AFC Holdings, a State-owned financial services institution, intends to raise as much as $10 billion through agro-bills to finance this year’s summer cropping, the group said on Sunday.
The agro bills will have a tenure of 270 days and 360 days with interest rates separately negotiated between the parties. The agro bills are open to both individual and institutional investors, according to the group, with a minimum investment of $10 million.
They are guaranteed by the Government and have prescribed asset status, liquid asset status, and tax exemption.
The summer cropping has just started and many farmers have already started planting. Funding of agriculture remains a challenge in Zimbabwe as banks are reluctant to lend due to a lack of collateral by the farmers.
The National Development Strategy (NDS)1 2021-2025 made it a priority to reform and restructure Agribank into a land bank to build confidence in the transferability and bankability of tenure systems and enhance the commercial value of the land.
The Government is on record saying it would finalise and roll out a 99-year lease in 2023, which is bankable in order to enable farmers to secure funding from financial institutions.
This also provides the farmers with collateral as they carry out their agricultural activities while the land title is also expected to boost confidence and increase growth in the agriculture sector.
The unbundling of Agribank resulted in a new entity, AFC Holdings, made up of four subsidiaries namely AFC Commercial Bank, which offers tailored banking solutions, AFC Land and Development Bank of Zimbabwe, which is focused on transforming agriculture through the provision of affordable agriculture finance for all farming sectors, AFC Insurance, a flexible short term insurance solutions provider and AFC Leasing, which leases agricultural equipment from over 22 cluster centres countrywide.
Zimbabwe launched the Food Systems Transformation Strategy in 2020, a plan through which the Government targets to grow the sector to an US$8,2 billion economy by 2025 and make the sector the driver of economic and social transformation; achieving national food self-sufficiency, and ensuring growing incomes for farmers and agricultural exports.
The sector remains the cornerstone of the economy, contributing about 10 percent of the gross domestic product and providing livelihoods for about 70 percent of the population.
However, production and productivity continue to be low and face vulnerability to weather-related shocks that impact on the performance of the economy at large.
The sector is expected to rebound during 2023, with growth projected at 6,7 percent, up from the 5 percent decline projected for 2022. Interventions in the sector will be guided by the Agriculture and Food Systems Transformation Strategy and Agriculture Recovery Plan.
During 2023, Government financing will focus on the Agriculture Productive Social Protection Scheme, while the private sector will fund the National Enhanced Agricultural Productivity Scheme (NEAPS) through private financiers, with Government providing guarantees where necessary. – The Herald
