FINANCE Minister, Mthuli Ncube’s newly introduced agriculture financing model has not done much to lower costs previously incurred under the Command Agriculture Scheme, International Monetary Fund (IMF) has reported.
The details contained in the global lender’s 2019 Article (IV) report show existing weaknesses in the new financing arrangement.
“Agriculture spending has remained high despite the changes in 2019 to the financing of the agriculture input schemes. In response to a significant drought, agriculture spending has spiked to nearly 5 % percent of Gross Domestic Product in 2018,” reads the report.
It is noted that there has been an increase in grain subsidies and the introduction of Command Agriculture to ensure food security.
“However, the effectiveness of the multiple agricultural schemes has been very low, as governance challenges, poor targeting, and structural barriers to agricultural growth potential hold the sector back,” noted the global financier.
IMF further said starting with the 2019/20 agriculture season, the financing of inputs under the command agriculture programme have been transferred to the banking system but risks to the budget remained high as the government provided a full guarantee against credit default.
The new financing model was incepted by Ncube and moved to transfer the support of agriculture support to banks as opposed to the Command Agriculture scheme which was government funded.
Previously, Sakunda Holdings owned by petroleum tycoon Kudakwashe Tagwirei was the principal funder of the project. Sakunda was paid hundreds of millions in treasury bills.
Under the scheme, farmers would take out loans from participating banks, with a requirement to pay back.
The model is premised on the provision of funding to farmers by commercial banks, with the government providing the necessary guarantees.
Commercial banks such as CBZ, Stanbic and Agribank participated in the programme.
Government also invited other commercial banks to also sign up for President Emmerson Mnangagwa’s signature scheme, once hailed as the panacea to Zimbabwe’s chronic food shortages.