Commercial Farmers Union of Zimbabwe

Land policy key to agric investment

Land policy key to agric investment

http://www.theindependent.co.zw/

February 22, 2013 in Business

Government must restore the financial value of agricultural land by 
developing a robust market for agricultural land which will release a 
mortgage market, triggering a natural capital gain in the value of all 
land-based investments, the Commercial Farmers Union of Zimbabwe (CFU) has 
said.

Report by Fidelity Mhlanga

In a working paper, the CFU said in line with recent growth trends in 
surrounding African countries, it was crucial for government to engender an 
attractive investment climate for international and local investors to 
finance the agricultural sector.

The CFU said the current policy framework adopted in the wake of the 
agrarian reform programme was militating against agricultural sector 
viability, exposing all farmers to a myriad of problems ranging from poor 
access to affordable finance and isolation from international financial 
markets, with virtually no access to collateral value.

In addition, the loss of farm investment security and transferability of 
title have resulted in fewer wealth creation opportunities, poor technology 
and less access to commodity markets.

“It is imperative to establish a credible and well financed Land Bank to 
fund agricultural sector working capital requirements at affordable interest 
rates. This will establish confidence and incentives on the part of both 
financiers and farmers for long term developments and capital expenditures,” 
said CFU.

In his speech marking the opening of the 2013 Tobacco marketing season, 
Youth Empowerment and Indigenisation minister Saviour Kasukuwere said banks 
were channelling peanuts towards agriculture as financial assistance to 
farmers has dwindled from 74% to 17%, forcing them to use meagre resources 
to finance expensive inputs.

The Zimbabwean banking sector remains largely crippled by lack of liquidity 
and a legal framework in the agricultural sector which hampers the use of 
land and agricultural developments as collateral security for loans or 
equity as investment in agriculture is regarded as high risk.

This is because farmers do not have established track records with lending 
institutions and a credible credit bureau is not in place, said the CFU.

“For farmers this means that the cost of capital is extremely high, making 
the production of agricultural commodities in Zimbabwe uncompetitive. This 
proposal seeks to trigger the potential of local lending institutions by 
creating an enabling environment for them to lend confidently into the 
agricultural sector at competitive interest rates,” CFU added.

The establishment of a land market will inevitably lead to cross sectoral 
recovery and boost revenue inflows to the government of Zimbabwe.

“Greater production in the economy means more jobs and in turn less social 
dependency and more taxes. The Government of Zimbabwe will in time be in a 
position to pay for redemption on the bonds and pay interest on them,” the 
CFU said.

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