Maravi

(HERALD) Funding key to Zim’s agricultural revolution

Funding key to Zim’s agricultural revolution
Tuesday, 20 December 2011 00:00
Golden Sibanda Senior Business Reporter

GOVERNMENT'S plans to raise US$100 million through the Agricultural Marketing Authority agro bills to fund grain production this season should be lauded, despite the private sector's lukewarm response.

The funding would enable Government to commercialise grain production and enhance food security and empower the majority of peasant farmers. Farmers rely solely on seasonal rain they are only receive once throughout the year and have to make the most out of it.

It is a pity that the majority of subsistence farmers include grain production as one of the main crops, but the selling price does not reward them well.

It is against this background that the commercialisation of grain production will economically transform rural communities in a big way.

Government says no farmer should this season fail to produce grain because plans are afoot to provide US$56,3 million inputs.

Cabinet has already approved the proposal for Government to raise the funding from the private sector to support the 2011-2012 agricultural season.

The facility would enable farmers to get fertiliser and seed on credit, which they will pay for using part of the crop they expect to harvest next year.

The AMA bills have been floated through CBZ Bank. Government will soon announce the finer details on how farmers will access the inputs, which they would pay for through a stop order facility after harvesting the crop.

But the fact that there has not been overwhelming response to Government's efforts to raise funding from the private sector for agriculture is worrying.

While the economy is illiquid, the fact that up to US$1 billion was used to import vehicles since January suggests modest liquidity exists in the economy.

So far, the US$50 million CBZ guaranteed AMA agro bills have raised US$17,7 million with only US$31,9 million bids having been submitted by investors.

Government recently said subsidising agriculture was inevitable considering the sector accounts for about 16 percent of the Gross Domestic Product.

It also accounts for over 60 percent of raw materials into the manufacturing industry and 65 percent of inputs used in the agriculture sector.

Besides, agriculture remains the single biggest employer in the country, but also ranks the lowest in terms of rewarding workers in this critical area.

But it must be noted the financially distressed value chain should be also be funded to ensure that produce finds a ready market that rewards farmers well.

While farmers should become self-sustaining in future, it is important to help re-establish the bedrock upon which this will grow considering economic and financial difficulties caused by pre-2009 economic instability.

Out of the US$100 million to be mobilised for new commercial financing, US$56,2 million would support farmers' input requirements this season while the balance would be used to clear liabilities from last season.

And Government plans to direct US$21 million to the Grain Marketing Board to settle its arrears with farmers for maize deliveries made last season.

Another US$18,6 million would go towards clearing liabilities to seed and fertiliser firms not paid for supplies under Government backed schemes.

A further US$4,5 million would be given to seed and fertiliser companies to kick-start supplies of inputs required for grain production this season.

The funding raised from the AMA bills would be accessed by communal, A1, commercial and A2 farmers and there shall be no collateral.

Deputy Prime Minister Arthur Mutambara, who chairs the inter-ministerial committee on commercial financing of agriculture, said local financial institutions no longer had reasons not to support agriculture.

"Paying the fertiliser and seed companies what is owed to them by the Government and providing them with a 10 percent kick-start deposit of US4,5 million will provide them with the liquidity they need for their operations, in particular the immediate movement of grain and fertilisers to depots and farmers throughout the country," said the DPM.

"Pension funds will no longer have any excuse anymore (not to fund agriculture), as this framework covers everything they have been asking for," he added.

DPM Mutambara pointed out that "no farmer should (this season) fail to get involved in (grain) farming because of lack of inputs. The multimillion-dollar facility will have 50 percent Government guarantee, prescribed and liquid asset status and would be exempted from tax.

The remaining US$50 million of the facility is being guaranteed by CBZ Bank.

Farmers would access the funding raised from the AMA bills at a cost of 12 percent and the scheme will have between 270 and 360 days tenure.

In line with pricing of bonds in the region, the bills are being floated at a coupon rate of around 10 percent on a tender basis, but the effective rate to farmers will be 12 percent after 2 percent onward lending interest rate.

GMB would be tasked with the establishment of a stop order system that would ensure a portion of farmers' proceeds would go towards paying for the inputs.

DPM Mutambara said grain production could be viable business if farmers were capacitated, which enhances their activities and ability to pay for inputs.

He implored financial institutions and pension funds to support grain production and make it a success as happened in cotton and tobacco growing.

The DPM said although the Government has been a pace behind in terms of preparing for next season it is confident inputs would be availed to farmers in time to make the 2011-2012 agricultural season a huge success.

But Agriculture, Mechanisation and Irrigation Development Minister Joseph Made said Government was concerned at the slow movement of fertiliser into the market.

He reckoned the slow movement of the key input was due to its arrears for supplies from last season.

"The concern is what is owed to the fertiliser companies. Demand for fertiliser is higher than seed maize. Seed companies have moved as much as is possible." There is, however, a shortage of top dressing fertiliser (AN).

Measures will be put in place next season to ensure GMB's capacity to buy grain, circulate the it around the country and ensure inputs are fully paid for, as Government moves to commercialise local production of grain.

Funding raised from the AMA bills will complement US$30 grain/input swap and the US$45 million subsidy schemes provided for in the 2012 Budget recently announced by Finance Minister Tendai Biti.

Labels: GRAINS

posted by MrK @ 5:54 PM