on separation of rights over land and structures built on it

Golden Sibanda Senior Business Reporter
Farmers have to wait for an indefinite period before they can use 99-year leases as collateral for bank loans because the leases remain “work in progress”. The issue is set for discussion with President Mugabe as well as Reserve Bank chief Dr John Mangudya before it is brought before Cabinet for final discussion. Bankers’ Association of Zimbabwe executive director Mr Sij Biyam said no finality had been reached on the issue, but the matter was “positive work in progress”.

“The 99-year leases have not yet been finalised; they are yet to be discussed by the President and Governor before they are submitted to Cabinet.
“There have been discussions with the Ministry of Lands and Land Rural Resettlement on issues that we need to be articulated, so it’s work in progress,” he said.

Mr Biyam said the situation was the same with Government’s AI permits. At least 221 427 resettled farmers are in line to receive the permits over three years.
Apart from giving security of tenure, farmers hoped 99-year leases and A1 permits gave them the much sought after and elusive collateral for bank loans.

The contrasting positions between banks and Government left the farmers handicapped to be able to optimally exploit the potential of the land they were given.
Lands and Rural Resettlement Minister Douglas Mombeshora told The Herald Business that they awaited opportunity to meet President Mugabe.

“We now have a draft of the issues we have agreed on with the banks,” the minister said. “We are waiting for a slot to see the principal,” he added.
Minister Mombeshora said they already had a draft document containing issues discussed between banks and the ministry on the leasehold land titles.

Banks have reservations around the acceptability of 99-year leases as collateral with concern on separation of rights over land and structures built on it.
Sources said BAZ has raised concerns on technicality around the fact that, ordinarily, the value of a property is inseparably attached to land it is built on.

Also of concern regarding use of the leases as collateral was their non-transferability, which banks felt made it difficult to issue debt against them. In the midst of the many concerns on the structure of the titles, proposals were made for a special purpose vehicle that would pay up if farmers defaulted.

Mr Biyam said while banks continue to lend to robust proposals in agriculture, the efforts were meant to refine the regulatory system to lending.
He said tobacco production was ample evidence of how banks could lend to farmers in an organised environment despite the tight liquidity rocking the economy.