‘Make the 99-year lease bankable’

Source: ‘Make the 99-year lease bankable’ – The Zimbabwe Independent October 6, 2017

NOW in its second year running, there has been wide-ranging debate on whether the Command Agriculture scheme introduced last year by government has been a success given the attendant problems surrounding the programme which include the erratic supply of inputs. Last week, the Zimbabwe Independent Business Reporter Tinashe Kairiza (TK) spoke to Zimbabwe Farmers’ Union executive director Paul Zakariya (PZ) on the impact of Command Agriculture on national maize output, the expectations of farmers ahead of next year’s agricultural season and the bankability of the 99-year lease.

TK: Following the introduction of Command Agriculture, would you say the programme has had a positive impact on national crop output?

PZ: Well, to begin with, one would want to look at Command Agriculture as a special maize programme rolled out last year in August as an inputs scheme. You can give it a name, but it was an inputs scheme to farmers initially targeting those with irrigation and later on it spread to those without irrigation and outside the Mashonaland provinces. So this was an input scheme. Last season was a good season; we had normal to above normal rainfall and in some areas flash floods.

So that was a contributing factor to the success of the programme. So Command Agriculture was not the only scheme available, there are some farmers who financed production of their own crop and others through contract farming arrangements. So we had a variety of schemes and of course Command was one of them. And then we had very good rains which gave us a very good and positive season. The reverse of it is that if we had very good rains and no inputs the season was not going to be as successful as it turned out to be.

So most farmers who ordinarily would have loved to go to the banks to borrow money for obvious reasons would not have secured loans because the risk is too high. So the season was good. Crops under Command Agriculture performed very well despite challenges posed by the army worm and other logistical challenges such as the late delivery of inputs such as herbicides.

TK: The organisation you lead is one of the largest farmer organisations in the country, how many of your members benefitted from Command Agriculture?

PZ: Looking at the statistics from ZFU, I would say in the three Mashonaland Provinces outside a database of about 75 000 farmers, a small number of about 500 farmers managed to secure inputs. Other members were covered by other schemes.

TK: Would you say the majority of your members failed to meet requirements stipulated under Command Agriculture?

PZ: Well, I don’t think it was that. It was mostly to do with the information dissemination and how the authorities were distributing the inputs. There was a lot of confusion in terms of who do you approach and how do you get enlisted. Naturally, we had fewer farmers signing up.

TK: Are you satisfied with the manner in which inputs have been distributed?

PZ: Generally there were complaints. It was the timeliness of the distribution of inputs and also the adequacy of the inputs themselves and the confusion I alluded to earlier, regarding who do you see and so a lot of things were happening on the ground but the procedures were not given out very clearly. This was a scheme introduced in the month of August and the rains were almost upon us so a lot of processes had to be done in a very short space of time. Logistically there were many challenges.

TK: The programme this year enters into its second season. Is the Grain Marketing Board efficiently and transparently distributing inputs?

PZ: There is a sense that the programme is actually growing. The registration started earlier. The distribution of inputs has been excellent. Inputs were distributed from August, there is remarkable improvement.

TK: We have spoken about Command Agriculture extensively, let us move to GMB.

I understand they are buying maize at US$390 per tonne and selling the same at US$270. Is this a prudent way of managing business?

PZ: Well from a policy point of view we have had justifications to that effect that the authorities are worried more about price increases that if they buy a tonne at US$390 and sell it at more than US$390 that would have the net effect of pushing up consumer prices and that on its own from a policy point of view is not desirable.

But from a business point of view, it does not make business sense. It does not make financial sense. You buy your stock for an X amount of dollars and you should put a markup so that you are able to cover your overheads and buy more stock. This is how we would do it in business. But with the explanation we have been given with the authorities there are other strategic interests that have to be addressed.

TK: What are those strategic interests?

PZ: Well, for instance, for the price of mealie meal going up would have the net effect on the ordinary man in the street which has nothing to do with the production of maize and that on its own potentially becomes explosive. Prices cannot just spiral out of control because you were merely following an economic principle.

TK: Has GMB improved in timeously making payments for maize deliveries?

PZ: It is a mixed bag; some applaud GMB for paying timeously. Some farmers are still holding onto vouchers in unpaid grain dating back three months.

TK: Let us talk about the Reforestation Levy introduced by government targeting tobacco farmers for purposes of replenishing forests. Has this money been disbursed to farmers to allow them to plant trees?

PZ: Government has not disbursed any money from those levies. The Tobacco Industry and Marketing Board (TIMB) has put in place a technical committee to see how that money will be used. There is a technical committee and a steering committee. More recently, TIMB received guidance from Treasury to the effect that they should not disburse the money to farmers. To the farmers, the sense is that they feel cheated and robbed. They get the feeling that government is taking money from them to finance other things.

TK: How much was levied from farmers last season?

PZ: It exceeded US$5 million; well, it can be much higher.

TK: And farmers threatened to withhold their crop from the auction floors citing poor prices, how can that perennial problem be solved?

PZ: It was a real problem. From one merchant to the other, the prices were the same. Farmers get the perception that merchants are colluding. But the issue is not on prices. Farmers should target to boost their average yields per hectare.

TK: Consultations for next year’s budget are now underway. What are your expectations as farmers?

PZ: Life has to be made easier for our farmers and we are saying this particularly looking at our tax laws. Our tax laws have to be relaxed. There was a lot happening with regards to tax laws. Farmers have to surrender 10% withholding tax on their tobacco sales.

This withholding tax should naturally be on real income not on capital that was laid out which might have been borrowed. So the 10% tax was news that scared farmers. We are saying the withholding tax should be scrapped. But this is not to say farmers should be exempted from paying tax.

TK: Do you have assurance from seed and fertiliser houses that they have sufficient stocks for this summer cropping season?

PZ: In terms of seed, the companies have adequate seed to meet demand. They have more than enough.

The only hitch will be on fertilisers, even last year we had some challenges with top dressing fertilisers around December.

It is on the issue of top dressing that we have a problem.

TK: What is your view on banks being reluctant to lend to farmers citing that the 99-year lease which is not bankable?

PZ: We are now talking about an active land market. If we do not have an active land market this land will not have value and nobody is going to lend to someone who has an asset which has no value. The problem is not with the bank, the problem is with the instrument itself.

The 99-year lease in its current form will not give comfort to financial institutions so they will not accept it as security.
Most of our government officials and influential people in authority actually hold 99-year leases which they cannot use to borrow.

So I would think that high ranking officials should see that as a problem because it is in their interest to use that instrument as security and not their houses in town.

Those in authority should address this so that ordinary farmers who do not have houses in town can also use the leases as security.