Banks in Zimbabwe pronounce 99-year leases valueless when acquiring loans
Zimbabwean banks have pronounced 99-year leases valueless when acquiring loans. They are saying the risk of financing local farmers is too high since land cannot be used as collateral due to tenure uncertainties. Instead they are demanding personal assets like houses as collateral to finance agriculture.
The other issue is the unresolved confusion over the bankability of the 99-year leases. A 99-year lease is a legal agreement between the Ministry of Lands, Agriculture and Rural resettlement on behalf of the government and the farmer who is the lessee.
Banks are refusing to use these leases as collateral because they are arguing that the land still belongs to the State. In other words banks are more supportive of freehold whereby the farmer is the owner of the land. That way they can be able to sell the land if one fails to pay back their loan.
The Finance and Economic Development Minister Professor Mthuli Ncube insists the government is looking at offering full and partial guarantees to banks for the acceptance of 99-year leases. However, banks argue that the process of redeeming land as collateral is unclear and seems to be covered in secrecy.
Bankers Association of Zimbabwe President Ralph Watumwa reports that lack of investments on the farm is the huge problem. Farmers seem not to be having the full sense of possession which drives one to develop the land he adds.
Banks in Zimbabwe pronounce 99-year leases valueless when acquiring loans
“The starting point is that we must get farmers to believe they own the land and they should invest on farms. Many farmers do not want to develop and invest on their farms but want to borrow from banks. That is the fundamental problem on the land issue.”
“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 cannot say you want to realise the security and find another Zimbabwean to buy the land, they 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.”
“You don’t go to an auction to buy land like a house. With land, it has to be certain people. It means the value of land as security then becomes questionable and banks would need to get their money back from the asset in the quickest possible time,” Watumwa said.
He further adds that banks are now financing agriculture using houses or another asset as security instead of the land. From all this it means that the land has no value.
The Commercial Farmers Union President Andrew Ivordale says that full recovery of the agricultural sector is hampered by lack of a bankable tenure instrument. Hopefully the New land Policy will rectify this issue.