Listed financial services group, ZB Financial Holdings has set aside a ZWL$672.7m kitty to fund the 2020/21 agricultural season in a major boost for the sector which has been begging for funding.
The support by the Zimbabwe Stock Exchange-listed group to local farmers is meant to boost output and dovetails into the government’s plea for the private sector to fund agriculture after it abandoned command agriculture.
The cash injection by ZB comes at a time when most farmers are struggling to access funding from banks due to stringent conditions set by financial institutions and failure by farmers to use the 99-year leases as collateral.
ZB chief executive Ron Mutandagayi told Business Times that the bank has increased the agriculture loan book to nearly ZWL$700m this season from ZWL$150m last year due to inflation.
This, Mutandagayi said, would enable farmers, even those without security, to get a chunk.
“This year we have invested up to ZWL$672.7m into the agriculture sector as we move to improve productivity on farms and help to resuscitate the sector,” Mutandagayi said.
We have invested ZWL$132.5m into tobacco farming, ZWL$135m into beef production, ZWL$30m into dairy, ZWL$82.5m on plantations, ZWL$80m on poultry and the balance to other crops.”
ZB is targeting individuals and agro processors to take up the loans for this upcoming agriculture season.
Mutandagayi said the interest rate for the loans will be at 35% per annum.
Mutandagayi said despite ZB coming up with stringent rules on lending security some farmers without security can benefit from agrobills, structured guarantees and overdrafts.
This targets farmers who are producing but lack security.
ZB, alongside CBZ, are some of the biggest investors in agriculture. CBZ is also heavily involved in the agriculture sector.
It was and still is one of the main financiers of smart Command Agriculture. Two weeks ago, Business Times, reported that banks are expected to extend loans to farmers amounting to about ZWL$20bn into agriculture for the 2020/2021 summer cropping season to turn around the country’s economic fortunes.
The sector requires US$1bn for the 2020/21 agricultural season. Mutandagayi said ZB will facilitate the funding of farmers to diversify its loan book and assist in increasing productivity to high levels.
The financial institution expects farmers to repay loans at the end of the season after they deliver their crops to various selling boards.
Tobacco sector is most likely going to struggle in terms of funding as most merchants failed to repay offshore loans due to the failure by tobacco farmers’ to fulfill their obligations.
The tobacco industry is another sector which ZB is looking into exploring due to interests from various merchants to apply for loans locally.
“We have received a lot of applications from various tobacco merchants but we are still looking into the matter and will see the way forward in the near future,” Mutandagayi said.
In the 2018 summer cropping season, ZB invested US$20m into agriculture.
Mutandagayi said farmers should invest in irrigation to remove overdependence on rain-fed agriculture so that the farmers can be cushioned from droughts.
The listed financial institution is looking at providing capital expenditure but such funding requires a longer tenure with farmers asking for anything between three and fiveyear money.
The group will fund the setting up of irrigation facilities to enable farmers to produce all year round and improve productivity.
The financial institution said if it can get a credit that is a five-year line, seven-year line or 10-year line then it will begin to take care of those needs for longer term funding but at the moment it’s principally short-term capital.
Government has identified agriculture as one of the backbones of the economy alongside mining and tourism.
In 2021, the agriculture sector is projected to grow by 11.3%, riding on favourable weather forecasts, timely financing, mechanisation and better capacitation of farmers through extension services and training, according to the 2021 pre-Budget Strategy Paper.
“However, this growth target of 11.3% is on the lower side than the sector policy targets. Successful implementation of sectors policy strategy will result in higher agricultural output for the next three years with positive impact on GDP,” Finance minister Mthuli Ncube said.