Government Warned Over Smart Agriculture Bank Guarantees

The newly adopted financing model for the special grain program (Command agriculture) dubbed Smart Agriculture has come under intense criticism from various stakeholders of its susceptibility to public debt contraction as long as government stands as a guarantor for the disbursement of loans by local banks to farmers.

Starting this farming season, government resolved to take a major shift from directly financing the special grain program in order to create fiscal space, instead bringing on board local private financiers to spearhead the program with it providing guarantees for the loans.

In his 2020 National budget presentation, Finance and Economic Development Minister, Mthuli Ncube said the country was shifting from Command Agriculture to Smart Agriculture.

But stakeholders, including a public debt watchdog, Zimbabwe Coalition on Debt and Development (ZIMCODD) are less amused given past experiences.

“Based on the experiences from the RBZ Debt Assumption Act which transferred private debt to the public, the citizens will end up shouldering the debt in the event of failure by individuals to repay their loans. The government should therefore safeguard public resources to ensure that the beneficiaries do not abuse the facility,” said ZIMCODD in a statement.

In 2015, then president, Robert Mugabe signed into law, the RBZ Debt Assumption Act which enabled the government to take liability of debts incurred by the RBZ.

This saw the government immediately assume a $ 1.4 billion debt from RBZ it incurred before December 31 of 2008 widely comprising of unpaid loans by beneficiaries of the RBZ farm mechanization scheme.

Now the Smart Agriculture does not provide guarantees that the process will not end up just like the failed farm mechanization scheme.

But the government is in desperate need to make the program as attractive to local banks as possible hence making these guarantees.

Billions of dollars are needed to sufficiently prop up production in the agriculture sector yet capital remains scarce.

“ The government is not supposed to have any business in agriculture except providing a right framework and policies that make private sector wholly leading the program. As long as we have the  government as a guarantor, then it means it still participates in the process. We should move towards making agriculture business a viable sector led by private sector,” economic analyst, Pepukai Chivore weighed in.

To date, the special grain program remains shrouded in controversy over its financing even under government supervision with corporates such as Sakunda and FSG alleged to have received huge allocations of public funds to provide service yet the country still finds itself importing over US$ 3 billion worth of grain each year.

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