FUNDING AGRICULTURE – POSSIBILITIES

AGRICULTURE is three things – controversial, political and essential. Of course, any sector that has commercial power and connected to the history and mindset of the local population can have potential to be volatile and political. Mining is another example.

For such sectors, politics is necessary to protect, provide and pacify. In other words, politics is used to protect the natural resource which includes the labour; provide a means of economic survival and pacify or create general rules of co-existence to avoid conflict.

Such sectors not only dictate strong government policies for job protection but also strong private sector participation to create money for the individual and especially the country. It is a delicate balance.

Modern agriculture, for example, would be nearly impossible to manage efficiently if totally in state hands. The priorities of government and commodity markets (where agriculture is traded) are at opposite ends in most cases. The one values food security as intrinsic to the process while the other largely makes decisions dependent on market dynamics.

On the other hand still, it would be potentially destructive if agriculture were left entirely in private sector hands because chasing profit and market efficiencies could easily replace labour with machinery. For any country, therefore, the pursuit of a central position becomes logical. A protectionist but commercially viable nexus.

This center protects the interests of both partners so that it can take the form of subsidies to support goods produced for the local market, or supportive trade policies that enhance exports.

Botswana is a fine example with its beef exports contributing well over 20 percent to their national income. South Africa exports both the agriculture product and the retail brand or store (Shoprite and Pick n Pay), from which you buy their products.

Before the recent riots in that country, South Africa’s growth strategy was to increase exports to undo the damage caused there by the Covid-19 pandemic. The increase in their exports would create (undue) competition for our locally produced goods but would earn them sufficient income and support their foreign currency earnings.

In Zambia, funding for the Farmer Input Support Programme (FISP) has received substantial support from banks even when the economy was depressed. The FISP is a good programme, or of good intent.

It was conceived as a protective measure to give local farmers a share of the income for their produce and protect them against market forces. The original idea was to provide local farmers a platform to grow into commercial status.

However, it is the most basic of agricultural support and still governed by seasonal effects. For example, if the funds were sourced late and out of season for some crops, it would be a wasted investment because the funds would have no use for that season.

The 2021 national budget shows about $300 million planned expenditure on FISP for 2021. This funding must be sourced within a given season so that it makes sense for the farmers.

Obviously, then, the major determinant for this funding is the weather. This is one weakness that can be resolved without forcing an increase in the budget allocation for FISP in subsequent budgets.

The goal is to create a system of institutional agriculture that graduates farmers from basic subsistence farmers dependent on government support and weather patterns. The strategy should focus on making farmers bankable within a given period. Ultimately the intention is for those local farmers to dominate the local market and eventually export the way South Africa does. I’m more than certain the financial markets would support such an amendment to the FISP. Once upon a time, government had waived tax on importation of modern agriculture equipment or machinery and the banking system supported and financed that a number of farmers to import machinery.

FISP is one strand of the agriculture sector and only a fraction of the possibilities achievable in agriculture. Even after liberalizing the sector, we do not allow farmers market discovery (explore other markets for profit) outside our borders. Government intervention forces players to smuggle out produce that they could have exported legally.

Agriculture is big business and that is why it is easily identified as a diversification sector. In January 2020, the head of the Africa Development Bank proposed that the agriculture sector in Africa could be worth about $1 trillion by 2030.

This statement means that a link must be made between the farmers’ market and the financial markets. It also means agriculture must become sustainable and predictable. It must be commercially gainful and this is what liberalization does best.

By liberalisation we mean share of responsibility by government and private sector. We mean creation and growth of private companies that provide on-lending and other schemes so that farmers have a ready market for their output and predictable income.

We mean turning farming into a bankable business that attracts (tailor- made) financing. We mean creating policies that enable local companies to export produce to developed markets and earn the country income. Liberalisation does not disable government plans, but rather aids them. In this regard, Zambia has scored fairly over the years, but more can be done.

According to numbers by the Central Statistical Office, the agriculture sector receives more loans and advances than Energy, Mining, Manufacturing and Financial services put together.

This is from an industry-wide perspective, whether borrowing directly from banks or indirectly through government. Only loans to individuals exceed the amount of loans to agriculture as a sector.

The question at hand is whether we invest for now through the existing FISP structure or modernise for the future. Remember, FISP does not encompass the entire agriculture sector but consumes sizeable funds from government. Owning the resource is fine; but developing that resource and using it to earn income and control the future is better.