Zimbabwe has all the essential ingredients to build a dynamic agriculture and agribusiness sector, but it will have to shift spending priorities to fix weak infrastructure, market distortions, structural barriers and policy issues that generate headwinds to improving productivity in the sector, the IMF has said.
In its IMF Staff Report on Friday last week, the IMF said the abundance of fertile land, an educated labour force, good weather, and access to large export markets should be seen as strengths of the sector that could be built upon.
About two-thirds of working Zimbabweans are employed in agriculture, and agricultural exports represent about 30 percent of the US dollar value of exports, second only to mining.
For the sector to fully realise its potential, the global lender said Government could improve its public spending on agriculture to enhance productivity, improve volumes, catalyse growth, and strengthen the sector’s resilience to climate change.
The country will have to first shift spending away from income support, input subsidies and price controls and move towards skills development, research and development, and infrastructure spending.
In essence, Government policies will have to move fiscal resources away from the provision of private goods to the provision of public goods.
“A new agricultural plan must also respect fiscal constraints and bring public support for agriculture to a sustainable level,” said the IMF.
The IMF recommended that there was need to reduce the guarantee on loans from 100 percent to avoid moral hazard and consistently high default rates.
“If the Government wishes to continue to subsidise access to finance for farmers, consideration should be given to providing only a partial guarantee that ensures fair risk sharing across stakeholders and is subject to a cap to avoid fiscal shocks, said the IMF.”
“Alternatively, the Government could commit to paying a portion of the interest bill so that farmers receive concessional financial support. Moreover, penalties and consequences for farmer loan defaults need to be established and enforced.”
The IMF suggested that Government allows for joint partnerships for the funding of growth-enhancing investments into the sector, a move which it believes could catalyse resources from the private sector and donors.
“There remains strong interest among the official and private sector to invest in agriculture given its potential for lucrative exports,” said the IMF.
“Carefully designed joint partnerships with appropriate burden-sharing can help alleviate critical bottlenecks in electricity generation, storage and transportation, market access, and skills development that would permanently increase the productivity of the sector.”
Government is already in favour of joint venture arrangements and Lands, Agriculture, Water and Rural Resettlement Minister Perrance Shiri is on record saying interested farmers were free to enter into joint ventures with resettled farmers to boost agricultural production and the economy.
Contract farming has also been encouraged and the country has already seen “notable success with tobacco, where yields have increased as financial constraints were removed and a market for the sale of the agricultural product was created.”
“To promote the use of contract farming in other crops, efforts should be made to improve and simplify the legal structure for contract farming and encourage small and communal farmers to form cooperatives that could facilitate contract farming at the appropriate scale,” the IMF said.
The IMF noted that many of the barriers to sustainable growth in agriculture were not unique to the sector, but affected the entire economy. It said macro-economic stability, reliable electricity supply, and a functional transport network were as essential to agriculture as the rest of the economy.