AGRICULTURE plays a pivotal role to the economy of Zimbabwe. The strong growth rates of the country’s Gross Domestic Product (GDP) between 2009 and 2012 were to a large extent buttressed by strong recovery in agriculture.
A good farming season impacts positively on other sectors of the economy. There are manufacturing firms in the food processing sector that rely greatly on output from agriculture.
Dairibord Zimbabwe Limited, Dendairy and Kefalos are examples of firms that rely on milk from dairy farmers.
The aspect of employment cannot be overemphasised given the large numbers employed by agro-based companies like Hippo Valley, Ariston Holdings and Tanganda.
The sector again has consistently contributed positively to the country’s export earnings, mainly through tobacco.
Therefore if the country is to sustain the positive growth trajectory then there is need to ensure that agricultural production continues to improve.
What is, however, of concern is the fact that regardless of these visible benefits, the powers that be continue to dilly-dally over providing support.
There are challenges that have affected the sector for a long time now and it appears that the same trend is set to continue this year.
The rains are now upon us with most parts of the country experiencing showers recently. As such, preparations on farms should be at advanced stages. Nonetheless this seems not to be the case. Perennial challenges include shortage of inputs, low yields per hectare owing to poor skills and, chiefly lack of funding.
Every year our funding for agriculture is a problem. Farmers themselves either complain that they are failing to access loans from banking institutions or Treasury faces challenges in securing money to fund the agricultural production. This time around,market sources say seed houses are not prepared to advance products on credit to government until it settles its outstanding obligations.
The support that government avails to farmers, whilst commendable, should not be permanent. It is time farming is treated as a business. Farmers should not expect handouts from government every season. A farming venture should be profitable in such a way that the owner is left with capital for the next season.
The level of nonperforming loans continues to grow within banks and stood at 18,5% of total loans as at 30 June 2014. Therefore the stance of banks not to advance credit to farmers owing to their poor credit ratings is justifiable. Furthermore, these farmers do not have collateral that banks can fall back on in case of default.
The 99-year leases are still not good enough as they do not constitute ownership. Effectively, all the land belongs to the state. If the farmer defaults on the loan then what fall back does the bank have?
In normal circumstances, a bank auctions the asset that the borrower would have pledged. Is this possible with the farms? Government should give closure to ownership of land through giving title to land owners.
Additionally, if financial institutions decide to take part in financing crop production then they should do it properly. Media reports are to the effect that ZB Financial Holdings is going to float agro-bills to finance the 2014/2015 agricultural season. The agro-bills will have a tenure of two years at an interest rate of 10%.
Whilst the idea is good, the timing is off.
The summer cropping season ideally stretches from October to April. Therefore it does not make sense for one to float the paper in November to fund cropping when the farming season has already commenced.
December is usually a quiet period as market players take their annual breaks. Hence disbursements by the bank may possibly start in the New Year when some early maturing crop varieties are ready for harvest.
On a closely related note, the Agriculture Marketing Authority (Ama) through CBZ Bank, floated Ama bills back in June 2014 to the tune of US$55 million so as to facilitate the purchase of maize on behalf of the Grain Marketing Board (GMB). In turn, the maize was going to be sold to millers. Was this necessary?
Why would millers go and buy maize from GMB at a minimum price of US$390 per tonne when imports were landing in the country at approximately US$285 per tonne?
We are of the view that Ama should be proactive and think outside the box to remain relevant. Instead of raising funding to buy maize from farmers for onward selling to millers, we believe that there are other areas were Ama should focus its efforts.
The cotton sector for instance is under threat as merchants are contemplating withdrawing funding from the crop due to growing incidences of side marketing. Some merchants are said to only surface to buy the crop that they did not finance. Improved regulation will help ensure that merchants continue funding the crop.
Tobacco marketing is another area where Ama could be helpful. Buyers are said to be colluding to depress prices. Whilst the price that a farmer obtains is a function of the quality of the crop, the concerns have reached alarming levels and call for investigations.
Power shortages again continue to adversely affect production in the country particularly for winter wheat. Output for the current year is estimated at 10 000 metric tonnes against an annual requirement of 450 000 tonnes.
Last year total production amounted to 24 700 tonnes. This compares with a peak of 400 000 metric tonnes attained prior to the year 2 000. If this deficit is to be resolved there is need for the power suppliers to dedicate uninterrupted electricity supplies to wheat farmers.
Ama in this case can be proactive and start sourcing funds for winter wheat production now rather than waiting for the eleventh hour to act.
Training programmes should also be undertaken in order to plug the skills gap in the economy if the sector is to return to levels reached prior the year 2 000.
The yields that are being achieved per hectare are a far cry from what other farmers in the region enjoy. Ideally, contract farming is the way to go. Involving corporates will ensure that farmers access adequate inputs and technical assistance.