GOVERNMENT is working on a new policy that will encourage companies to finance up to 40% of farming activities of agricultural producers, source can reveal.

The move has been necessitated by farmers facing challenges in getting funding for their activities and companies struggling to get foreign currency to pay for certain commodities.

Companies that are already partly financing production of raw materials for their final products include Dairibord Holdings Limited that has robust livestock farming activities and Hippo Valley Estates who have sugar cane out-grower schemes.

“We are actually encouraging and persuading the private sector into the processing, in this case, Oil Expressers Association of Zimbabwe, to say can you finance 40% of your requirement. It is not yet law, but we are saying what incentives do you want? People are coming,” the Lands, Agriculture, Fisheries, Water and Rural Resettlement ministry, Strategic Policy Planning and Business Development chief director, Bwenje Clemence Taderera told source in an interview.

“For example, there was the issue of withholding tax, then we lobbied with Finance (ministry) and Zimbabwe Revenue Authority (Zimra), now there is no withholding tax on soya bean. So, at the moment, it is persuasion, it is not law. It is across all the value chains be it soya beans or cotton. Please, let us see how far we can support ourselves, especially if we can get up to 40% then that will be good for us,” Taderera said.

With a huge foreign currency backlog on the forex auction, sourcing forex officially to import raw materials or to pay suppliers increasingly demanding the greenback remains challenging.

This is because local suppliers are pegging their crops or livestock against the parallel forex rate currently at US$1:$750 when companies are being forced to source at the official rate of US$1:$465,39.

Thus, funding farming activities can release this burden on firms and provide guaranteed income for farmers.

“The thinking is that they (companies) are the ones who are interested in the product, right? Government has no business in business. We facilitate business,” Taderera said.

“If you want throughput to your plant, you better integrate backwards, support the farmer, then you can have the throughput to your market. As a government, we can commit, but only to a certain extent because of resource constraints.”

He added that companies must finance producers, the farmers, themselves and not do it themselves because that would be “corporate farming” of which they would need land to do that.

To support farmers, government is spearheading the V30 Accelerator Model, a business model meant to “promote production, enhance productivity and profitability for communal irrigation schemes countrywide and implemented through Agricultural and Rural Development Authority in partnership with communal farmers (Arda)”.

According to Treasury, Arda will provide the technical expertise in the form of a competent Scheme Business Manager with Agri-technical expertise who will transform the schemes into viable commercial enterprises.

Further, in the recent 2022 Mid-Term and Supplementary Budget Review, Finance minister Mthuli Ncube said despite the numerous risks and shocks affecting performance of the agricultural sector, insurance cover for agricultural activities has remained very low.

He said insurance premiums for agriculture were less than 3% of the total gross premiums generated by the insurance industry.

“In this regard, development of agricultural index insurance in the country which commenced in early 2022, is expected to be launched during the 3rd quarter of 2022,” Ncube said.

“This initiative will lead to development of a regulatory framework for agricultural index insurance, setting up of knowledge exchange forums, as well as developing capacity in agriculture index insurance including innovative insurance solutions for smallholder farmers.”

Source Newsday