EDITORIAL COMMENT: Modified 99-year leases will boost agriculture

Dr John Mangudya

Dr John Mangudya

New farmers have, for 17 years, been seriously hampered by lack of finance.  

This had an adverse impact on production and productivity on the farms and the economy at large.

The low level of farm utilisation we are seeing now is partly because farmers lack finance. Lack of skills is indeed an important factor but the inability by farmers to access cheaper, longer term finance is, in our view, the biggest reason why farm utilisation has not grown as fast as we would have wanted.

The bulk of our farmers were not well-resourced when they benefited under the land reform programme. Many acquired large pieces of land under the A2 model, but instead of producing at a commercial scale, some are still stuck in subsistence production. Others have abandoned the land after failing to access enough resources.

A few of them, who sought and obtained bank loans, had to give up title deeds of their houses or some other properties as collateral. Furthermore, the money they received was short-term finance, payable over not more than five years. Interest rates were obviously high. Many farmers therefore failed to pay back the loans at such usurious interest rates and over short periods. These are possible reasons why many farmers, including ministers, former ministers and businesspeople who took loans under these tough conditions have, or are defaulting, their property being attached as financial institutions that lent them money seek to recover it.

A few years ago, the Government came up with 99-year leases, not only to enhance security of tenure for new farmers, but also to facilitate farmers’ access to loans from the private sector.  While the leases gave farmers security of tenure, they were not enough to back them when applying for bank loans as they were not bankable or transferable. In the event that a farmer borrowed money on the basis of a 99-year lease in its old form and later failed to repay, the lending institution had no way to recover the loan. To avoid this, banks consistently refused to accept the leases, leaving farmers short of finance.

This is a problem of the past.

Reserve Bank of Zimbabwe Governor Dr John Mangudya announced on Wednesday that the Government has come up with a strategy that makes the leases bankable and transferable.

“In line with the current economic dispensation’s aspiration to transform agriculture into viable business proposition and taking into account the significant improvements made by Government on the 99-year leases to enhance the security of tenure of the lease and making it bankable and transferable, the bank has agreed with banking institutions for them to accept the 99-year leases as security for accessing credit from financial institutions in line with the provisions of the leases,” said Dr Mangudya in his 2018 monetary policy statement.

“The issue is that the Government has improved the 99-year lease document; it now has a transferability element, now has a bankable element. Before the changes were done to these 99-year leases, there was no provision in the old document about financiers (but) it now provides the financier with the comfort of lending. It also says that in the unlikely event of Government taking someone’s farm, and that person had been given a loan at the bank, the first port of call for compensating goes to the financier. So we are quite happy as banks.”

A 99-year lease is important in many ways. It provides a 99-year guarantee of land ownership if the farmer continues to meet the terms and conditions of the lease agreement. It is subject to the country’s laws of inheritance. It takes cognisance of spouses and women in their own right as it includes them in the lease agreement.  The lease can be registered at the Deeds Registry.  It is only given after surveying has been done.  This is an advantage as farmers are assured of their final actual boundaries at issuance of the 99-year lease agreements and copies of the survey diagrams would be attached on the agreements.  Thus a 99-year lease helps in preventing or solving land disputes. Also, the document does not privatise land; the resource remains State property and no one can sell the land or hold it for speculative purposes.

Now that farmers will have new 99-year leases, this should encourage them to go out applying for the loans they need to be able to increase farm production and productivity. This should unlock the potential that has been buried underground for 17 years.

While we hail the Government for finally securing the support of financial services on the acceptability of the new leases, we recognise that not many farmers have this very important document. We don’t think the number of growers who have it, the old lease, are more than 2 000.  There are stringent conditions that a farmer must meet for him to qualify to secure a 99-year lease.  He must prove that he is able to work the land and produce. He must also have built permanent structures on their farm, which highlights their commitment to work. He must have proper records of production on the farm.

These are very important requirements that reward only the hardworking and deserving.  However, the Government is urged to intensify on-farm inspections and reward many more farmers with 99-year leases. If more people hold the new modified lease agreement, the impact of the document on the farm and to the economy would be greater.