Old farmers lead in agriculture loans default

Zimbabwe’s agricultural sector could be facing a growing crisis due to an aging farming population, according to a study by CBZ Agro-Yield, a leading local agricultural financier.

An analysis of the company’s lending data revealed that the average age of defaulting farmers is in their 60s, highlighting a potential significant challenge for the industry’s future.

The lack of a robust social safety net and the migration of young people to seek viable opportunities elsewhere including the diaspora, has left many older farmers struggling to manage their farms effectively, CBZ Agro-Yield chief executive Simbarashe Mhungu revealed.

The data, though collected at a micro-level, offers a valuable snapshot of a potential emerging crisis in the country’s farming sector.

Some observers feel the mindset of not repaying loans guaranteed by the Government could have also contributed to high defaulting rate.

“I had my team do a very small study,” said Mhungu at a recent event to unpack the 2024/25 summer cropping plan last week organised by Zimpapers.

“And this is going to be very uncomfortable information. I said, I want to take a look from all the data that we have. We financed well over 100 000 farmers over the last five, six years. I wanted to find out the average age of defaulters.

“The findings have been very difficult. The data is showing that our farmers are getting older. They are 60s on average. “A lot of them are incapacitated. Because the social safety net that we relied on to look after us does not exist anymore.

“A lot of our children have gone to the diaspora. And so it is difficult for them to commit to the level of complexity that is required to jumpstart our agriculture into the next century.”

He said many elderly farmers relied solely on their land as a pension, and there is a pressing need to develop strategies to improve productivity and generate income from the farms.

He emphasised that the future of the agricultural sector depends on finding solutions to maximise the potential of these landholdings while ensuring the well-being of the farmers.

Compounded by the devastating effects of hyperinflation, which eroded retirement savings, many older farmers are struggling to maintain their livelihoods and sustain agricultural production.

“It’s the only asset that they can see and say, well, this is mine,” said Mhungu. “So, what do we do in order to unlock value for all those people in their 60s, 70s and 80s who see this as their pension? It is their only credible pension.

“How do we deploy resources into that land that we have been given in order to bring about value to them and to the nation? These are some of the questions that we have to ruminate over,” Mhungu added. He emphasised that the solution does not lie in land redistribution but in creating an environment that enables farmers, particularly the elderly, to maximise the value of their land while benefiting the nation.

Mhungu highlighted the need for financial institutions to accept land or land rights as collateral to unlock long-term investment in agriculture.

He argued that addressing this issue is crucial to breaking the cycle of short-term financing and ensuring sustainable agricultural development.

“The answers is not about dispossessing land from anyone. But it is ensuring that there is the right ecosystems and tools and resources to unlock value from that land whilst everyone else is able to benefit.

“That is what we have got to focus on. Because it is their inheritance and also our inheritance. These are the difficult questions that we have got to pose. So, part of this is ensuring that the underlying asset, which is land or the right of use to that land, is somehow acceptable to financial institutions as collateral.

This is the question and answer that we all know we do not want to discuss. But until we are able to really answer that question in a credible way, we will still keep going around in circles with seasonal financing that does not match what needs to be done.”

CBZ Agri-Yield was formed as a JV between the Government and CBZ Holdings to de-risk the agriculture ecosystem to ensure that we have food security for the prolonged period of time.

However, during its early stages, the funder faced a challenge of high default rates, resulting in high non-performing loans (NPLs) under sovereign guarantees, which the Government ultimately had to pay off.

“So, we definitely tightened the book until we got what we call stable farmers, tightened our systems, ensured that we could get the confidence of not only Government funders or public funders but private funders in order to allow us to give you more money at a duration that actually works. So, all the three, four years of very painful restructuring that had to occur at Agri-Yield, very painful, was so that we could stabilise the balance sheet and attract not only local funders but international funders,” said Mhungu.-ebusinessweekly