Farmers struggle to service loans

FARMERS, who obtained loans through the CBZ Bank Agro Yield programme to finance their businesses during the last three farming seasons are having difficulty in repaying them, with official data showing a very low recovery rate.

Some of the loans are 100% guaranteed by the government, while others are partially guaranteed.

In a bid to support the agricultural sector, the government partnered CBZ Holdings to finance production of maize, soya bean and wheat through the CBZ Agro-Yield initiative.
 The government partnered CBZ Holdings to finance production of maize,

According to the 2022 Annual Debt Bulletin of the US$275 million disbursed to support maize farmers during the 2020/21 summer maize and soyabean cropping season, only US$56,4 million was recovered, representing 20,5% recovery rate as at the end of September 2022.

The report said the government guarantee claim of US$188 million has since been called up and settlement is in progress.

Of the US$66,6 million disbursed to support wheat farmers during 2021 winter wheat cropping season, US$26,09 million has been recovered, representing 40% recovery rate. The government guarantee claim of US$29 million has since been called up and settlement is in progress.

Of the $15,4 billion disbursed for maize and soya farming during the 2021/22 summer maize and soya bean cropping season, $11,2 billion has been recovered, representing 72,43% recovery rate.

The government guarantee claim of $3,1 billion is outstanding.

Of the $1,019 billion disbursed to wheat farmers during 2020 winter wheat cropping season, $1,21 billion was recovered, representing a 74% recovery rate. The government guarantee was called up with an amount of $0,65 billion, including interest and has been fully paid, the report shows.

Maize farmers also borrowed $76,8 million during the 2020 winter maize cropping season but only managed to repay $0,44 million, representing 0,6% recovery rate as at end September 2022. The government guarantee was called up with an amount of $0,0764 billion, including interest.

The report shows that the guarantee has been fully paid. Post guarantee payments received amounted to $100 million, it said.

The Zimbabwe Coalition on Debt and Development raised concern over the low recovery rate.

"We are concerned by a very low recovery rate on publicly guaranteed private sector debt particularly in the agricultural sector," the organisation with high interest in the country's debt said.

"For instance, of the $4,5 billion CBZ Bank Agro-yield (100% government guaranteed) disbursed to maize farmers for the 2019/20 season, only $1,5 billion was recovered representing a paltry 38,5% recovery rate.

"By assuming such debts ($2,77 billion unpaid balance), Treasury has increased the burden on taxpayers who are already overtaxed."

The organisation said it was also concerned that the debt figures provided in the report are not disaggregated.

"Ironically, the reasons given for contracting those debts are extremely dubious and unconvincing," it said.

"Apart from this, we also question the sustainability of some projects where borrowed funds are being invested. For example, investing in the expansion of airports at a time when social infrastructure is crumbling and the majority of citizens are wallowing in abject poverty leads to questions on prioritisation," it said.

The organisation said it was concerned that the country's inability to service existing debts is taking a toll on various facets of the economy.

For instance, in the first half of 2023, economic agents experienced prolonged electricity load-shedding averaging 12 hours per day.

The nation could not easily access electricity imports from regional counterparts as it owed a staggering US$102,9 million in unpaid electricity import bills as at the end of December 2022, it said.

"This has greatly subdued industrial activity and overstretched household budgets as they had to look for expensive substitutes."

Public debt rose by 5,1% to US$18,02 billion in 2022 as the southern African nation continues to sink in debt.

In 2021, annual debt stood at US$17,15 billion.

In United States dollar terms, total public and publicly-guaranteed debt amounted to US$18 billion, as at end of December 2022, comprising US$12,8 billion external debt, and domestic debt of US$5,2 billion.

The external debt was down from US$13,35 billion recorded at the end of 2021.