via Lack of integrity, skill haunting ZimAsset’s agriculture ‘cluster’? 2 July 2014 by Tapiwa Nyandoro Painona
“The farmer that we now have is not the same as we had before. [When may I ask?] The challenge with the new farmer is that of integrity”, said Cotton Company of Zimbabwe – Cottco – Managing Director Collins Chihuri recently explaining rampant side-marketing by contract farmers avoiding servicing their debts.
It is these new farmers, most without integrity as alleged, that the nation has trusted with its most important asset: land.
They are supposed to be the backbone of the so called Food Security cluster in the Zimbabwe Agenda for Sustainable Socio-Economic Transformation.
But they may be more of “weevils” than agents of transformation or guarantors of food security, if the allegation of widespread lack of integrity is true.
The lack of integrity in the value chain of the agriculture sector is deep-rooted, leading the RBZ Governor, in a recent appearance in Parliament, to “appeal to the market, customers and everyone to pay up”.
The government itself does not service its debts to fertilizer and seed companies on time. Some companies that provided farm equipment years ago to government via the Central Bank still have to be fully paid.
Beneficiaries of the farm mechanisation project who won’t own up are protected by special interests, their names sealed from public scrutiny and ridicule.
Can such a system, without accountability and short on integrity ensure food security?
The Ministry of Agriculture, irrigation and mechanisation will not release the names of people who may have looted operation Maguta.
The short-changed banks that funded it are stuck and have no option but to penalise innocent depositors and borrowers by reducing interest paid and increasing interest payable respectively, besides raising other charges, making the whole economy uncompetitive. This is the exact opposite of what a cluster must do.
According to Working Paper 10 [UNDP 2010], quoting Porter [2007: 55] and titled Manufacturing Industry, Economic Recovery and Poverty Reduction in Zimbabwe, “the second feature of post-1990s industrial development is the increasing importance of clusters, defined as geographical agglomerations of companies, suppliers, service providers and associated institutions in particular fields linked by externalities and complementarities of different types. Clusters should be “manifestations of the role of specialised knowledge, skills, infrastructure, and supporting industries in enhancing productivity”.
Without functional clusters, such as the US’s “Hog and Corn” belt, agriculture in Zimbabwe will remain predatory and internationally uncompetitive, surviving on tariff protection, tax evasion, tax avoidance and subsidies.
If the Ministry of Agriculture has a strategy for the agro-industry, amongst which should be restoration of integrity and skills in the value chain, it seems not to have been communicated.
Events on the ground tell a rather negative story, with key organisations of the cluster such as the CSC, GMB and David Whitehead to name, but a few, illiquid, insolvent or out of commission.
The result has been a reduction in cotton production for example.
With a 67% reduction in cotton volumes bought and a large book of non performing loans advanced to contract farmers, Cottco ordinarily should have made a big loss.
That it made a profit raises questions about the fairness and integrity of its own pricing formula. The side marketers may thus be partly justified.
One way of restoring integrity and skills is to re-introduce title deeds and put a commercial value to land. Offer letters are not good enough and are behind some of the loss of integrity.
Ownership and title deeds will bring accountability, besides making the whole industry bankable. One stands to lose a hard earned asset if one behaves in truant manner, such as side marketing produce in breach of a contract.
Moreover it will be cheaper to borrow directly from banks than to be funded by your product’s buyer, whose finance arm will be seeking to make a profit from the financial transaction over and above its own borrowing costs.
Government too must play its part and stop playing games.
A price of $390 per tonne, as opposed to $220 obtaining on the free market regionally, is unsustainable at a time when there is a regional glut of the staple.
The justification of the price when the Grain Marketing Board is under capitalised and unable to pay salaries is questionable.
Should it be left with a surplus the GMB would not be able to off load its stocks without a huge loss. Such pricing directives may also lack integrity. That too should go.
“Clusters provide external economies of scale and scope – so called externalities [such as the role of GMB and CSC and national research centres] that accrue to the firm [and the Farmer] merely because it locates at a particular geographical location. Location within the cluster enables the business to become more specialised, more productive and more innovate” continued the Working Paper 10.
Clusters also reduce entry barriers to new firms [farmers]. They provide soft infrastructure in the form of specialist and back up services that firms [and new farmers] need, ranging from tractor repairs, extension services and marketing.
They enable individual firms [farmers] and especially small and medium enterprises (SMEs), to exploit scale and scope economies usually associated with in-house vertical integrated large firms [and factory farms].
The Food Security “Cluster” seems to do the opposite. The challenge facing the Ministry of Agriculture is formidable, but it is the perception of the absence of a bankable strategy that is most worrisome. The over $5bn locked in commercial A2 and A1 land value must be released.