BANKS HAPPY WITH CHANGES TO 99-YEAR FARM LEASES
The Herald 30 August 2011
Banks have agreed in principal to accept the improved 99-year leases as collateral when farmers apply for loans.
This comes at a time when Finance Minister Tendai Biti has said Government does not have capacity to fund agricultural activities.
Banks have been refusing to accept the 99 year leases as collateral, saying the land was not transferable in the event that farmers defaulted on loan repayments.
In a letter written to the then Acting Secretary for Lands and Rural Resettlement, Mr Marius Dzinoreva last year, immediate-past president of the Bankers Association of Zimbabwe Dr John Mangudya said bankers were pleased with the redrafted agricultural land settlement lease.
The letter was copied to the current BAZ president Mr John Mushayavanhu, who also sent a copy to The Herald indicating the latest position by banks.
“It is pleasing to note that a lot of the constraints, which made the lease unattractive to beneficiaries, have been addressed to our satisfaction, key among them being;
“Clause 2 – conditions under which corporate bodies may benefit, Clause 3 – effect of endorsements against cancelled title deeds, Clause 11 – relaxation on stringent conditions on how to use the land including sale of cattle to the state and forced farming of cereals.
“Clause 18 – right of spouses and dispute resolution clarified, inheritance issues have also been dealt with.
“Clause 26 – clearly states that the lessee may use the lease as collateral in securing agricultural financial assistance from any financial or agricultural institution. The lease is also registrable in a deeds registry,” said Dr Mangudya.
BAZ, however, said there were still other grey areas that needed to be addressed. “The lender will therefore be handicapped by the onerous conditions at Clause 17 with key constraints as follows;
“Clause 17.1.1 lessee cannot cede, assign hypothecate or enter into a working partnership without the authority of the lessor, lessor has six month to respond. This does not work for debt recovery.
“Clause 22 the Government (lessor) has retained broad powers to repossess the land in the interests of public safety, public order etc.
“Clause 24 the Government can cancel the lease on account of breach with 17 grounds provided for as breaches. There is no provision guaranteeing the interests of a money lender in the evetn of cancellation of the lease, “Dr Mangudya said.
He said the ideal solution would be “to give the assignee/lender the same rights as the lessor (government) with a proviso for the rights to be surrendered after payment of the debt.
“The lender could therefore get eligible persons to farm and take over the debt. In short the lender must be able to sell the lease.
“In conclusion, the land leases provide limited security and in the event of default by the debtor, the chances of recovering the loans are very low unless the bank takes over and works the foreclosed leaseholds”.
In an interview recently, acting Lands and Rural Resettlement Minister Francis Nhema, said the drafting of the lease was being done in consultation with all stakeholders.
“Government is working on the leases with all stakeholders including banks who should put an input of what they would want covered.
“Government and the stakeholders are currently negotiating on what becomes bankable but in this case it has to be the project just like the way we compensate for improvements on the land and not the land itself.
“Banks will obviously have to do due diligence when farmers apply for loans to see if the project is good,” Minister Nhema said.
He said the land would remain state land, adding that the provision would only give leasing rights to the owners to make sure banks, insurance and third parties were covered.
He said the land would remain state land, adding that the provision would only give leasing rights to the owners to make sure banks, insurance and third parties were covered.
Speaking in the Senate recently, Minister Biti said it was important for farmers to have security of tenure on their farms so that they can get loans from banks.
He said there was need for the Government to come up with “proper executable, transferable long lease”.
“A transferable long lease means you can go to a bank and borrow money on it.
“It also means that you can transfer it in you Will ….. Most importantly, that long lease which is recognised in an Act of Parliament is protected in an Act of Parliament. You can also go to a bank and borrow money on it” he said.
He said agriculture was a business, which could not rely on state handouts.