Agric deal in limbo

LIVINGSTONE MARUFU

Commercial farmers may  find themselves in a precarious situation after Government decided not to extend guarantees to several commercial banks for farmers to access funding under the National Enhanced Agriculture Productivity Scheme (NEAPS), formerly known as Command Agriculture, a move meant to relieve pressure on the fiscus, Finance, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube has said.

According to Professor Ncube, the high rate of farmers defaults is forcing the government to compensate banks that would have otherwise  had to use  their money  to finance farmers guaranteed by the government  to recover their funds in the event that farmers default.

This  puts pressure on the fiscus to repay  banks that would have otherwise used their funds to finance the farmers.

For the 2023–2024 agricultural season, only two banks—AFC and NMB—will receive partial guarantees under the NEAPS financing model. As a result, the other participating financial institutions will have to rely on their own resources.

“Government used to support commercial farmers under the NEAPS, through extending guarantees to commercial banks. However, due to high levels of defaulters and unwillingness by farmers to deliver produce to the Grain Marketing Board [GMB] , the government has reviewed this financing model to give room to a more commercialised approach led by private financial institutions,” Professor Ncube said.

Professor Ncube said  for the upcoming 2023–2024 agricultural season, the government is only offering AFC and NMB partial guarantees; the other participating financial institutions will need to rely on their own resources.

“This is part of the agriculture financing reform to reduce the burden on the fiscus and let the financial sector play its role,” Professor Ncube said.

The Zimbabwe National Farmers Union (ZNFU) chairman Stewart Mubonderi told Business Times that  GMB’s failure to pay farmers according to the agreed-upon payment model was the cause of the low recovery rate.

“Sometimes, it is not the farmers’ problem as the GMB is yet to pay for the grain delivered in July and this is a huge demoralising factor for them.The farmer will only pay once  he or she has been paid by GMB.

“The delays will force farmers to choose  another buyer who pays cash instantly,” Mubonderi said.

According to ZNFU vice president Edward Dune, low recovery rates in NEAPS were caused by farmer payment delays.

“The Treasury must learn to pay for what has been delivered to GMB in time. If it  delays payments,  many  farmers will default as they will divert their produce to independent buyers. Quick payments will  boost confidence and will enable more banks to recover money from the farmers. But if the government shows that it pays when it wants hence the farmer will do the same and the banks will suffer.

“If the government had paid on time the bank would have easily identified the defaulters and acted accordingly  but with the government having not paid them the situation is complex,” Dune said.