Zimbabwe: Banks Now Accepting 99-Year Leases As Collateral

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12 December 2017

The Bankers Association of Zimbabwe (BAZ) said on Friday it will now accept 99-year leases that were given to resettled farmers by Government as collateral for bank loans. Since Zimbabwe embarked on the fast track land reform programme in the early 2000s, lack of title deeds had been cited as one of the major obstacles to improving productivity on farms as banks contended there was no security on which they could give the farmers loans.

Government, which maintained that land belonged to the State, later issued 99-year leases to a limited number of farmers which the banks still refused to accept. But the two parties had since ironed out the issue, and banks now accept the leases as collateral security. BAZ president, Dr Charity Jinya said banks had no problems accepting 99-year leases from farmers wanting to borrow funds.

"Last year we agreed as Bankers Association to (accept) the 99-year leases which were then going to be submitted to Cabinet, so as BAZ, we are certainly not the impediment," Dr Jinya said to applause at a post 2018 budget meeting in a response to a question by finance minister, Patrick Chinamasa who wanted to know why banks appeared not keen to accept the leases as collateral.

"We have been looking for these 99-year leases as well and they appear to be like pangolins, so we are hoping to see them as banks so that we can go through our normal credit granting criteria for lending."

Dr Jinya replied in the affirmative when asked to just state if banks would now be accepting the leases as collateral. Minister Chinamasa presented the 2018 National Budget on Thursday in which he stated that the economy would grow by 4,5 percent based on the improved performance of sectors such as agriculture.

But the banks' lethargy in supporting agriculture was being seen as problematic. Minister Chinamasa had said earlier demands by banks that farmers be given title deeds to the land, which they would then accept as collateral, made no sense.

"The anchor to any economy is trust and confidence," Chinamasa said, citing examples of neighbouring countries such as Mozambique and Zambia where he said banks still funded farmers who had leases. Analysts had, however, noted that the main challenge that led to banks refusing to accept the leases as collateral was lack of trust and confidence in the previous administration which kept on shifting goal posts on its policies. The land was effectively described as "dead capital". The new Government, led by President Emmerson Mnangagwa has stressed that it will not be fickle and will stick to its policies to maintain certainty and predictability to attract investment in the economy.

New Ziana.

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