Value Chain Financing underpins cropping season success

The recently released Zimbabwe Agricultural Sector Survey report indicated the Government of Zimbabwe remains the lead funder of agriculture through the Climate Proofed Presidential Inputs Scheme (Pfumvudza) and the National Enhanced Agriculture Productivity Scheme formerly known as Command Agriculture.

However, the report further notes that contract farming remains one of the most preferred sources of agriculture funding. This funding demonstrates the importance of partnerships in achieving national objectives related to agriculture.

Contracts play an increasingly important role in organizing agricultural production. The private sector has a role to play in topping up on the agricultural funding mobilised by the Government.

Under the value chain finance model, private players can expand financing for agriculture thereby improving efficiency and repayments in financing. Currently, CBZ is the leader in private sector financing, accounting for over 45 percent of agro-financing in Zimbabwe.

The insatiable appetite to import has harmed the growth of the local agricultural sector. Henceforth, one of the envisaged outcomes of The Agriculture Recovery Plan (2020 – 2023) is import substitution.

One of the strategic interventions to the attainment of this target is value chain financing. If modeled properly, commercial contract farming is a sustainable way of capacitating local farmers to venture into production thereby improve food security and create employment.

It is the Government’s position that private sector offtakes are supposed to contract 40 percent of their raw material requirements from farmers.

The Agricultural Marketing Authority (AMA) recently invited agribusinesses and other players who depend on raw materials from the agricultural sector to enter production and marketing contracts with farmers.

The response from agribusiness and players expressing interest in the invitation has been overwhelming.

The core aim is to encourage local sourcing of raw materials so that the country can cut down on imports as well as create employment for the Zimbabwean people. This arrangement will also enable contractors to ring-fence their production requirements.

With production contracts, they detail specific farmer and contractor responsibilities for production inputs and practices, as well as a mechanism for determining payment. The success of such an arrangement is premised on the protection of contractors.

Therefore, a review of legislation in particular SI 140 of 2013 (Grain, Oilseeds and Products) and S1 142 of 2009 (Seed Cotton and Seed Cotton Products) has been made to protect value chain investments.

The role of AMA is to register the contractors and ensure that they submit returns on growers, input support levels, product prices, and purchases and processed products.

The coming in of the private sector is indeed a game-changer. Already for the 2021-2022 season, the private sector has committed to supporting 20 000ha maize and 20 000ha soya beans, and 200 000ha castor bean, and 3000ha processing potatoes.

The Government has also committed to creating enabling environment for private sector financing by implementing a raft of measures.

These include; productive sector financing facility at appropriate interest rates and terms, duty-free importation of basal and nitrogen fertilizers and accelerate the localisation of fertilizer manufacturing including coal to fertilizer project, removal of the 10 percent withholding of tax on soyabean, stop order system for soya beans and other oil seeds supervised by AMA where both Government and private sector players co-pledge default guarantees for farmers loans on private sector off-take agreements.

More private sector participation

The annual national target for potato production is 20000 hacters. The introduction of the potato value chain facility targeting over 300 farmers will ensure continual growth in production trends of the crop.

This program will be administered through commercial banks to support the production of 3 000 ha of processing, table and seed potato production over three seasons.

In this regard, the AMA will continue to exercise its financial facilitation role to ensure loans are available for production through the issuance of Agro bills.

Another emerging crop is castor beans. The national target this year is to produce 200 000 Ha of castor beans under contract farming targeting mainly A1 farmers and some A2. Each A1 household will be supported with 3kgs of castor seed to establish 0.5 ha.

A total of 1 200 MT of castor seed will be distributed on a cost recovery basis. Government will facilitate with farmer identification and agronomic support.

Word from the market is a column produced by the Agricultural Marketing Authority (AMA) to promote market-driven production of crops. The Permanent Secretary in The MLAWFRD Dr J Basera contributed to this article (Food and Nutrition Security: The Game Plan for 2021/22 FARMING Season, ZAS Agribusiness Conference presentation). Feedback mmlambo@ama.co.zw or gmashiri@ama.co.zw

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