Clear inputs debt, Govt urged

Clear inputs debt, Govt urged | The Herald 14 October 2014

Government will need to clear its obligations from last season’s farming inputs supplies to get new credit for its input scheme this year, leading seed produce Seed Co has said. Chief executive Mr Morgan Nzwere said all seed houses in the country expected to be paid, as they could not afford to keep supplying without being paid for last season’s supplies.  The seed company is owed about $14 million from last year’s Government input scheme and wants Treasury to clear the arrears from last season before accessing fresh credit.
Cash strapped Government owes seed and fertiliser suppliers about $30 million from last season’s inputs supplies and may well follow the same approach this season.

Government, however, recently indicated that it would set off amounts due to seed house against their tax liabilities, but may still have to use other means to fully clear the debts.
“Government has been talking about an inputs scheme, but we do not know the modalities of how this will be paid,” he said.

Government came up with a $161 million inputs scheme last year, targeting 1,6 million families under communal, old resettlement, small scale, A1 and A2 resettled farmers.
“All seed houses would like to be paid, it is a normal business decision, you cannot keep supplying without getting paid,” he said.

Seed Co, however, contends that Government may take time to pay, but always eventually pays up. Seed Co also recently said it was no longer largely dependent on the Government for volumes after setting footprint in West and East Africa, which may help drive its sales.

“We (Seed Co) are owed quite a lot, the figures we announced last time are (largely) still outstanding,” Mr Nzwere said.
He said the company was well prepared for the 2014/14 farming season, adding the market was well stocked.

He said while retailers were fully stocked for the next season and only waiting for the onset of the rainy season, it was difficult to predict level of demand due to liquidity constraints.
Government has been using offsetting debts against companies’ tax obligations to clear its debts, including PAYE and VAT, but since the debt is big, may issue Treasury Bills to settle all the liabilities to the inputs suppliers.

Treasury has also suggested that companies enter into arrangements with banks in tax paying position and the companies owing them to come up with a structure where the banks will not pay Zimra and the firms do not pay the banks.

Seed Co said it would take time to fully liquidate the debts since the banks were making little profits, which is why there is possibility of Government using a combination of setting of debts against tax liabilities and issuing treasury bills.