Harare - Declining productivity in Zimbabwe’s economy is pushing the government to have a rethink of its economic policies on commercial farmers, but there is little appetite for new large-scale commercial agriculture ventures, because of inherent regulatory and operational risks.
Zimbabwe’s agriculture sector has been struggling since the government instituted a land reform programme in 2000 that displaced commercial farmers from their prime land.
The emergent black farmers have proved to be inexperienced and the temporary respite the country received from massive uptake of tobacco farming is faltering, with tobacco prices weakening and the quality of the crop from black farmers falling.
However, Peter Steyle, an executive with the Commercial Farmers Union in Zimbabwe, said although there were private commercial farmers that were willing to come back to Zimbabwe, the environment was still risky.
No collateral
“There are some farmers that are willing to come back, but the environment is just risky and there is no collateral for any capital from the banks. There are still farm invasions that are taking place, so this affects the certainty of any investments by commercial farming investors,” Steyle told Business Report last week.
He said commercial farming was a long-term and capital intensive venture that needed to be safeguarded by clear policies and property rights that shield investors.
Other investors in Zimbabwe are battling for clarity on the indigenisation policy, although the government has recently outlined frameworks for implementation of the law despite sticking to the 51 percent equity transfer to black citizens.
“There have been limited new investments in commercial farming and white farmers fear that their land will be taken as there has been no end to farm seizures. Additionally, this is not the right time to be venturing into any large scale farming, but long-term investors could capitalise on this if the right conditions are in place,” said an economist at a Zimbabwean commercial bank.
Zimbabwe requires about $1.7 billion (R25.90bn) for the 2016 agricultural season, according to the finance minister, Patrick Chinamasa.
Maize, cotton and winter wheat production is declining while beef production is facing difficulties owing to the dry weather patterns occasioned by El Niño that are hammering southern Africa.
Chinamasa said in his 2016 budget statement that financing for farmers in Zimbabwe this year would come “through credit from the banking sector, support arrangements from government, co-operating partners, farmers’ own resources, as well as contract farming arrangements” especially for cotton, tobacco and sugar cane.
Read also: Zimbabwe expects first IMF loan since 1999
The government is also forcing banks to advance loans to farmers, but collateral has been hard to come by. Government officials said last week that the 99 year lease papers awarded to farmers can be used as collateral when accessing loans from banks, but the banks have not yet confirmed this.
Pay-off
According to a document quoted by state media in Zimbabwe this month titled Constitution of Land Compensation Fund, Zimbabwe intends to pay off dispossessed white farmers through a fund created from “land rental and rentals for improvements from beneficiaries of the land reform programme who were allocated land”.
About 6 000 commercial farms were taken over by the government and parceled to black inexperienced farmers. Some of the displaced white commercial farmers settled in Zambia and Mozambique, while others are now inching to come back, but are finding the environment too risky.
Prospects for the agricultural sector have been dampened by current drought conditions, but farmers with crops such as tobacco and sugar will be better off as there is a “sound financial support framework” from agro-processing companies such as British American Tobacco and Tongaat Hulett owned operations.
BUSINESS REPORT