Zimbabwe’s farmers are suffering under punishing=20 interest rates. Lewis Machipisa in Harare reports=20
Two years ago it was drought, a freak of nature, that=20 crippled Zimbabwe’s agricultural sector. Now the=20 problems besetting the industry’s recovery are entirely=20 man-made. =20
At 32 percent, the country’s interest rates are=20 punishingly high, undermining efforts to resuscitate=20 farming, the backbone of the economy.=20
“With punitive interest rates of more than 30 percent=20 farmers are reluctant to borrow from commercial banks to=20 finance the rebuilding exercise,” says Paul d’Hotman,=20 chief executive of the Cattle Producers Association=20 (CPA). Financial institutions have stopped dishing out=20 loans unless farmers clear their backlog.=20
“Some of the farmers have not repaid debts dating back=20 to three years ago. We cannot be sympathetic=20 indefinitely,” said a spokesperson for the Agricultural=20 Finance Corporation (AFC). As a result, d’Hotman says,=20 ranchers are selling their cattle to meet debt=20 obligations with a reported glut of beef at abattoirs=20 around the country.=20
The CPA has appealed for concessional interest rates,=20 allowing farmers to pay five percent in the first year,=20 7,5 in the second and 10 percent in the third year.=20
Beef exports normally earn the country more than US$30- million annually. But the 1991/92 drought, the worst in=20 living memory which ravaged southern Africa, wiped out=20 about 4,2-million head of cattle.=20
Tobacco, which accounts for about 30 percent of=20 Zimbabwe’s total exports, is having a similarly painful=20 recovery. According to Peter Richards, president of the=20 Zimbabwe Tobacco Association (ZTA), the biggest problem=20 his members face is not the lack of capital but finding=20 ways of repaying the interest. “The interests are=20 crippling,” he says bluntly.=20
Richards notes that the current high interests rates=20 will only see the fittest survive.=20
The tobacco industry supports more than 500 000 families=20 and earns the country more than US$400-million in=20 foreign currency.=20
The reason for the country’s high interest rates lies=20 simply with mismanaged public spending and the public=20 sector, say economists. =20
According to Professor Tony Hawkins at the University of =20
Zimbabwe, the country “is in a serious debt trap with no=20 less than 23 percent of this year’s budget (and probably=20 more) earmarked to pay interest charges. The national=20 debt is estimated at 95 percent of GDP.”=20
The government aims to cut the budget deficit this year=20 to five percent of GDP from the current 7,9 percent.=20 However, heavy subsidies to ease state-owned company=20 losses are likely to mean the deficit will actually rise=20 to 10 percent, analysts warn.=20
Agriculture, at 30 percent of GDP, is the most important=20 foreign currency earner, the largest employer and=20 contributes more than 50 percent of raw materials to=20 industry. — IPS=20