Between a rock and a hard place

19 Aug, 2022 - 00:08 0 Views
Between a rock and a hard place Commercial agriculture funding is key for the success of the country’s agriculture industry

eBusiness Weekly

Clifford Shambare

This article starts with a pertinent question: With all that intellect, that experience, and that expertise in the agricultural field, can Zimbabweans fail to feed themselves? The answer to this question is a definite; No!

In the past two decades or so, some black  commercial farmers have demonstrated their capabilities to farm. At the beginning of the Command Agriculture Programme, considerable amounts of money — about US$ 3 billion-plus — were made available to fund the project but over a period of three years, only 45 percent of the principal was left.

Now, there are several pertinent reasons for the failure of this programme. Because of the complex nature of the issues involved here, it is rather difficult to rank these reasons.

That said, here are some of the most critical of them: Corruption, mismanagement, poor capital levels, a distorted and dysfunctional marketing system and the now rather frequent droughts.

This effectively means that, to resuscitate this programme, there is the need to address all these challenges simultaneously; and doing so with a determined attitude. To my mind, there is need to distinguish the farmer categories first.

This suggestion may appear discriminatory, especially when considered from the political perspective, but it is necessary for a number of reasons. Policy is one, planning is the other. And yet the other is the design of funding vehicles and /or systems.  Although they may appear to be separate, in practice all three aspects (of the matter)are closely linked.

In this case a clear policy on food self sufficiency strategies is imperative. This is especially so for designing suitable funding systems for each farmer category. But why so?

You see, in Africa generally, and Zimbabwe in particular, the attitudes, ambitions and general life objectives as well as the degree of level of technological exposure, of the farmer are critical here. Ultimately, whether one is in a given farmer category becomes a matter of mentality and mindset.

To clarify this point let us take — for lack of a less derogatory term — the peasant farmer category. This is a category in which the majority find themselves by default. Under such conditions their level of ambition is likely lower than that of the commercial farmer.

And due to history, they are found living under dire conditions of a degraded environment — poor soils, low rainfall and the so forth. This condition further reduces their level of ambition. Logically, they need an appropriate financing regime.

Then there is the ‘commercial’ farmer category which also needs an appropriate funding regime. In the case of this country, to my mind, this is the most determinant category to the success or failure of our agriculture industry. But why so?

To begin with, a good proportion of those involved possess varying degrees of ambition.

A good number have an opportunistic attitude and/or mentality. Some of them have failed elsewhere. And yet the other category possess characteristics that render them suitable for success.

These are people with the appropriate training. Some of them have been extension agents, either in government or in the private sector — specifically the NGOs. Others have been farm managers. And yet others have somehow, acquired farming experience by their own means.

From this classification, it is easier to determine which individuals are likely to use funding properly and to consequently, succeed in their venture.

In this country, under current conditions, the authorities’ seemingly nonchalant attitude in selecting individuals for ‘commercial’ agriculture funding has had much to do with the current demise of this industry.

It therefore stands to reason that, in order for the agriculture industry to succeed in this country, this the area which needs very close monitoring by both the government and the banking sector.

At this juncture let us go back to the other reasons  for the failure of this programme.

A close scrutiny of the state of our agriculture industry shows up its parlous state of capitalisation. This is the major reason for the setting up of the Command Agriculture Programme anyway.

The capital components concerned are machinery and related technologies and working capital.

Now, if we consider machinery, we find that to date, the level of machinery in the commercial farming sector is pathetic to say the least.

And there is no way the country’s agriculture industry can recover without a substantial injection of investment in machinery — tractors and other motive power included.

This state of affairs has almost paralysed the Government which is now aware of the challenge.

In this case, the latter has tried to address this challenge through a number of strategies but somehow is not working well here; but why?

To begin with, the numbers are well below par. Secondly, maintenance is poor or non existent. Thirdly the system has been corrupted.

Fourthly, mismanagement is rife — almost endemic — in the whole system. But of course, all these reasons are interlinked, one way or the other.

Ultimately, this makes a very complex scenario that is very difficult to solve. But to my mind, ridding the system of corruption will be the most effective route to take.  But why make such a suggestion — you may want to know.

Here is why: This action creates capital by making available, those funds that would otherwise find their way out of the system through theft. For example, through the procurement process, a lot of monies running into millions — even billions — are involved.

As far as mismanagement is concerned, there a couple of ways to deal with it. One is to rid the system of nepotism—itself a form of corruption. The other is training. The other is to improve the level of remuneration of staff.

The other strategy that has been used elsewhere is to attract back our technicians from the diaspora.

This strategy needs funds for the purpose. This approach has been tried before but corruption has dealt it fatal blow.

Then there is another no less important — in fact the most effective strategy — that of going into partnership with foreign companies specialising in agricultural machinery. But again, this strategy has been and apparently still is — being used but for some reason, it too is not working that well.

When everything is said and done, there is still the need to create funding strategies for the agriculture industry for this country.

But here you may still ask ; What is wrong with the ones that are already there — these being CBZ Agro-yield and the AFC as well as the Women’s Bank?

Under the capitalist system, any venture that does not lead to profitability will eventually collapse. So is the case with farming. And the marketing system is very critical for achieving profitability.

Sadly, in this country, the agriculture industry has become a serious victim of a distorted marketing regime.

At this juncture, let us look closely into this matter.

In doing so let us consider the crop of maize.

Today maize farming has become unprofitable to the local farmer to the extent of rendering him bankrupt. In this respect he is now between a rock and a hard place — a condition also referred to as a dilemma.

On the one hand the state is breathing down his neck expecting him to support the nation by feeding it.

On the other hand, it has left him to the vagaries of a capricious market.

What is currently happening in the agricultural marketing — particularly in the case of maize in this country—is very detrimental to progress of any kind.

In this case, the farmer needs money for several purposes — that is harvesting, packaging, transport school fees and so forth. A rough estimate of this amounts shows that it can be as much as 30% of the production costs of the crop. This situation is worsened by the lack of working capital in the loan package of this and other crops.

The reasons for this lack of working capital, a component that used to be a part of the previous AFC(later, Agribank) loan package, are varied — and sometimes vague — but of concern to the farmer, all the same.

On their part, the banks alleged that this part of the loan was abused by the farmer who used it for purposes other than farming. In some cases, such allegations held true.

In some cases the bank claimed that it could not afford the cost. And yet in other cases it was argued that since the farmer used family labour in his operations, he did not need to pay for it; so that saving would enhance his profitability.

At a smaller scale of farming, the overall impact of such a stance did not amount to much. But at a larger scale it did and still does.

So this is one of those cases where the demarcation between a peasant and a commercial farmer results in the said funding challenges.

But whatever the case may be, there is no doubt that today a lack of working capital is negatively impacting on the operations of the farmer in a way that is of serious concern to him.

Under current conditions he has to resort to means of raising this capital, that are quite damaging to his operations.

One of these is the sale of other produce such as cattle, small stock and horticultural produce. But in a good number of cases, these sources are — for one reason or another — gradually becoming inadequate.

So in that case selling some of the crop becomes the only means for raising these funds. This is where the middleman comes into the equation. And given the attitude of the Zimbabwean today, he will jump onto such an opportunity to exploit his fellow Zimbabwean — the farmer.

In this case, there are middlemen who buy grain and either sell it to starving communities scattered throughout the country, especially those in the remote areas. In some cases they sell this grain to stock feed companies, a good number of whom produce meat for export, so they do not mind buying the grain in foreign currency — specifically the US dollar.

Here the middle man is making huge margins by manipulating the differential between the price he pays the farmer and the one he is being paid by the buyer.

For example, he/she is buying maize basing his price on a bag supposed to weigh 50kg.

This is a figure that is mired in dubiousness. Some of them use a bucket as a measure. Now, if the test density of the crop— that is grammes per cubic centimetre — is good, say from 0,7 upwards, at 3 buckets a bag will weigh up to 60kg so here the farmer loses 10kg per bag translating to 200kg per ton.

If the amount is substantial, say 100 tonnes, this translates to 20 tonnes! So under such circumstances, this figure should have added a substantial proportion to the farmers profit.

In some cases, the scale is tuned to measure a figure of as much as 5kg below par. In some cases they deduct 3 kg to cater for trash and/or moisture, whatever that means. Then they reduce the price of the crop to hedge against losses brought about by the risks associated with the measures being taken by the GMB for dealing in a controlled crop; these being prosecution of the final buyers of the product and bribe money paid to the police at road check points and so forth.

For example, of late the price has dropped from US$9 to as low as US$6/bag. This results in a price between US180 and 120 per tonne. As compared to the import parity price of 280 this results in a loss to the farmer of as much as US$ 160 per tonne.

Under such condition is it any wonder that the farmer may end up unable to grow the crop next season. And even if he is able to do so, he will be compelled to reduce his area.

Meanwhile, he may fail to pay up his loan, especially with the high-interest rate ruling today.

Meanwhile, the banker is dubbing him a persona non grata — a bad debtor/borrower. This is a fact which in some cases, he cannot deny.

So here, a critical analysis of such a scenario clearly illustrates how corruption and [the] mismanagement of a system can kill it in the end. In the end instead of growing, the fund meant for that purpose is gradually reduced.

This clearly, is against the ethos of capitalism in which capital is supposed to generate profits which should be recapitalised to create and/or grow mow more capital.

Such a scenario is the reason why developing economies either stagnate or degenerate instead of growing over time.

Shambare is an agriculture economist based in Chinhoyi and is reachable on 0714045435


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