Banks, farmers impasse unbreakable
Most of our farmers have less security to offer in the event that they need to acquire bank loans
Edmund Kudzayi Political Mondays
LAST year we were told the 99-year lease was now bankable and that farmers would be able to borrow money from banks for the 2014-15 farming season. I was incredulous; not out of cynicism but because what is being negotiated is nearly impossible. I just could not see how an agreement could
have been reached.
A few weeks ago the authorities publicly admitted that the banks had in fact rejected the 99-year lease and that there was more work to be done.
Unless banks fundamentally change the way they do business, an unlikely scenario, or Zanu-PF relaxes a fundamental ideological position, the impasse will remain. Banks require security that can quickly be disposed of in the event that a borrower defaults. The vast majority of our farmers do not have any security to offer. The problem is compounded by the fact that all land now belongs to the State. In the past a farmer could simply risk his land as collateral, this is no longer possible.
Tendai Biti has offered a facile solution, calling for farmers to be given title deeds so they can borrow against their land. This would effectively allow beneficiaries of the Land Reform Programme to sell and profit from land that they acquired at no cost. That is the smaller problem. Zanu-PF fears that allowing land to be sold could result in vast tracts of land being bought up by monied whites or corporations, in the process dis-empowering blacks.
I suspect there is an additional political angle that Zanu-PF will never verbalise. Over 250 000 families were resettled. Assuming a household has three eligible voters, those are nearly 750 000 votes that Zanu-PF will continue to harvest since it has consistently portrayed itself as the only party that can be trusted not to reverse the Land Reform Programme. This is a terribly cynical theory but realpolitik; beneficiaries of the Land Reform Programme have an interest in protecting Zanu-PF since their own welfare is inextricably bound to Zanu-PF’s electoral success. Whether this is by chance or cunning design, one can only speculate.
The thinking element in the opposition has caught on to this hence Biti’s uncharacteristically emphatic remarks asserting that land reform is now irreversible. Biti has gone further, promising that an opposition government would give beneficiaries of the Land Reform Programme title deeds. This is clearly designed to woo voters that are motivated by the land question. It’s a clever move but it probably will not work because the opposition has vacillated on the issue too many times. People just do not trust it. What is to stop Biti and friends changing their minds once they are in power?
Coming back to the funding impasse. Another problem with the 99-year lease is that it can be withdrawn at the discretion of the minister. While the authorities will argue that they are benevolent and will use these powers with restraint the reality is that governments the world over tend to squeeze the most out of the powers they hold. Nobody acquires power for the fun of it; it would be naive to think that the authorities will not flex those lease withdrawal muscles.
Banks are rightly wary. No business wants to subject itself to the vagaries of political whim. A preferable scenario would be one in which the courts, not politicians, are given the power to withdraw a lease. Government would have to approach the courts if it wants to withdraw. Fighting in the courts is an expensive, time consuming and sometimes embarrassing exercise; this tedious process discourages frivolous cases. The alternative of having a bureaucrat recommend withdrawal and then requiring a farmer to defend himself places no restraining burden on the state.
I doubt any government would voluntarily give up so much power. But even if the authorities were persuaded into this generosity that still would not answer how the banks would recover their money in the event of a default.
State land cannot be sold and what belongs to the leaseholder are the developments on the land. Let us assume an individual borrows $23 000 for seed and fertiliser but the crop fails. How would the bank recover its money since there are no developments to speak of?
Even if the banks only funded the purchase of assets such as barns and tractors; in the event that the farmer defaulted the bank would not recover much. The machinery would have depreciated. Even on paper what we’ve heard of the proposed policy leaves more questions than it gives answers.
The only way this is going to work is if Government surrenders some control to the market but puts in place strong checks and balances to prevent land falling into the wrong hands. One possible system would be to look at the average cost of inputs per hectare and allow farmers to borrow up to a maximum, for instance $50 000 for a 100-hectare farm in region one.
In the event that the farmer defaults the bank would be allowed to sell the 99-year lease to an indigenous Zimbabwean to recover the borrowed amount. Alternatively Government could be given the right of first refusal, allowing it to buy back the land. Regulation would play the role of preventing farmers borrowing beyond set thresholds.
The demand for land is what determines value. If the market is willing to pay $900 to lease a hectare of land in region one then banks could safely lend anything under $90 000 for a 100-hectare piece of land knowing that in the event of a default they can simply sell the lease into the market. If Government has no objection to land rentals I cannot see why it would object to allowing indigenous Zimbabweans paying off a defaulters debt and acquiring his lease.
Ndatenda.
Most of our farmers have less security to offer in the event that they need to acquire bank loans
Edmund Kudzayi Political Mondays
LAST year we were told the 99-year lease was now bankable and that farmers would be able to borrow money from banks for the 2014-15 farming season. I was incredulous; not out of cynicism but because what is being negotiated is nearly impossible. I just could not see how an agreement could
have been reached.
A few weeks ago the authorities publicly admitted that the banks had in fact rejected the 99-year lease and that there was more work to be done.
Unless banks fundamentally change the way they do business, an unlikely scenario, or Zanu-PF relaxes a fundamental ideological position, the impasse will remain. Banks require security that can quickly be disposed of in the event that a borrower defaults. The vast majority of our farmers do not have any security to offer. The problem is compounded by the fact that all land now belongs to the State. In the past a farmer could simply risk his land as collateral, this is no longer possible.
Tendai Biti has offered a facile solution, calling for farmers to be given title deeds so they can borrow against their land. This would effectively allow beneficiaries of the Land Reform Programme to sell and profit from land that they acquired at no cost. That is the smaller problem. Zanu-PF fears that allowing land to be sold could result in vast tracts of land being bought up by monied whites or corporations, in the process dis-empowering blacks.
I suspect there is an additional political angle that Zanu-PF will never verbalise. Over 250 000 families were resettled. Assuming a household has three eligible voters, those are nearly 750 000 votes that Zanu-PF will continue to harvest since it has consistently portrayed itself as the only party that can be trusted not to reverse the Land Reform Programme. This is a terribly cynical theory but realpolitik; beneficiaries of the Land Reform Programme have an interest in protecting Zanu-PF since their own welfare is inextricably bound to Zanu-PF’s electoral success. Whether this is by chance or cunning design, one can only speculate.
The thinking element in the opposition has caught on to this hence Biti’s uncharacteristically emphatic remarks asserting that land reform is now irreversible. Biti has gone further, promising that an opposition government would give beneficiaries of the Land Reform Programme title deeds. This is clearly designed to woo voters that are motivated by the land question. It’s a clever move but it probably will not work because the opposition has vacillated on the issue too many times. People just do not trust it. What is to stop Biti and friends changing their minds once they are in power?
Coming back to the funding impasse. Another problem with the 99-year lease is that it can be withdrawn at the discretion of the minister. While the authorities will argue that they are benevolent and will use these powers with restraint the reality is that governments the world over tend to squeeze the most out of the powers they hold. Nobody acquires power for the fun of it; it would be naive to think that the authorities will not flex those lease withdrawal muscles.
Banks are rightly wary. No business wants to subject itself to the vagaries of political whim. A preferable scenario would be one in which the courts, not politicians, are given the power to withdraw a lease. Government would have to approach the courts if it wants to withdraw. Fighting in the courts is an expensive, time consuming and sometimes embarrassing exercise; this tedious process discourages frivolous cases. The alternative of having a bureaucrat recommend withdrawal and then requiring a farmer to defend himself places no restraining burden on the state.
I doubt any government would voluntarily give up so much power. But even if the authorities were persuaded into this generosity that still would not answer how the banks would recover their money in the event of a default.
State land cannot be sold and what belongs to the leaseholder are the developments on the land. Let us assume an individual borrows $23 000 for seed and fertiliser but the crop fails. How would the bank recover its money since there are no developments to speak of?
Even if the banks only funded the purchase of assets such as barns and tractors; in the event that the farmer defaulted the bank would not recover much. The machinery would have depreciated. Even on paper what we’ve heard of the proposed policy leaves more questions than it gives answers.
The only way this is going to work is if Government surrenders some control to the market but puts in place strong checks and balances to prevent land falling into the wrong hands. One possible system would be to look at the average cost of inputs per hectare and allow farmers to borrow up to a maximum, for instance $50 000 for a 100-hectare farm in region one.
In the event that the farmer defaults the bank would be allowed to sell the 99-year lease to an indigenous Zimbabwean to recover the borrowed amount. Alternatively Government could be given the right of first refusal, allowing it to buy back the land. Regulation would play the role of preventing farmers borrowing beyond set thresholds.
The demand for land is what determines value. If the market is willing to pay $900 to lease a hectare of land in region one then banks could safely lend anything under $90 000 for a 100-hectare piece of land knowing that in the event of a default they can simply sell the lease into the market. If Government has no objection to land rentals I cannot see why it would object to allowing indigenous Zimbabweans paying off a defaulters debt and acquiring his lease.
Ndatenda.