GOVERNMENT has accused bankers of being dishonest concerning the conditions needed to use 99-year leases as collateral, and implored financial institutions to reduce the cost of borrowing.
Source: Banks dishonest on 99-year leases: Govt – NewsDay Zimbabwe August 24, 2016
BY TATIRA ZWINOIRA
Interest rates for loans from banks average 15% to 20% per annum.
Speaking at a breakfast meeting yesterday at the Harare Agricultural Show, Agriculture deputy minister (livestock) Paddy Zhanda said bankers have to understand that finance was a major challenge in agriculture.
“The challenges of agriculture in this country are issues to do with finance, and on the issue of finance, is the issue of the interest rates. On the issue of productivity, when you are talking about agriculture as a business, you are talking about basically what yield are you achieving, whether you are producing eggs, milk or whatever you are producing. The viability of agriculture is dependent on your yield that you achieve. Also, there is an issue of access to the markets and climate change,” Zhanda said.
“Even if the 99-year leases are bankable, the issue here is that bankers are not being honest. The issue here is that the Reserve Bank (of Zimbabwe) requires that bankers give you loans on the basis of security that you provided.
Therefore, banking institutions should never be on the basis that you have given security,” he added.
“It must be on the basis that the project makes sense and the money is structured in a manner that it gives client-to-borrower flexibility. Also, your interest rate has to be reasonable. Really 15% or 20% is for the top farmers.”
Government and banks have been haggling, with the latter arguing that the 99-year leases in their present form do not constitute collateral.
This comes nearly two decades after government embarked on a fast-track land reform exercise meant to redress colonial imbalances.
In the past, commercial farmers used to pledge land as collateral and get loans from banks.
The land reform exercise has brought uncertainty as government has failed to bring closure to the exercise.
Bankers’ concerns are on proposals that bankable 99-year leases must ensure that the farmer has stability, an assured stay on the land for as long as they are productive and an incentive to invest in the land such as a structures that promote productivity.
Other concerns included farmers having an established market for their produce, reasonable and predictable transfer market of buyers, and allowance for the lender to hold both movable and immovable as collateral.
However, disagreements between government and bankers started after banks asked for moveable and immovable collateral, than in the old days when they would only ask for the latter.
Bankers also stated that there will also be other risk factors involved on top of these concerns.
Government proposed farmers use these 99-year leases to access loans from banks, as the sector struggles from a lack of funding.
The agricultural sector is estimated to require $2 billion in financing.
But banks currently allocate about 20% to 25% of their lending to farmers.
COMMENTS
Bankable should equal saleable and no racial attachment. These leases are equivalent to bond notes. All are not worth the paper that they are printed on. Both do not amount to property. ZANU needs to rethink this useless gimmick. Not all can be fooled by racist rhetoric. Let those who want land buy it and get title deeds. That is bankable not these worthless leases. The correction of colonial wrongs story is tired and clearly a lie. Most of the land exchanged hands after 1980 and ZANU governments said they had no interest in purchasing the land. One day the racists will pay for the loot. Wait until there is rule of law. A day is not far when property rights will be respected. Watch this space.
Is this NewsDay Zimbabwe run by the CIO? Or are they just imbeciles, aimlessly reporting rubbish? There appears to be a subtle trend in their reporting which might be a semi-sophisticated attempt to appeal to readers who vomit when they read the Herald.
Anyone with even the slightest understanding of bank lending knows the 2 rules. Firstly, and most importantly to a bank is the “return of their money”. Secondly and less importantly is the “return on their money”. By using land as a political tool the government has taken away any opportunity for farmers to use their farms as collateral, thereby creating a situation that works against the first rule of bank lending.
One question that has never being asked is. How much did the banks lose when the farms were taken. The rightful owners did not repay their debts because this regime did not think at all about anything.
The exercise had nothing to do with colonial injustices , it was more of hatred and spite. Let this regime pay up and maybe banks will begin to trust this cabal of bandits. Even then no one will trust the bandits.
It’s all about one word in my book and that is ownership which equals collateral. Forget leases and other baloney.
This is not only farming – it applies in all walks of life and has done since mankind.
It can be observed in the most simple of situations – I own 10 cows and with the winter approaching, threat of thieves and predators, I wish to build a stronger holding pen, but I do not have the available funds to build and protect my milk producing stock. I go to the bank or the like and put my cards on the table.
That institution is only interested in financing me based on the value of my owned assets in the case of default.
If I did not own those cattle, I would be told to get lost.
So Zanu PF, carry on dreaming in a haze of stupidity – study your comrades Pol Pot in Cambodia and Castro in Cuba if you want the real answers!