LIVINGSTONE MARUFU/CHENGETAI ZVAUYA
Only $700m of the $1.6bn mobilised by banks to finance the 2018/19 agriculture season was drawn down due to lack of security as financial institutions continue shunning 99–year leases.
Now government is planning to compensate the evicted farmers in an attempt to bring closure to the emotive land issue.
Information gathered by Business Times shows that out of the $1.6bn mobilised by banks, $700m was channeled towards agriculture with $400m going to tobacco.
Government is sweating over the lack of bankability and transferability of the 99-year leases as land remains a dead asset due to lack of serious investments on farms resulting in low productivity levels and exports.
Over the years, banks’ lending to farmers has fallen causing the productivity in farms to decrease resulting in high imports and subdued exports.
Lands, Agriculture, Water, Climate and Rural Settlement deputy minister Vangelis Haritatos told Business Times that government has noted that lack of security on 99 year leases on agricultural land is deterring significant investments on these lands.
“The ministry is currently fast tracking the issuance of bankable offer letters and 99 year leases to A2, this is due to the fact that many farmers across the country have indicated challenges with the security of the legal document,” Haritatos said.
“We would like 99 year leases that are secure and bankable for our farmers to boost productivity which is a bit low right now. Some preliminary work has been done but there are a few matters that need to be resolved quickly and we are working on this.”
The development comes at a time when Finance and Economic Development Minister Mthuli Ncube has opened renegotiations with banks to make 99–year leases acceptable to financial institutions.
Banks are on record saying farmers armed with 99–year leases can now access loans to finance farming upon meeting conditions set by the banks and the fact that one has the legal document does not translate to obtaining a loan.
Ncube told Parliament this week that the 99 year leases were supposed to be bankable and needed clarification to the financial institutions for them to be acceptable.
“I recall that even small scale farmers prior to Independence used to have leases and these leases were bankable. There must be something in some of the clauses in the 99–year leases which I am not aware of which is making them unbankable,” he said.
“I think that the issue of the content of these leases is not closed, if there are issues they need to be renegotiated to be better understood by the financial institutions. That avenue is still open. We have to fine tune it to a level of where they are acceptable to financial institutions.”
Ncube said what worked best were title deeds which are not available adding that banks could still finance agriculture in the absence of 99–year leases.
“If banks are sufficiently innovative, you do not even need a 99–year lease to lend to a farmer; you can basically securitise the crop for a farmer and use innovative instruments that do not require collateral in the form of land itself. There are so many examples on how this is done,” he said.
Ncube said land has become a dead asset in agriculture adding that more needs to be done in terms of security of tenure.
Bankers have insisted that the leases are not transferable in the event that a farmer borrows money and fails to repay. BAZ previously said financial institutions were committed to supporting the agriculture sector but would assist only those with viable farming projects and valuable infrastructure.
BAZ, however, warned that 99–year leases did not guarantee a farmer access to bank loans.
“Banks are looking at various other risk factors in assessing whether a farming business meets the minimum criteria. The farming enterprise must be viable in accordance with the assessment criteria set by the lending bank,” it said.
Government has moved to pay 93 former commercial farmers US$64,4m for the improvements they made on re-allocated farms for the improvements they made on re-allocated farms.
This is a move meant to help the re-engagement drive, observe property rights and taking agriculture as a business.