Zimbabwe: 99-Year Leases Now Bankable, Transferable

Reserve Bank of Zimbabwe.
8 February 2018

Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mangudya yesterday said bankers have agreed to accept 99-year leases as collateral after Government tweaked them to be transferable and bankable.

The acceptance of 99-year leases by banks represents a landmark development that is bound to transform the agriculture sector. Banks have previously been rejecting the leases, arguing that they were not transferable, in the event that a farmer borrowed money and failed to repay.

But after marathon meetings involving Government, bankers and RBZ, it has been resolved that the 99-year leases are now bankable. Another meeting was held yesterday between Dr Mangudya and bankers, which it was agreed that farmers can now obtain loans on the strength of 99-year leases.

In his 2018 Monetary Policy Statement presented in Harare yesterday, Dr Mangudya said bankers were now happy with the 99-year leases and were ready to lend to farmers who use them as collateral.

"In line with the current economic dispensation's aspiration to transform agriculture into viable business proposition and taking into account the significant improvements made by Government on the 99-year leases to enhance the security of tenure of the lease and making it bankable and transferable, the Bank has agreed with banking institutions for them to accept the 99-year leases as security for accessing credit from financial institutions in line with the provisions of the leases," said Dr Mangudya.

Quizzed to explain the major changes between the current form of 99-year lease and the previous one, Dr Mangudya said it now gives bankers the comfort of lending because should Government decide to repossess a piece of land whose owner had obtained a loan from banks, compensation would first be paid to the financial institution.

"The issue is that the Government has improved the 99-year lease document; it now has a transferability element, now has a bankable element. Before the changes were done to these 99-year leases, there was no provision in the old document about financiers (but) it now provides the financier with the comfort of lending.

"It also says that in the unlikely event of Government taking someone's farm, and that person had been given a loan at the bank, the first port of call for compensating goes to the financier. So we are quite happy as banks," said Dr Mangudya.

He added that bankers were only concerned about "confidence" and whether or not a proposal is bankable, before extending loans. In other countries such as Ethiopia and Mozambique, farmers don't own the land permanently, but on lease agreements, yet they access funding from banks because of policy predictability.

As part of ensuring policy stability and reassure bankers that farmers would be on their pieces of land for long, Government has extended security of tenure, even to the remaining white commercial farmers. The provision of 99-year leases to white commercial farmers is a major policy shift from the previous arrangement where they could only get five-year leases.

Dr Mangudya said the bankability of 99-year leases was part of measures being adopted to turn around the economy. The acceptance of 99-year leases by Government is part of measures by the new administration led by President Emmerson Mnangagwa to stimulate agriculture production.

In his inauguration speech on November 24 last year, President Mnangagwa said he would anchor his economic turnaround efforts on agriculture and attracting foreign direct investment.

Other measures being implemented by the RBZ to revive the economy include increasing production, exports, foreign direct investment, diaspora remittances, loans and putting in place measures to protect investors' funds.

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