Zimbabwe turns to market financing to boost farmers

Zimbabwe will no longer offer subsidised agricultural inputs to farmers as the country, whose population is facing starvation following a dry 2011-2012 farming season, moves to grasp a market-based agricultural financing system aimed at “cost recovery” and offsetting food insecurity.

Farmers and officials with links to President Robert Mugabe’s Zanu-PF party have previously benefited from free input and farming implement schemes despite failing to guarantee Zimbabwe’s food security. Movement for Democratic Change officials and other groups accuse Zanu-PF of abusing the provision of farming inputs and implements and using these as a tool to win support from the country’s rural population.

Joseph Made, the agriculture minister, said this week that the finance ministry would make available an additional $5-million in a credit scheme for farmers to access inputs. It would be run by the Commercial Bank of Zimbabwe at a 3% concessionary interest rate.
There is also an additional $15-million, which has been carried over from the last summer cropping season and will now be utilised for the winter cropping season.

“It is critical that the government should institute market-based support mechanisms and in this regard agriculture financing strategies will be on the basis of cost recovery with a view of establishing the revolving fund,” said Made.

He emphasised that the government, which has been accused by the Zimbabwe Commercial Farmers’ Union of failing to ensure food security in the country, would “use carry-over agriculture inputs to the amount of $15-million” while “the minister of finance undertakes to pay the outstanding obligations to the companies relating to fertiliser and seed — $5-million is the new injection the minister of finance is going to make”.

Analysts told the Mail & Guardian this week that the new plan fell short of sustainable measures because farmers would have to find working capital on their own.

Economist Jeffrey Kasirori said the environment in Zimbabwe would make access to working capital for farmers “hard to come by”, because banks would not advance loans without collateral with a matching value. He said the government needed to support serious farmers and give them incentives to produce.

Zimbabwe’s agricultural sector is battling to get back to peak production levels following the chaotic land reform that the then administration, presided over by Mugabe and Zanu-PF, embarked on at the turn of the millennium. It displaced several productive, mostly white, commercial farmers. Instances of fresh displacements of the few remaining white farmers have been reported recently, whereas the new black farmers are battling to keep the farms in production.

Finance Minister Tendai Biti said his ministry and that of Made were finalising a “three-year agricultural rolling plan” that was important because it “defines a clear road map in respect of how we finance agriculture” and how to “deal with the issue of subsidies”.

Zimbabwe’s wheat production for 2011 was “a mere 12 000 tonnes” against the country’s requirement of 400 000 tonnes, Biti said, hence the move by the ministries to boost production. But the government’s new scheme is likely to experience hurdles because it still owes manufacturers and producers of agricultural inputs substantial amounts.

Said Biti: “We have to deal with the debt that we owe to the manufacturers of fertiliser and seed.”

The government owes $40-million to producers of fertiliser and seed and about $20-million to the state-run Zimbabwe Electricity Supply Authority. Analysts said the government’s domestic indebtedness, “whereby one parastatal owes another”, was crippling the economy. Biti, however, did not outline how the government would offset this.

“As the ministry of finance, we are mobilising resources that will mitigate domestic indebtedness to our local suppliers,” was all he said.

The farmers would access inputs “at a cost price under a credit arrangement” because the government wanted to avoid the “reselling of fertiliser” on the parallel market, Made said.

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