By David Mhlanga
Many people who benefited from the 2000 land reform programme especially the communal and small-scale farmers are the victims of financial exclusion, rendering land one of the valuable assets a nation can have to be dead capital. Commentators, researchers and scholars have come up with their own explanations as to why poverty, low productivity and gross output in agriculture is at unprecedented levels yet the people in Zimbabwe have vast tracts of land. Some argue that agricultural production is affected because black farmers are inept, others put the blame on international isolation, the farmers on the other side lament lack of capital. With the clarion call by the government on the irreversibility of land reform, actions must be taken to restore the bread basket status of agriculture.
Predominantly white commercial farmers used to provide a livelihood for over 30% of the paid workforce even though they were underpaid and accounted for some 40% of exports. The principal crops included sugarcane, coffee, cotton, tobacco and several varieties of high-yield hybrid maize. Both the commercial farms and the subsistence sector maintained large cattle herds, but over 60% of domestic beef was furnished by the white commercial farmers. In sharp contrast, the life of typical subsistence farmers was difficult, and their labour was poorly rewarded, hence the need to take the land. But the issue now is on restoration of the bread basket status.
At the recent Southern African Confederation of Agricultural Unions (Sacu) conference held in Victoria Falls farmers called for agricultural funding from African governments for productivity to improve in agriculture. The conference highlighted that agricultural output for Africa as a whole annually stands at 4%. The presenters reiterated the need for funding in order for Africa to improve on agricultural output from 4%. It was revealed that out of the 4% South Africa, Kenya and Egypt were the key players, while the rest shared about 1%. According to World bank 2008, Zimbabwe’s agricultural sector was considered to be the second leading food producer after South Africa averaged 0,6% food output per annum during 1990-2005, compared to an average of over 3% for the rest of southern Africa. From this statistics Zimbabwe was producing close to 20% food output annually for Southern Africa. However, the bread basket status has gone, to an extent that Zimbabwe is now in the basket of countries sharing 1% output in Africa.
One way of restoring the bread basket status for Zimbabwe among others, is financial inclusion. Knowing the importance of financial inclusion, the African Union Commission, through the Maputo Declaration of 2003, encouraged member states to spend at least 10% of their national budget towards agriculture. However, African governments have not been doing that, especially in the Sadc region according to the biannual review by the African Union released in Gabon.
In Zimbabwe many farmers also lament the problems of capital. Initially farmers were unable to access credit, savings and risk mitigation products, well-functioning, financial infrastructure due to the fact that the farmers had no collateral security among other requirements from financial institutions. This made many farmers to be financially excluded hence dismal levels of production. Financial inclusion allows economic growth to be translated into shared prosperity and better livelihoods for the majority. At the same time, for growth to be sustainable socially and politically it has to be inclusive. One key component of inclusive development is financial inclusion, an area in which Africa and Zimbabwe has been lagging behind.
Less than one adult out of four in Africa have access to an account at a formal financial institution. Broadening access to financial services will mobilise greater household savings, capital for investment, expand the class of entrepreneurs, and enable more people to invest in themselves and their families.
The question which remains is what is financial inclusion? Financial inclusion refers to all initiatives that make formal financial services Available, accessible and affordable to all segments of the population. With particular attention to specific portions of the population that have been historically excluded from the formal financial sector either because of their income level and volatility, gender, location, type of activity, or level of financial literacy. In Zimbabwe the portions of the population are the black farmers, SME businesses, small scale farmers even small-scale miners.
It can also be defined as the process that ensures the ease of access, availability and usage of the formal financial system for all members of an economy or the delivery of banking services at an affordable cost to the vast sections of disadvantaged and low-income groups.
On the other hand, financial exclusion means the inability to access necessary financial services in an appropriate form. Financial exclusion also refers to those processes that serve to prevent certain social groups and individuals from gaining access to the financial system.
State of Financial Inclusion in Zimbabwe
The National Financial Inclusion Strategy by RBZ (2016) indicated that, almost 70% of the total population in Zimbabwe is excluded from financial services and only 30% is financially active. In addition, Finscope in a 2014 survey revealed that there is a low uptake of formal investment services by Zimbabwe’s adult population and the majority of Zimbabweans do not borrow — almost 58% of the adult population do not borrow.
The majority rely on informal sources of credit which catered for 30% of adult borrowings whilst formal credit accounted for only 13% of adult credit in 2014 (Finscope, 2014).
According to the Making Access Possible (MAP) Diagnostic Review conducted in 2015, noted that the actual usage of banking products and services declined in Zimbabwe.
This was reflected by the increase in the proportion of dormant accounts of deposits from 4% in 2011 to 25% in 2014 as well as from 3% in 2011 to 23% in 2014 of withdrawals. The proportion of active accounts declined from 25% in 2011 to 9% in 2014 in deposits and from 32% in 2011 to 14% in 2014 in withdrawals.
FinMark (2011) also supported the fact that financial exclusion is high in Zimbabwe which stands at 40%, excluding the percentage of those who are informally served which stands at 41%. The percentage of those who are financially excluded use neither formal nor informal financial services to manage their finances. If the informal sector is disregarded the percentage of financial exclusion in Zimbabwe would reach a peak of 81%.
This high figure by FinMark also goes hand in glove with the high figure shown by the Reserve Bank of Zimbabwe reports on financial exclusion which stands at 70% of the population. In order to bring back the bread basket status in Zimbabwe, policies, strategies and methods should be put in place in order to equip farmers financially so that productivity in Agriculture improve.
Let’s hope the $100 million British bail out will also find its way to agriculture.