Banks reject 99-year leases

Source: Banks reject 99-year leases – The Zimbabwe Independent August 12, 2016

LOCAL financial institutions are of the opinion that changes made by government on 99-year lease agreements are not enough to guarantee the issuing of loans to farmers, a development likely to result in the agricultural industry continuing to be underfunded.

By Bernard Mpofu

Banks, it has emerged, are requesting more clarity on the security of tenure while also warning that the amendments made by government could result in financial institutions engaging in non-core business.

In an effort to boost funding for agriculture, government, through the Ministry of Lands, this year amended the 99-year leases to make them bankable, but bankers believe the amendments are littered with potential legal minefields.

Although Bankers Association of Zimbabwe president Charity Jinya could not be reached for comment, bankers who attended a meeting with government last month over this issue said Section 25 of the Lands Act, which goes into detail to explain how the 99-year leasehold can be used as collateral to borrow from financial institutions, needed more tweaking to make it attractive.

Under the section, the lessee may mortgage security upon the leasehold for the purpose of securing to the lender whereupon no such cession or transfer shall take effect until the monetary obligation is discharged unless the lender agrees otherwise.

The section further states that in discharging any charge, mortgage or other security recorded upon the leasehold, the lender in whose favour such charge, mortgage or other security is recorded may cede, assign, hypothecate or enter into a partnership for the working of the leasehold. Under this clause banks are expected to engage a partner to farm the leasehold for purposes of utilising the leasehold.

“This could constitute a non-core banking business in contravention of Section 14 of the Banking Act which prohibits financial institutions from engaging in non-core business,” a banker who attended the meeting said.

“Before this meeting, banks were also worried about unclear security taking and perfection, challenges with realisation of security and marketability of the 99 year lease. Most of the issues raised by lenders were dealt with in the last consultative meeting held between the Ministry of Lands and BAZ in April 2016.

“Regarding the issue of repossession of land by government, during the said meeting it was agreed that repossession would be exercised in very rare circumstances when the state needed to exercise its eminent domain for a given ‘public purpose’.

“It was also agreed that while repossession for purposes of eminent domain were catered for in the general laws of the country, it was necessary to include a clause in the lease to provide greater security to banks as well as give certain timeframes and notifications to be observed before the state exercises such domain. The latest 99 year lease agreement has undertaken to address all these issues thereby further protecting the banks.”

The leases came as a reprieve for most farmers who benefitted from the chaotic land reform programme who have been failing to access loans due to lack of security of tenure.

In his first Monetary Policy Statement as RBZ governor in July 2014, Mangudya said there was need to expedite the issuance of bankable and transferable 99 year leases to qualifying farmers.

“It is noted that the majority of farmers have offer letters which are considered by banking institutions as a weak form of security. There is therefore need to expedite the issuance of bankable and transferable 99-year leases to qualifying farmers. Leases with such features are considered better forms of security than offer letters or leases which are not transferrable.”


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    The leases are about as legal and valuable as a BOND NOTE……..No matter what is written or printed on them……The banks should make a stand with the people this time around……it will not be forgotten what they do now……GO GO NOW

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    Cde Sinjonjo 6 years ago

    Basically, the issue of risk remains. The Constitution states clearly that all land belongs to the state. This means, at constitution, a farmer may not use state land to borrow money because it is not his land. Then a situation can arise where a bank lends a farmer money against the farm, which is at law not his and then fails to repay the loan. Even if the banks were to repossess the land then what next? Can the bank “sell”land that belongs to state and who is willing to buy land that can be repossed by government at any time. Izvi hazvibude! Who really is advising President Mugabe and government?

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      Bwedebwese 6 years ago

      You have stated the correct position as simply as possible. Land grab is a political project that does not make economic sense. But does ZPF care?

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      Yayano 6 years ago

      That’s correct @Sinjonjo. As a bank all you need is recover your money back in the event that the borrower defaults.
      This is obviously not possible with a lease, the lease has no monetary value that can be extracted.

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    I wonder why Gideon Gonzo from the RBZ chose to buy his land and get title – rather than just take it?

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      nelson moyo 6 years ago

      Gideon Gono borrowed heavily in ZW dollars and bought land and got full title. Then the ZW dollar fell to zero value and Gono repaid his debt with valueless ZW dollars. He of course boasts that he paid for his land and on final judgement day when Zimbabwe has to join the civilized nations of the world with proper law and order and business dealing he will go hopelessly broke.
      Remember Gono was never a farmer (a weeeknd farmer maybe !) in the first place. He will always be remembered as the Governor of Zimbabwe’s Central bank that took the ZW dollar to a zero value. He also gave Zimbabwe 89.7 sextillion per cent inflation and impoverished millions – he had the audacity to also say that the USA Federal Reserve had offered him a job – originally a tea boy that never really rose much higher

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    Doris 6 years ago

    Of course @Sinjonjo. This government has the habit of opening its mouth and letting the wind blow its tongue around!

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      Tired 6 years ago

      Well … The advantage of education is now paying .. The populus and the banks ain’t fools.. Who would touch a paper printed by chinamasa a puppet of even the toothless governor as guarantee .. Not me say I

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    former farmer 6 years ago

    Not to forget, I have the original Title deeds for my property and the GOZ has no claim to it as they have not cleared their debt to me and after 16 years they clearly have neither the intention or ability to do so. When the time is right I will look at reclaiming my property as the constitution at the time I bought it and the day it was nationalised is binding.
    I want to return and contribute to my nation and that is the only way the country is going to get out of this mess. The next article gives the true impact of the GOZ’s actions and there in lies the solution.