Spiralling debt stunts farmers’ growth

Moses Mazvimba, who acquired a 100-hectare farm under the fast-track land redistribution programme, is considering abandoning farming because of huge debts. He’s not alone. Reporter Tawanda Majoni spoke to farmers and agriculture experts about the burden of debt and “lopsided” contract farming.

Four years ago, Mazvimba, who was producing tobacco, paprika, winter wheat and maize, borrowed $50,000 from the bank to buy a tractor, inputs and replace irrigation equipment stolen at the height of the land reform programme.

The resettled farmer has been struggling to produce enough and, with a crippling interest rate of 25 per cent, his debts have been growing. In April, he auctioned off most of his property.

“The bank engaged an auctioneer who sold off my two tractors, a truck, a generator and irrigation equipment over the debt that is now more than $100,000. It makes it extremely difficult for me to farm this year,” Mazvimba said.

He added: “I have been getting bad harvests because the quelea birds destroyed the wheat, power supplies were poor and so were the rains, particularly in the 2012-2013 farming season. I used some of the money to pay the workers, and still owe them a big amount.”

A former business consultant, he used his upmarket house in Harare as surety and negotiated with the bank not to repossess it as that would have left him homeless.

He could not use the land the government gave him as security because, as in the case of other resettled farmers, banks declined his 99-year lease as collateral.

For the 2013-14 main farming season, Mazvimba is only farming tobacco on three hectares, instead of the average 25ha in previous years. He has abandoned his other crops.

Farmers not insured

When the April auction took place, he said he counted more than 30 other farmers whose properties were being sold because of bad debts.

Eddie Cross, a farmer since the 1970s and an agricultural expert, told The Zimbabwean: “The issue of debts accrued by farmers is very serious. Many of those who borrow through various means are left heavily indebted and unable to continue with farming, a situation that tends to severely compromise national production.”

He added that most of the farmers were not insured and, in the event their crops were damaged through incidents such as fire outbreaks, hailstorms and quelea attacks, they failed to recover from the losses, making it difficult to repay loans.

Other farmers who suffered the same fate as Mazvimba are resorting to leasing their farms.

“I know that it is against the law and the government can take away the farm if I am found out, but in order to get some income from my plot, I have decided to let another person use my farm, since I no longer have the money to run my project,” said one farmer. He has signed a secret agreement whereby his tenant will pay him 10 per cent from the total money he will get from the tobacco he has planted on 15 hectares on the farm over the next two years, but he will keep pretending that he is the one who is doing the farming.

His plot went fallow last year when one of workers accidentally burned a storeroom where he kept bags of cured tobacco. It left him with barely anything to sell and a $12,000 debt to a private loan shark who took away his farming equipment.

Freeze debts

John Robertson, a Harare based economic consultant, said medium- to large-scale resettled farmers with access to loans were acutely affected by bad debts, but he also blamed them for defaulting willfully.

“While the farmers are victims of drought and the late disbursement of inputs that have contributed to poor yields, some of them are also to blame. Even when they get good harvests, they tend to postpone paying the loans, and this is a widespread culture following the land reform programme,” he said.

Vice-president Joice Mujuru announced last October that government would approach banks to freeze debts accrued by farmers so that they could get more funds for the 2013-14 farming season.

While some farmers with large farms have been able to acquire loans from banks using personal security such as houses, cars and other properties, the financial sector is reluctant to provide funding, especially to smallholder farmers, arguing that the leases they obtained under the land reform programme cannot be used as collateral. Farmers’ indebtedness has been worsened by the failure by the Grain Marketing Board to pay them on time.

The GMB owes farmers millions of dollars dating back several years, with the State-run cereal utility saying it has failed to get sufficient funding from government to honour its debts to farmers.

Contract farming

“I delivered maize worth $11,000 to GMB in 2011 and 2012 and have only been paid $3,000, in addition to $250 worth of fertiliser and maize seed.

I had borrowed from a bank hoping to repay using my proceeds after selling to GMB, and my loan keeps accruing and I have scaled down production,” said Dickson Murinda, a farmer from Concession in Mashonaland Central.

Many farmers who have not been able to get funding from the banks, a substantial number of them smallholders, have resorted to contract farming, whereby they provide land and labour on their farms while the contractors give them inputs, technical skills, funds and buy the produce, but experts say this is also facing difficulties. “Where farmers cannot easily get loans from banks, contract farming is an effective model to use to ensure that the farmers are well funded and there is a ready market for their produce. However, contract farming in Zimbabwe is facing severe constraints,” said Omen Muza, a banker and agricultural consultant. He said contracting firms made the farmers sign contracts they did not understand, resulting in the farmers losing out, particularly those producing tobacco, soya beans, and to some extent maize and seed maize as well as livestock such as pigs.

Ripped off

“Because the farmers do not adequately understand the contracts, they have tended to breach them, resulting in them losing everything to the contractors and, in some cases, even owing the firms, a trend that has resulted in their belongings such as livestock being auctioned,” he added. Because of “lopsided” contracts, farmers ended up selling to other private buyers who offered better money, resulting in contractors pulling out.

“This is the reason why, this year alone, several traditional contractors, among them millers who had promised to fund wheat production and soya bean as well as maize seed funders and buyers, have pulled out,” said Muza.

He said contract farmers did not have enough power to negotiate prices, resulting in the contractors ripping them off, but also accused some farmers of greed and dishonesty when they engaged in side marketing.

“Contract farmers have become contractors’ slaves because the firms are the primary funders and the primary buyers of produce. Government needs to put policies in place to protect the farmers and properly regulate contract farming,” said Charles Taffs, the Commercial Farmers’ Union president.

Post published in: Agriculture
  1. irrigation matters

Leave a Reply

Your email address will not be published. Required fields are marked *