The Sunday News
EACH country has at least one main economic activity which naturally becomes the pivot on which all other subsectors of the economy revolve and offshoot their business models. As such in their due diligence, investors or any other business identify such a key sector and model their investments in line with its needs. In Zimbabwe, there is no doubt that agriculture has been the main economic lubricant which has helped the growth of many other sectors.
Latest Government statistics show that agriculture, even now when it is generally subdued, contributes 12 percent of Gross Domestic Product. That Zimbabwe is an agro-economy has been the case since pre-colonial era and that is why even today, years after Government readjusted a colonial imbalance by giving the majority blacks land, detractors and their handlers still yearn for a stake of the country’s fertile soils. They know that with agriculture you can never go wrong in Zimbabwe.
Other industries too, both local and those outside, whose primary inputs are agro-based tend to look at Zimbabwe as a key source in their input supply chain. Surprisingly over the years especially after the land reform programme, one of the important service sectors in any country — the financial services sector — has not supported agriculture to levels befitting the princely status it deserves.
The financial service sector is very important in any economy. It oils the economy but more importantly it is structured to support the biggest economic activity of its locality. This also help banks to keep the cents flowing into their vaults.
However, in Zimbabwe this has not been the case, as since dollarisation or rather post land reform programme the banking sector has not provided enough support to agriculture.
The distribution of loans by banks has shown that the best position agriculture has occupied in terms of priority is number three. This simply means that agriculture, despite it being the fulcrum of Zimbabwe’s economy, is never top of our bankers’ minds. Rather, all along their preferred choice of lending is to individuals whose appetite is mostly consumptive in nature rather than agriculture whose benefits have a multiplier effect across most, if not all economic activities.
It is worrying that the same bankers who were queuing to have white farmers on their books just a few years ago, are waking up to deny black farmers loans. The same land which the whites were farming is the same land the black majority are farming and we wonder why in some cases bankers now do not want to recognise that land as security.
That is why we must applaud the Reserve Bank of Zimbabwe for finally realising that its foot soldiers — the banks — have been firing at the wrong targets for too long hence the need to reorient them and remind them what Zimbabwe is. Zimbabwe is agriculture.
Presenting his monetary policy statement, RBZ Governor Dr John Mangudya instructed banks to ensure that 20 percent of their total loan portfolio must be channeled towards agriculture. To ensure that banks follow this, Dr Mangudya said financial institutions are now required to show proof of this support after every four months.
“Banking institutions are required to report on a quarterly basis information on their agricultural portfolios with effect from quarter period ending 30 June 2016. The detailed variables to be reported will be provided by the Reserve Bank in due course,” he said.
This is a noble idea which will help authorities and the nation at large to see how the banks are supporting agriculture. Dr Mangudya should also put in place a mechanism that will see banks not only availing these figures to the central bank but to the public as well so the nation can all see which ones are sabotaging the economy.
We cannot have financial institutions so short sighted that all they think of is to dole out short term expensive loans to individuals so that they can mop the little foreign currency and import cars and clothes. In addition, RBZ must not just make such an instruction but must also prescribe punitive measures that will be meted out on banks that will default on this directive.
Right now the country is staring a painful drought and Government is appealing for $1,5 billion to feed more than three million citizens until March next year. Of course this drought is mostly as a result of El Nino, a natural phenomenon.
However, if the farmers had been capacitated and supported for long, we could not be mourning about livestock dying. We would not be mourning about irrigation schemes folding.
This just shows that the financial sector has not been doing enough. We hope from now the country will see change of attitude from bankers to support agriculture and ensure our silos are full again with all sorts of agricultural products. That is the only way we can reclaim our rightful position as the food basket of southern Africa.
