Zimbabwe banks declare 99-year leases worthless

LOCAL banks are demanding personal assets, including houses as collateral to finance agriculture, amid the unresolved confusion over the bankability of 99-year leases.

Banks say the risk of financing farmers is too high since the land cannot be used as collateral due to tenure uncertainties.

A 99-year lease is a legally binding agreement between the Ministry of Lands, Agriculture, Water and Rural Resettlement, on behalf of the government, and the farmer the lessee. Government issued 99-year leases from 2006 to resettled farmers after the land redistribution exercise that began in 2000. However, banks have refused to use leases as collateral, arguing they are not bankable, citing that land still belongs to the State.

Finance and Economic Development minister Mthuli Ncube insists the government is looking at offering full and partial guarantees to banks for the acceptance of 99-year leases. But banks argue the process of redeeming land as collateral is shrouded in secrecy.

Bankers Association of Zimbabwe (BAZ) president Ralph Watungwa said talks stalled due to lack of transferability mechanisms of the 99-year lease. Lack of investments on the farms is a sticking issue.

Last year the government embarked on a farm downsizing programme, while underutilised land was repossessed.

"The starting point is that we must get farmers to believe they own the land and they should invest on farms. We have farmers who don't want to invest but want to borrow from banks. That's the fundamental problem on the land issue," he said.

"The problem is that there are certain sections of society who are not entitled to take over the land because they are not indigenous or don't have the money. You can't say you want to realise security and find another Zimbabwe to buy the land; there are very few people like that. It means the ability of banks to realise value in the event that the customer is unable to pay becomes limited."

Watungwa said according to the law, when one transfers land, it has to be to the government.

"You don't go to an auction to buy land like a house. With land, it has to be to certain people. It means the value of the land as security then becomes questionable and banks would need to get their money back from the asset in the quickest possible time," he said.

"A lot of banks are now financing agriculture using houses or another asset as security instead of the land. So it means that the land has no value. again the process of making it bankable takes a long time because of the bureaucracy, as the process requires legislative changes. It's not an overnight thing. It requires a lot of stakeholders' approval. But should the relevant authorities apply their minds, it's a process that should not take two years."

Commercial Farmers Union (CFU) president Andrew Ivordale said full recovery of the agricultural sector is hampered by lack of a bankable tenure instrument.

"Hopefully the new National Land Policy will deal with this issue. The consultation process for this only ended in December 2020, so we need to allow time for the process to be completed. Banks lend depositors' money. They have to have sufficiently secure collateral for those funds. a secure, tradable, transferable tenure instrument is what is required. While it is difficult to quantify, Zimbabwe has suffered substantial losses as a result," he said.

Zimbabwe's land tenure and title deeds system was disrupted and thrown into chaos by the fast-track land reform programme which started in 2000. The farm invasions violated property rights.