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AMA contract policy needs support

The last summer season and the present winter irrigation season have shown that Zimbabwe’s farmers can, with proper financing, boost production significantly and, with better oversight and enforcement of rules that end cheating and side marketing, make that proper financing viable.

Outside the tobacco industry, however, much of that financing is either from the Government or through our largest bank operating with a Government guarantee. This is fine, and the Government has shown that the systems can work, that the corruption seen when the pilot schemes were started can be eliminated and that, very largely, the side marketing that bedevilled viability can be stopped.

A lot of active Second Republic measures were combined to make it work and make it viable. The experts in the Ministry of Lands, Agriculture, Fisheries, Water and Rural Resettlement were given full scope to apply science to farming and, using a regenerated Agritex network, get this out to the farmers.

Input credit came from the Government, but again there was a certainty this time, through Agritex certification, that the farmers eligible had land, had undergone training and had done their initial preparation, all fairly obvious requirements but not followed through until the results-based new dispensation made it part of the normal rules.

The Grain Marketing Board was converted from a cosy and rather inefficient outfit back to what it needed to be, sorting out the Government contracts, recording who exactly had received what inputs, restoring its network of distribution and collection points, revamping its storage, and generally running a tight business. Again all this was obvious, but again it needed the results-based planning and pressure.

Behind this operational effort, largely through the Agriculture Ministry, was that relentless pressure from the Ministry of Finance and Economic Development. Yes, the required money would be found and was found, but the fiscal discipline that has transformed the economy had to be applied right down the line, to the records that even the smallest farmer is now legally compelled to keep. The result means that what amounted to ad hoc arrangements can now be put on a permanent basis, converted into a commercial system that will still have a lot of Government input but will be a business operation with everyone, from the farmer with a very small farm right up to the top seeing farming as a business and the systems forcing business approaches.

Now the Agricultural Marketing Authority, another reformed and revamped entity, wants to move forward and bring in a far greater input from the private sector. Privately financed contract farming is now being encouraged. Basically this would mean the big agro-industrial companies, millers, oil expressers and the like, will start having a direct relationship with farmers to grow their raw materials. To some degree this already exists. Delta, for example, now has a list of contracted farmers who produce its barley, both kinds of sorghum it needs, and its maize. It started years ago with barley because basically it was the only market for that grain, moved into sorghum both to ensure supplies and, fairly critically if you brew beer, to grow the precise varieties with the “right taste” that it needed. It added maize when supplies of that grain became trickier.

The result is that our largest industrial company secured both its raw materials and was able to insist on the quality it wanted. The farmers under contract won with guaranteed markets, guaranteed pricing, and extra support. Other companies can now follow suit. They are not operating in a vacuum. The AMA will be the licenser of both the contractors and the farmers, so there is a referee and umpire who can who can watch out for the sharp practices, on both sides. More importantly there are now lists of farmers with track record, the farmers who operated under the pure Government schemes, who produced and who delivered.

A private contractor does not have to take many risks, being able to start with the proper farmers who know what they are doing and will produce the required crop.

Some might find this AMA initiative curious considering the new programme in the tobacco industry to have more local financing of the farmers directly. The problem in tobacco was not that contract farming has not worked. It has worked so well that around 94 percent of the crop is grown under contract with the Tobacco Industry Marketing Board doing a good job as licenser and umpire.

But the open-market auction floors that basically set the prices for each type and grade in the contract formulas are now too small to do that efficiently, so there needs to be more direct financing. Because tobacco is a pure export crop and local finance was wiped out, the industry has become over-reliant on off-shore financing. For both reasons more direct financing is needed, but no one pretends that contract farming will not remain a major factor and produce the majority of the crop. The only change, we all hope, is that more of the required financing for contract farming will be sourced in Zimbabwe.

Grain, oil seed and cattle farming are at the other end of the spectrum with far too little private-sector contracting. The AMA is thinking, for at least initial targets, that around 40 percent of the national requirements should be financed through these commercial contracts. And that is a seriously large jump.

A production sector as critical as agriculture cannot use a single simple system with one size fits all. A highly successful farming business sector will be complex and will incorporate many different types of financing to meet the needs of farmers, buyers, industrialists and final consumers. The AMA realises this and is ready to help create and regulate that complexity.

There are obviously details to work out as the AMA scheme moves from policy to a detailed operational system, with pricing issues for crops grown for local consumption being an important point. Do we use world prices, landed costs or some sort of formula that takes these and the production costs into account and smooths out the spikes and dips?

But once the concept is accepted these issues can easily be ironed out. It will clearly take more than one season to move even to the 40 percent target, but every advance requires someone to start the process. The Second Republic has developed a functional system that works, both on the production side and the business discipline that is required. It can now grow to everyone’s benefit.

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