Government is considering banks’ proposals on 99-year leases

Business Reporter
The Attorney General’s office will soon evaluate proposals by the Bankers Association of Zimbabwe on how 99 year leases could be made bankable to enable farmers access funding.Despite agriculture being the cornerstone of the economy, farmers continue to face innumerable challenges to obtain affordable financial resources they need to support their activities.

Lands and Rural Resettlement Minister Dr Douglas Mombeshora last week said the issue of making 99 year leases bankable remained work in progress, but added that submissions by BAZ would be send for scrutiny at the AG’s office.

“That is work in progress. We had inputs from the Bankers Association of Zimbabwe. We have looked at their proposals,” he said.

The minister would not be drawn into discussing the submissions from the bankers’ association, but BAZ once revealed banks wanted a special purpose vehicle to be set up, which would pay off loans in the event that farmers defaulted.

Such a scenario would mean none of the resettled farmers would lose their land in the event that they failed to pay their loans.

However, the system could be prone to abuse as farmers may willfully default in the knowledge that there is a  facility that would pay off the loan. It was not clear too who would fund the SPV.

“We will send them to the legal department of Government, which is the Attorney General’s office. We are looking at all the issues to see if we can address their concerns,” Dr Mombeshora said in an interview on Friday last week.

Government wanted banks to recognize the 99 year leases as collateral to give farmers access loans, but banks would not agree arguing the land titles were not transferrable.

They have proposed that an SPV be established and that in the event farmers fail to pay back loans from banks, the SPV would step in and clear the liability to financial institutions.

The situation has starved thousands of farmers of funding from banks prejudicing the country millions of dollars in potential revenue from agriculture at a time when virtually all banks have tightened credit conditions due to the liquidity crisis.

Further, the cash crisis has constrained the potential agriculture, which accounts for about 16 percent of gross domestic product, to contribute to accelerated economic growth.

While the entire agricultural sector face challenges accessing bank loans, resettled farmers are the most affected, as the majority of them do not have the security banks demand.

The agricultural sector requires a staggering $2 billion annually to optimally finance farming activities yet the amount represents a considerable chunk going to all sectors of an economy going buckling under serious liquidity strain.

While resettled farmers struggle to obtain loans from banks, in the past commercial farmers would simply walk into banks and obtain loans using their land titles as security.

If Government could make agricultures self-financing, it would considerably boost farm produce while relieving Treasury the burden of having to finance farmers each season.