LOCAL banks are expected to expend more than ZWL$20bn on agriculture in the 2020-2021 cropping season from ZWL$2.2bn in the 2019/2020 agricultural season as they move to improve productivity on the farms.
The proposed funding, which is about US$247m using the auction rate, falls short of the US$1bn required for the sector, according to the Zimbabwe Commercial Farmers Union.
Well-placed sources at the Bankers Association of Zimbabwe (BAZ) confirmed that local banks have tabled ZWL$20bn to spend on agriculture.
“Local banks which are very supportive of agricultural activities in the country are set to invest in excess of ZWL$20bn and clearly understand that increased agricultural production is dependent on availability of adequate financing for the sector,” one source at BAZ who requested anonymity told Business Times this week.
BAZ president Ralph Watungwa said there was no cumulative figure as yet on the sector’s support in the summer cropping season.
“As far as I’m concerned we don’t have a cumulative figure for now but we are working with CZI [Confederation of Zimbabwe Industries] and the government to come up with an enhanced package so that we can maximise the hectarage that is available,” Watungwa said.
“Some banks are not giving loans on the back of security but the crop on the field as some will have made good performances in the field which attract funding.” Watungwa indicated that some banks were giving loans on the basis of one’s ability to operate on a commercial basis rather than on security alone.
Zimbabwe Commercial Farmers Union president Wonder Chabikwa said the proposed funding was not adequate to meet the needs of the agricultural season.
“Agriculture business needs US$1bn yearly to revive the sector and economy as a whole. As you know we started the summer cropping season very well last year but in January all hell broke loose as drought affected all agriculture related activities hence there is need to invest heavily in irrigation infrastructure all year round,” Chabikwa told Business Times this week.
Several players in the banking sector told this newspaper there were still some inhibitions to deal with notwithstanding banks willingness to support the agriculture sector.
“Despite the willingness of banks to finance the agricultural sector, there were still a number of impediments which include lack of an effective farmers’ stop-order system to ring-fence encumbered sales of produce by farmers to deal with the problem of side marketing,” the source told Business Times.
It is understood that tobacco and maize crops will be apportioned the lion’s share of the ZWL$20bn financial support from the local banks.
They are said to be earmarked to get 70% of the total amount. Cotton will be allocated 5% of loans to be disbursed, according to BAZ sources.
Some analysts have, however, questioned the rationale to allocate a paltry amount to cotton, that once was a significant export earner for Zimbabwe.
Tobacco is the country’s second highest foreign currency earner after gold.
Its massive funding is expected to help turn around the economy in 2021.
Maize, through smart command agriculture, is also expecting greater output.
But crops like horticulture, sugarcane, potatoes, and sugar beans will have to settle for a relatively small amount.
This is despite that global horticulture markets are now top earners of foreign currency.
Since the government embarked on the agrarian reform at the turn of the millennium which resulted in nearly 4000 white commercial farmers losing large swathes of land, resettled indigenous farmers have perennially faced hurdles in accessing funding, a development that has resulted in a plunge in agriculture output.
Before this exercise, agriculture was the backbone of the economy contributing nearly a fifth of the country’s gross domestic product and employing hundreds of thousands of workers.
Farmers have been struggling to use 99-year leases as collateral to access loans for agriculture.