Bankers clears air on 99-year leases

Published: 05 December 2013

THE Bankers Association of Zimbabwe says it has only suggested recommendations to enhance the proposed bankable 99-year leases contrary to widespread assertions it made fresh demands on the land use contracts.

BAZ president Mt George Guvamatanga said that the banks representative group did not have problems with the current proposed amendments to make the 99-year leases bankable, but suggested improvements to the leases.

Enabling farmers to get bank loans using soon to be bankable land use contracts could boost agricultural production and productivity, especially after Government said it would not provide direct input support to farmers next year, but subsidise manufacturers to make inputs affordable.

But concerns were raised recently that if banks made fresh demands on amendments to make 99-year leases bankable, the development would delay the use by farmers of the land use contracts as collateral for bank loans.

Banking institutions, through their representative group BAZ, have suggested the establishment by Government of a Special Purpose Vehicle that would pay for loans in the event that borrowed farmers default.

"If the stakeholders have made recommendations on the basis of the original suggestions this is not like calling for a review of the leases. We are simply saying that the process can further be enhanced," he said.

The SPV would ensure that instead of selling the land when a borrowed farmer defaults on loan repayment, the SPV funds would be used to settle it.

But this appears untenable considering the funds are required at a time Government and the entire nation is pressed for cash.

Financial analysts also contend that such an arrangement would not work effectively as farmers would relax in ensuring loans are fully repaid in the knowledge that their liability would be taken care of by the SPV.

Lands and Resettlement Minister Dr Douglas Mombeshora expressed reservations about suggestions made by BAZ saying instead of expediting amendments to make the leases bankable Government would first need to look at "fresh demand" banks had made.

"Government wanted the 99-year leases to be used as security, but the banks said they had problems with it. In the process we said let us improve the document.

"There is a document we need to present to Cabinet.

"(But) the banks are talking about setting up a trust fund, which has nothing to do with the 99-year leases. If the Government has to alter the document, we want to know what they (banks) want," the minister said.

Putting finality to concerns around the use of 99-year leases as collateral in their current state was critical considering that Government will from next year stop direct funding support to farmers opting to subsidise the production of inputs to make them more affordable.

With agriculture having traditionally been financed by banks, circumstances changed after the land reform programme that saw previously marginalised indigenous blacks getting productive farming land.

But while resettlement tobacco farmers have become highly productive largely because of the contract farming model where farmers get inputs and funding assistance to enable them to produce, it has been nightmarish for other crops as farmers struggled for collateral to get loans.

Making agriculture fully productive is critical considering the sector, which accounts for 16 percent of Zimbabwe's gross domestic product, supplies 65 percent of the raw material used in the manufacturing sector.

The latter, before its fall, was equally critical to Zimbabwe's economy, accounting for just over 12 percent of GDP and employing hundreds of thousands of people and supplying about 60 percent of inputs to agriculture, making the two economic pillars mutually interdependent.
- herald

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