Columnists Features

Productivity improvement through smallholder agro-finance

WHY are our banks not coming on board in as far as providing finance to the agriculture sector? Indeed, we are alive to the fact that they are here to make money but the money has to be made sustainably.
They have concentrated on servicing only clients in formal employment and commercial farmers at the expense of the many small-scale producers. I sometimes doubt whether they have done their homework in knowing the demographics of their potential clients in the farming sector.
Sadly enough, some civil servants have been loaded with loans such that they are almost suffocating. I know they are into business to make money but business without spending is not business at all. Most of them are behaving like ‘shylocks’.
I am compelled to say this because the smallholder agriculture sector is the single largest employer in this country; literally all the people in the rural areas are farmers of some kind.
My problem is that the agriculture sector in Zambia will not develop if farmers do not have access to finance. You will agree with me that everything hinges on money. Look at what has happened this year in the tobacco sector. Because the larger pre-financiers in that value chain did not participate for reasons that we can discuss later, we have a reduction of about 60 percent in the cultivated area.
No matter how much advocacy is done to promote the use of certified seed and other inputs, as long as the smallholder farmers do not have access to affordable financing, they will not have the money to buy fertiliser, seed, chemicals and other inputs and implements needed to improve their productivity. The implications are that limited jobs will be created and their contribution to GDP will stagnate.
Recently, I was excited when I read that finally the government has given a go-ahead to ZAMACE to implement the warehouse receipt system (WRS). This is one of the key risk mitigation factors for the banks to come on board because the output from the farmers can be deposited with merchants through ZAMACE as the regulator.
This piece of legislature should have been signed a long time ago but they say its better late than never. However, we still have a big challenge with storage space but this is an opportunity waiting for someone to get hold of. In an article that I discussed with you last month, I indicated that if productivity can increase by doubling, Zambia can harvest about 9.6 million tonnes of maize alone but our storage capacity including those run by the private sector is less than four million tons.
With the coming in of the WRS, construction of storage facilities is a business that we should all venture into. As a matter of fact, I will approach my good bank next month for a loan to build a 20,000-metric tonne storage facility in Lundazi.
I do not have collateral but the business proposal I have is viable; I know my bank will not make a mistake of denying me that loan because they might just miss a good business opportunity if I sell the idea to venture capitalists. We all know that banks are the second partner in development after the governments’ creation of an enabling environment.
We now want to see establishments of out-grower schemes and forward contracts now that the market end of the value chains looks promising. We should see births of out-grower schemes in maize, soybeans, sunflower, vegetables, even fish.
Everyone has reiterated for a long time that with the favourable climate, fertile soils and sheer number of farmers involved in agriculture, our crop productivity should double which ultimately will lead to achieving the first ever true bumper harvest.
As we revise the national agriculture investments programme (NAIP), let us set productivity targets that will make us sleep in ‘gumboots’ but that will make us happy at the end of the period. I would not want to see targets such as attaining a national average yield of 3.5 metric tonnes (mt) of maize – nay. That is too low, we are already at 2.2mt and we should aim at attaining at least six metric tonnes in five years’ time.
This is attainable with the right strategies and support from our colleagues in the private sector such as the banks, commodity merchants, multinational input suppliers and the farmer. This should include the research institutions as well as the schools and training institutions.
In a nutshell, my humble appeal is that lets invest into smallholder agriculture because that is where we have large numbers of participants and the major supplier to the national food basket.
The government is trying its best with the FISP but that is not enough. Governments worldwide generally are very bad at doing business and the private sector should be the main drivers of productivity. Congratulations to ZAMACE and GTAZ for ensuring the dream of WRS comes to fruition, a job well done!
This author is an agribusiness practitioner.

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