Metbank had, through its offshore relationships, arranged for fertiliser stocks and raw material to be brought into Zimbabwe.

By Christopher Mahove

METBANK Limited made some timely intervention this 2016/17 agricultural season by stitching together a triangular relationship that helped in enhancing the availability of fertilizers on the domestic market.
This was revealed by Liz Chitiga, the chief executive officer of the National Social Security Authority (NSSA), in a letter to Japhet Moyo, the secretary-general of the Zimbabwe Congress of Trade Unions (ZCTU) — the country’s biggest labour federation with over 50 affiliates.
Moyo had written to the pay-as-you-go pension scheme seeking details of a US$20 million loan facility provided by NSSA to the commercial bank last year to enable it to secure raw materials for fertilisers for the current summer cropping season.
The current agricultural season had almost turned into a disaster due to shortages of essential inputs, mainly fertilizers.
In response, Chitiga said Metbank had, through its offshore relationships, arranged for fertiliser stocks and raw material to be brought into Zimbabwe under a Collateral Management Arrangement (CMA) in the face of fertilizer shortages that were threatening the 2016/17 farming season.
CMAs are most common in developing markets or rather emerging markets whose main feature is a lower-than-average per capital income.
They are basically a form of commodity financing technique designed by banks for commodity producers and trading companies.
In such transactions, the bank acts as an arranger to structure financing solutions for the seller and buyer by combining end-to-end funding for the entire trade value chain.
In this particular case, Metbank was able to leverage on its offshore networks to complete a triangular relationship whereby the offshore supplier and local buyers were brought together; completing the value chain by arranging for the US$20 million facility from the cash-rich NSSA.
By so doing, over 20 000 tonnes of fertilisers have been produced as a result of this intervention.
This number will increase significantly once arrangements are put in place for the fertiliser producers to access foreign payment capacity, using their local funds.
“The US$20 million facility that you refer to in your letter was advanced to Metbank for the purposes of on-lending to Windmill (Private) Limited and ZFC Limited, both of which are local manufacturers,” wrote Chitiga in response to Moyo.
“Metbank, through its offshore relationships had arranged for fertilizer stocks and raw materials to be brought into the country under a collateral management arrangement (ie. stocks still belonged to the supplier, even though they were now in the country).
“The stocks were then released to the local producers once funds, which were made available through the facility from NSSA, were released and paid to the supplier.
“The effect of the transaction, therefore, was that Metbank did lend the funds from NSSA to the two fertiliser manufacturers who then, in turn, used the loan proceeds to purchase fertiliser stocks and raw materials from the supplier,” said Chitiga.
Zimbabwe’s economy is heavily dependent on agriculture and any slip-up in this critical sector tends to have ripple effects across the value chain.
If Metbank, NSSA and many other players had not innovated to rescue the situation, farmers could have burnt their fingers once again after incurring heavy losses in the previous two seasons due to a combination of poor rains and inadequate fertilisers.
A poor season would have taken the steam out of the much-hyped Command Agricultural programme being spearheaded by government to increase output and enhance Zimbabwe’s food security situation.
In a way, private sector participation in agriculture financing and input supply is exactly what President Robert Mugabe’s government has been crying out for to pull the country’s economy from the brink.
In the past, government has been up-in-arms with the private sector, especially banks that it accused of not doing enough to support agriculture.
The 2016/17 season is expected to be the best in many years in spite of the fall armyworm invasion and floods that hit some parts of the country, thanks to interventions by many industry actors, among them NSSA and Metbank.
A bumper harvest has the effect of curtailing the country’s import bill by removing the need to bring in food imports, especially of the staple grain.
The local fertiliser industry has installed capacity capable of producing 900 000 tonnes of compound and ammonium nitrate per annum, but none of the local manufacturers have been able to meet demand due to various factors.
The current season saw manufacturers being hamstrung in their ability to source foreign currency required to bring in imports of essential raw materials.
Government’s Industrial Development Policy for 2012–2016 identified the fertiliser industry as one of the priority sectors to anchor industrial growth.

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