Eric Bloch: Ending agriculture’s financial crisis
http://www.theindependent.co.zw/
Friday, 03 September 2010 18:22
SPEAKING at last week’s opening of the 100th Harare Agriculture Show,
President Robert Mugabe said that “financial support for the agricultural
sector remains a sore challenge, with limited resources being availed as
costly agricultural loans”. He continued: “Thus, the need for properly
planned agricultural financing still calls on all of us to put our heads
together and come up with appropriate strategies and solutions.”
The reality is that the creation of viable financing for agriculture is
almost entirely in the hands of government. That does not imply that
government must provide the funding (in its bankrupt state it would be
unable to do so).
But the creation of an enabling environment, which would
make ready access to funding for agriculture possible, lies firmly and
squarely in government’s hands, and it should not seek to abdicate its
responsibility to do so by striving to place the onus upon others. If
government would urgently and constructively modify the disastrous
agricultural and economic policies which it had myopically pursued for most
of the past decade, the financing required to ensure a virile agricultural
sector would progressively become readily available.
First and foremost, government needs to adjust its land reform programme and
attendant policies for, more than any other factor, those policies are the
greatest constraint upon accessing funding for agriculture. As if it did
not suffice for the state to destructively expropriate all land in
contemptuous disregard for property rights (in many instances for
commitments under Bilateral Investment Promotion and Protection Agreements),
it then speciously claimed to issue 99-year leases to “new farmers”.
However, whilst several thousands received and accepted 99-year lease offer
letters, to date only an estimated 128 farmers have actually received
written leases, although great numbers have settled on the offered land.
Moreover, although the issued leases are stated to last for 99 years,
government retains a right to terminate them upon three months’ notice.
Thus most of the farmers have no written assurances of continuing occupancy
and usage of the land, and the few that do are at risk of losing that
occupancy and usage at short notice.
This negative state is markedly worsened by the fact that the rights of
occupancy and usage, whether documented by leases or not, are
non-transferable. As a result, the farmers cannot avail themselves of their
land as collateral security to support borrowings of the working capital
that is a prerequisite for the productive usage of the land. This is
catastrophic as, on the one hand, lenders invariably require security for
funds advanced, and very few of the “new farmers” have any resources which
they can utilise as security.
If government wishes its land reform to succeed, it must forthwith issue leases to all that it has accorded usage of the land, which leases must endure for 99 years under all circumstances
other than in the event of non-remedied defaults by the occupant.
In addition, the leases should be freely transferable and negotiable, save
and except for restriction that the recipient must not already be a farm
lessor (pursuant to the principle of “one man, one farm”!). If leases are
properly documented, of genuine 99-year tenure and capable of cession and
transfer, they become tangible collateral to support borrowings. This gives
the new farmers some opportunity to obtain desperately needed capital to
fund inputs, operating costs and, in some instances, essential farm
development and acquisition of equipment and implements.
While addressing the capital needs of the farmers, government must make it
possible for the financial sector to obtain the funding required to service
those needs. Zimbabwe’s money markets are catastrophically lacking in
resources. To a major extent, the magnitude of non-availability of funds in
the banks, building societies and other financial institutions is due to the
constrained state of the economy, and is intensified by a wideranging
(although mainly unjustified) concern amongst the populace as to security of
funds placed with those institutions. As a result many businesses and
individuals are holding funds in their businesses and homes. However, to an
even greater extent, the lack of money market funding is due to the
miniscule extent of international lines of credit, matched by an
insufficiency in foreign investment, and by the relatively minimal extent of
Zimbabwean export proceeds generation.
The near-total absence of international lines of credit, and the low levels
of foreign investment are almost wholly because of the perceptions, beyond
Zimbabwe’s borders, that security of loans and investments is limited. That
sense of insecurity is founded upon pronounced concerns that there is
ongoing political instability, that the economy is not only adversely
affected by destructive government policies, but also by grievous
inadequacies in utility service delivery by parastatals and local
authorities. Investment security is endangered by legislation prescribing
mandatory disinvestment to an extent of forfeiture of investment control.
In addition, there are fears of government recourse, yet again, to excessive
economic regulation and control.
Revitalisation of the money market and hence creation of access to
much-needed working capital for mining, manufacturing, tourism and the
distributive and service sectors necessitates that all outstanding issues of
the GPA be unreservedly implemented. Concurrently, the indigenisation and
economic empowerment legislation requires substantive amendment, according
investors with a credible sense of investment security. In addition,
government must speedily and vigorously pursue its recently reiterated
privatisation intent, wholly or partially, of parastatals, so as to access
working capital and technological skills critical for the revitalisation of
the parastatals.
Of equal urgency is that government ceases its endless berating of Western
countries, restoring harmonious interactions and relationships with those
countries. This will facilitate access to much-needed developmental aid.
Linked to that repair of the impaired relationship of Zimbabwe with the
international community is the need for Zimbabwe to acknowledge liabilities
in terms of Bippas.
Government must also swallow its misplaced pride, seeking debt relief and
rescheduling under the Heavily Indebted Poor Countries conventions, in order
to address its cripplingly accumulated debt of more than US$5,7 billion,
thereby restoring access to funding from the Bretton Woods institutions
including the International Monetary Fund and the World Bank.