via Govt, banks on collision course – The Zimbabwe Independent June 5, 2015
GOVERNMENT is pressuring the Bankers Association of Zimbabwe (Baz) to push financial institutions into accepting A1 permits and 99-year lease documents as collateral for farming loans — efforts which banking industry sources say are likely to hit a brick wall.
Hazel Ndebele
Lands and Rural Settlements minister Douglas Mombeshora told the Zimbabwe Independent on Wednesday that officials from his ministry would engage bankers today, having failed to meet them last week.
Mombeshora last Thursday told farmers who gathered at the Grace Mugabe Foundation Farm in Mazowe that ensuring banks provide loans to farmers on the back of the 99-year leases and A1 permits was a priority, before accusing foreign banks of refusing to fund resettled farmers.
“One of the top priorities in my ministry right now is to get banks to accept security of tenure documents as collateral. In our meetings we want to scrutinise the reasons why banks cannot release funds upon receipt of A1 permits and 99-year lease documents,” said Mombeshora.
“As government we are actually convinced that foreign banks are the ones that deliberately do not want to support our farmers.”
The minister assured farmers that their permits and leases were adequate confirmation that they owned the land, adding all farmers would receive permits.
“The A1 permits state that the land is yours forever and a 99-year lease states that land is yours for 99 years and can even be renewed after those years, which is as good as that the land is yours forever,” he added.
Baz president Sam Malaba refused to comment on the matter saying: “I am not able to comment as discussions with government are still in progress.”
However, a top bank executive who spoke on condition of anonymity told this paper this week it is highly unlikely banks would bow to government pressure to issue loans to farmers.
“Despite farmers holding the permits or leases, they do not own the land and cannot sell it to another party or use it to settle debts, hence banks cannot use the land as security,” the banker said.
“Land belongs to the state despite the fact that a farmer has acquired certain documents. Therefore in cases of bad debts, which are common in the agricultural sector and elsewhere, the bank is not able to sell the land to recover its money, neither can it pass on the debt to government,” said the executive.
Most Zimbabwean banks have set stringent loan conditions because of a high percentage of non-performing loans (NPLs) over the years.
Reserve Bank of Zimbabwe governor John Mangudya recently said NPLs in the banking sector were now about US$800 million, forcing banks to drastically cut down on lending.
Section 72 of the new constitution, which deals with rights to agricultural land, empowers government to acquire agricultural land for a public purpose. This may include resettlement for agriculture, land re-organisation, forestry and environmental conservation among other purposes.
“… the land, right or interest may be compulsorily acquired by the State by notice published in the Government Gazette identifying the land, right or interest, whereupon the land, right or interest vests in the state with full title with effect from the date of publication of the notice,” reads Section 17(c)(2).
Some farmers are said to be neglecting developing their land fearing government could acquire it at any time as questions over security of tenure persist.
Government is desperate to revive the agricultural sector following a disastrous farming season. The country needs to import 1,2 million tonnes of maize to feed the nation. A long overdue land audit has, however, finally started.
COMMENTS
No bank is going to lend unless the property securing the loan is owned by the applicant or if the real owner, in this case the state, guarantees the loan.
Previously loans to farmers could be secured against the title deeds of the property and where the state had issued a certificate of no interest at the time of purchase. A fat lot of good that did.
After the events of the last 15 years nobody trusts the state, and with very good reason. I don’t know how long it will take to rebuild trust but with their record would you take their word on anything even if written into a contract.
If local funds are used for loans of this sort so be it but bank deposits must be mainly small and short term and any depositor would rapidly transfer to a safer location.
No foreign owned bank in its right mind would bring in money for such an unsafe investment. Their shareholders would think they were mad.
The minister probably understands all this so really just a bit of political grandstanding. Not very edifying !
Are you crazy -accept a guarantee from Zanu Government? Party yeMafia….show me one straight person in Zanu or Minister….anaSuper, Walter you name them all crooks who would rather have the country die and poor as long as they hold on to power and line their pockets.
If these idiots squeeze the international banks too hard they will simply shut shop and move on. The banks are too polite to say openly that the Zimbabwe Government is a very small operation compared to Standard Chartered or Barlcays. Zimbabwe needs these banks more than these banks need Zimbabwe. Are the simpletons who run this country able grasp a thing as basic as this?
Sometimes you wonder what Zimbabweans have done to deserve such dumb leaders.
The issue is that banks are a business which are supposed to be run properly and not run like the Zim government.
When banks loan money out they need a guarantee that in the event the money borrowed is not returned what can they get in return.
Those leases and permits do not offer that kind of guarantee and hence any bank worth its salt will not accept them. That’s what its all about.
Title deeds on the other hand means that the bank can take over the land and sell it and recover its money.
In a lawless country like Zim, they have done away with land title deeds and therefore banks are right not to accept papers which are of no monetary value.
How simple can this be?