Columnists Features

Financing agro production


SINCE 2002 when the late president Mwanawasa introduced production subsidies in agriculture, we have been a net producer of the staple crop, maize. Since then, the economy has been doing quite well until recently when the prices of copper plummeted on the world market.
It is evident that these subsidies might not continue. The reality is that the cost of inputs will be dear to most of us and, if not handled well, we might start having challenges to even produce enough to feed ourselves.
This will be very unfortunate because we might just see some of the investments put in various value chains such as processing in soybean close shop because they will not have adequate raw material for processing. This calls for well thought-out policies from the government through my namesake, Mr Felix Mutati, and his team, including those at commerce.
Just thinking on top of my head, we have companies like NWK, Cargill, Zambian Breweries, COMACO, Illovo, Buyabamba and others that have been running various outgrower schemes in various commodities such as cotton, maize, groundnuts, soybeans, sugar cane, barley and potatoes.
These companies should be encouraged in that they are bridging a very important factor of production – finance, which under normal circumstances is supposed to be provided by financial institutions at affordable interest rates.
In Zambia, securing financing from financial institutions is very expensive as interest rates are very high, ranging from 30 percent to as high as 100 percent in certain instances. It is no longer a secret that our economy, which depends mostly on copper, is not doing well.
Though late, this is the right time to look to agriculture as one of the main sectors that can turn around our misfortunes. We need to encourage these companies that are making great investments in agriculture at high risk by putting up policies which will make them invest even more.
We all now know that a Zambian farmer, when supported, will produce and we can only create wealthy if we venture more into production than just being mere traders through retailing.
The other companies, especially those in value addition, should emulate what their colleagues are doing if they are to remain relevant in business.
There is normally a tendency of processors not investing in production to target farmers that might have been pre-financed by other companies by offering a few cents above what the pre-financier is offering at the time of buying.
This leads to side-selling, and what the farmers forget if involved in such an underhand method is that they are killing themselves. Though we know that outgrowing of commodities is a problem worldwide, but where it has been managed and handled well with good supporting policies, it has worked well and removes the burden on government (Boma iyanganepo pilizi!).
With this in mind, I hope the Finance minister can come up with deliberate policies to encourage outgrower schemes. For instance, he could reduce company tax for any company which is pre-financing, say, a minimum of hundred thousand farmers in any value chain.
I am sure that once this is done, many companies would start pre-financing farmers with various inputs so that the farmers can produce. This would not only encourage the traditional farmers to produce but also new agricultural graduates that might not find formal employment as well as some weekend farmers like myself.
Agri-financing is one area in which we have fared so badly in Zambia, and once we get a saviour in this segment, all the idle land may become productive overnight and we will realise our dream of being the grain basket of the region and Africa.
Lastly, we as farmers should change our mindset; we are no longer in the humanism environment but a capitalism one. When we have the opportunity to be provided with inputs through pre-financing, let’s honour our contracts by selling back to people that helped us with the inputs even if there could be someone dangling some juicy carrots.
We should remember that by them investing in us without collateral, they exhibited confidence and we need to pay back to harness this relationship. The only way we can realise good return on investment is by putting to good use the inputs we have been provided with.
I have seen some farmers get eight bags of fertiliser and sell half of them to get money for kanchina (shame on them) and expect to get 200 bags in a hectare.
I will end with a plea to the government, through Mr Mutati, to think through before removing productive subsidies such as the Farmer Input Support Programme if they will ever do. We are ready to produce and make Zambia proud again.
This author is an agribusiness practitioner.

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