The Sunday News
Judith Phiri , Business Reporter
THE introduction of a Credit Guarantee Scheme is likely to yield favourable results when accompanied by complementary interventions to stimulate increased lending to the Beef and Leather Value Chain (BLVC), an expert said. Speaking on the sidelines of the 7th BLVC stakeholders’ workshop held in Bulawayo last week, an access to finance expert, Mr Lloyd Guzha-Chanetsa said Credit Guarantee Schemes (CGS) were likely to ease constraints of working capital and investment finance to smallholder cattle farmers in the beef and livestock sector.
“Financial drought is more prevalent at smallholder farmer primary production level as only five percent of the interviewed smallholder cattle farmers in Matabeleland North had access to formal credit.
“With Credit Guarantee Schemes there will be less need for collateral and minimised risks faced by lenders as noticed in countries like Malaysia and South Korea who have overcome market failures as well as expanded capital availability to perceived high-risk projects,” said Mr Guzha-Chanetsa.
He said in the process of setting up credit guarantee schemes, successes and failures should also be considered.
“The Reserve Bank of Zimbabwe’s subsidiary, the Export Credit Guarantee Corporation is working towards the development of a Micro, Small and Medium Enterprises CGS and the scheme will be introduced as part of Zimbabwe’s Financial Inclusion Strategy, initiated in 2016.
“But as they are still working on that we are also asking that they take into account that which has worked elsewhere and also that which has not worked so that we can get it right. Our guide should be the success stories put together by World Bank of what has worked elsewhere,” he said.
Mr Guzha-Chanetsa said loss sharing was the most important aspect in credit guarantee schemes.
“There should be an agreement on loss sharing between the scheme and lenders, the claim procedure, and the expected settlement time so that there is a smooth flow of the transactions. And also consider a clear distinction of how to distribute the risk, hence one could also reflect on the introduction of several risk sharing mechanisms, including suitable insurance products,” he said.
A consultant, Mr Bryan Wilson said under the policy and regulation, the 75 cents tax charged per kilogramme of every hide exported was a constraint to the beef and leather sector.
“The export levy of US $0,75 per kg introduced in 2013 failed to satisfy its intended benefits, instead it led to the decline in raw hide exports which led to a marked reduction in demand for hide, prices fell and many hides were left to rot.
“The levy has adversely affected the collection of raw hides as domestic leather processing capacity is poor because most tanneries work at 15 to 25 percent capacity, as a result it is estimated that some 150 000 hides are wasted each year. If the responsible authorities were to look into this, the scrapping off of the levy would allow smallholder farmers to benefit by exporting their hides,” said Mr Wilson.
Confederation of Zimbabwe Industries Matabeleland chapter president Mr Joseph Gunda said the leather sector was also key to reviving the industry in the region.
“For industries, Bulawayo is the hub but not only for manufacturing, also for leather and beef so these workshops have re-opened a new page, new dimension in how people can motivate themselves to build different leather value chains for economic growth.
“Our herd has gone down from 12 million to about 5 or 6 million but the farmers through these workshops are capturing information that will build our economy as witnessed in countries such as Ethiopia and Nigeria,” said Mr Gunda.
The Beef and Leather Value Chain Technical Assistance Project which was formed last year in May aims at increasing the overall competitiveness of the beef and leather value chains.
The project which is being piloted in the seven districts of Matabeleland North Province, is funded by the African Development Bank and is being managed by the Ministry of Industry and Commerce.
