Farming woes remain
http://www.theindependent.co.zw/
Thursday, 10 November 2011 15:21
By Linda Tsarwe
ZIMBABWE yet again faces one of the most important periods for the country;
another agricultural season. A lot depends on a successful agricultural
season: The economy is expected to grow by 9,3% this year, with agriculture
forecast to grow by 19,3% to support this growth. The success of
agriculture is vital for the country’s food security. Once known as the
bread basket of the region, Zimbabwe’s tables have turned and the country is
now a net importer of agricultural products. Such a development is sad
indeed.
Many have placed the blame on the lack of preparedness on the part of the
new farmers. Ideally, one should have inputs in place before the season
begins so that no delays are experienced as soon as the rains start. That,
however, is not the case on the ground. One season after another, the
farmers are always found wanting and the whole farming process is delayed
from the onset.
During hyperinflation, farmers found it difficult to secure inputs which,
like any other goods, were scarce. Although there was some form of
governmental assistance, it was not enough to cater for the high demand of
inputs by both subsistence and commercial farmers.
However, that is no longer the case. From input scarcity, the issue has
shifted to that of funding. The CFU immediate past president was recently
quoted as saying that a total of US$2,5 billion was needed to revive the
agricultural sector each season. It is an interesting figure, considering
that our economy’s estimated GDP for 2011 is around the US$8 billion level.
This means that we require more than 30% of our economy to support
agriculture alone! Although this seems like a very high estimate, the point
that the CFU president was trying to make is that the sector requires
significant amounts of funds to operate efficiently.
Another point of interest is that according to the October issue of the
African Development Bank monthly economic review for Zimbabwe, as at August
2011 bank deposits stood at US$2,95 billion, of which 91,2% were demand and
short term in nature. Clearly, our own local market cannot on its own revive
the agricultural sector with these sorts of liquidity levels.
Government only managed to allocate US$350 million for A2 farmers in the
2011 budget, which is far below what the farmers reckon would revive their
sector. The Government is working on a very tight budget as it is currently
facing a US$700 million budget deficit.
Additionally, institutions such as the GMB have only worsened the problems
that farmers are facing. Recent reports alleged that the GMB still owed
farmers about US$40 million for grain delivered to them from the 2010/2011
season. If this is the case, then surely GMB is doing a disservice to both
the farmers and the nation. Firstly, the farmers do not have money to
prepare for next season, which compromises their success.
Secondly, because farmers now do not have any income streams to repay their
debts, this creates bad credit records for them, closing all avenues of
financing. Banks have tightened measures to minimise defaults and as such
are demanding security before on-lending funds. Most farmers do not have any
acceptable security and are unable to access the loans that the banks are
offering.
Agribank, which was mainly established to assist farmers in accessing
funding without much difficulty, has got no capital to carry out such a task
at the moment.
Farmers have not been entirely innocent in the demise of the agricultural
sector. After the land reform programme, most new farmers lacked the
know-how of commercial farming and there was a significant drop in farming
output.
One would expect that more than 10 years after the exercise there should be
some significant improvement coming from the new farmers. Without
discrediting the ones that have done well on their new farms, some resettled
farmers misused farming equipment and inputs availed to them by government.
This contributed significantly to the underperformance of the sector.
With such a history, serious farmers are finding it difficult to source
funding from outside the country. There is a lot of risk attached to farming
and also the low performance levels that have characterised the sector in
recent years can only worsen things. Investors would rather invest their
money at a later stage of the agricultural cycle than fund it from the
start.
Dr Oliver Hartwich, a research fellow on environmental issues at
International Policy Network, mentioned in his 2006 report that resolving
problematic issues such as rule of law and respect of property rights will
go a long way towards ensuring growth in the sector. More people are willing
to put their money into farming if they are guaranteed that their investment
is safe.
However, we cannot rule out that some outsiders might be interested in
undertaking some contract farming. Grain in particular is not an attractive
option for investors who would rather fund attractive crops such as tobacco
and cotton. The bulk of the programmes carried out for funding crops such as
grain are humanitarian-based and do not go far in reaching the levels that
would grow the economy.
Banks, on the other hand, could also venture into contract farming as an
indirect way of funding the agricultural sector. Recent reports mentioned
that BancABC has entered into partnership with Tongaat Hullett to provide
US$30million for their contract farming needs.
The bank is not directly exposed to the risk inherent in contract farming,
as its recourse is with Tongatt Hullett. On the other hand, banks like CBZ
are on-lending directly to farmers, which increases their exposure to risk.
As things stand, the 2011/2012 agricultural season is not going to be any
better. The CFU immediate past president, Deon Theron, is quoted in the
press as saying that maize output for the 2011/2012 is forecast to be
1.3million tonnes.
This is against the national demand of about 2 million tonnes, meaning the
balance would have to be imported. The same story goes for wheat,000 whereby
the country is facing a possible deficit of 339 000 tonnes, for which
importation would be the only option to cover the gap.
Just weeks before the agricultural season starts, it is saddening to note
that not much improvement is expected in the coming season. Farmers have
expressed pessimism and it looks like the country will continue to require
importing staples.