The move is set to provide a lasting solution to lack of adequate financing in agriculture with banks having been accused of deliberately starving the sector of loans.
In correspondence seen by Standardbusiness, banks argue that by having the same rights as the borrowers, they can recover the debts. “The lender could therefore get eligible persons to farm and take over the debt. In short the lender must be able to sell the lease,” Baz said.
It said the current land leases had limited security and cannot be used to obtain funding. “The land leases provide limited security and in the event of default by the debtor, the chances of recovering the loans are very low unless the bank takes over and works the foreclosed leaseholds,” Baz said.
Government has amended some clauses to the 99-year leases to entice banks to accept them as security. Baz said Clause 17.1.1 which states that the lessee cannot cede, assign, hypothecate or enter into a working partnership without the authority of the lessor and that lessor has six months to respond does not work for debt recovery.
It said while Clause 24 gives government the power to cancel the lease on account of breach of 17 grounds provided for as breaches this did not help their cause.
“There is no provision guaranteeing the interest of a money lender in the event of cancellation of a lease,” Baz said. The absence of agriculture financing has been identified as the missing link to boost production in the sector more than a decade after government embarked on the chaotic land reform programme.
The new farmers do not have access to financing and this has incapacitated the thrust to boost production after government said it could not allocate adequate resources in agriculture.