Clemence Machadu Insight
In the village courts, mambo usually fines those who have been found guilty of various offences in the currency of cattle, goats or chickens, depending on the nature of the crime.Howdy folks!
A Danish proverb says that if a beard were all, the goat would be the winner.
The goat has been winning attention lately, following the unfolding of two events.
First it was the discussion of the Movable Property Security Bill which seeks to provide for movable property to be used as security for the purpose of obtaining loans.
In that discussion, Finance and Economic Development Minister Patrick Chinamasa hinted that different movable assets, including livestock,would be considered as collateral.
His Primary and Secondary Education counterpart, Dr Lazarus Dokora, was also widely misquoted following his pronouncement that parents could sell their livestock to raise school fees.
Now, the goat has congested the social media with almost every smartphone having traded a few goat memes.
“Ndokumbirawo kuvhunza, ndikaendesa mbudzi kunobhadhara fees ikabereka, next term ndinobhadhara futi here?” goes one of the many memes.
But a closer look will show that livestock have been playing the role of de facto currency since time immemorial in Zimbabwe, especially in the countryside where more than 70 percent of the population resides.
Most folk there survive on subsistence agriculture and use their produce for barter trade.
In the village courts, mambo usually fines those who have been found guilty of various offences in the currency of cattle, goats or chickens, depending on the nature of the crime.
It is only in our modern courts that restitution normally happens in money.
Again, when paying lobola, one is normally given the option of paying danga either in cash or cattle.
All this point to the fact that livestock plays some primary functions of money in some enclaves of our economy: from acting as a medium of exchange, to being a store of value and a standard for deferred payments.
That doing barter trade is a sign of primitiveness is in itself a lack of proper comprehension of how modern economies actually work.
You see, even big formal companies are still doing barter trade in this country; it’s not a rural phenomenon.
As a case in point, a newspaper company can get free flight tickets from an airline in exchange for free advertising space for that airline.
Most corporate organisations are doing related bartering arrangements to get goods or services they require.
Livestock can actually be a good investment compared to holding cash. Consider an individual living in the city with US$1 000 in his bank account when inflation is rising like it is currently doing.
How much return will she get at the end of the year?
Compare with someone in the village who decides to buy 50 goats with the US$1 000 and how many more goats he will be holding at the end of the year, given the abundant pastures.
Who will be richer there?
Folks, we are an agro-based economy and our biological assets should play a big role in unlocking value that steers the economy. Government is not reinventing the wheel in its intention to use movable assets such as livestock as collateral when obtaining loans.
It is only putting a proper legal infrastructure to allow for smooth operations and foster discipline, so that even banks can be encouraged to see it worthwhile to consider cattle as collateral and start lending more.
TN Bank, now Steward Bank, used to run a cattle bank a few years ago, although I am not sure about the current status.
A farmer would get a loan after depositing her cattle to the bank. The financial institution had paddocks across the country for fattening and breeding programmes. Given the abundant rains that we received, the TN model can work well as feeding costs are lowered by the abundant pastures we now have.
Local value chains and linkages can also be deepened by ensuring that by-products from sugar cane and sugar producers, for example, such as molasses and sugar cane upper tapes and leaves are utilised as feed by the cattle banks during low rainfall seasons.
In the Lowveld, Tongaat and other cattle fattening establishments there are already using such by-products for cattle fattening.
Bottom-line is, livestock banks are really not a new phenomenon that should be reduced into a billion jokes.
A number of banks across the Limpopo and some parts of the region actually accept livestock as collateral.
Banks such Absa, Standard Bank and First National Bank allow farmers to use cattle as collateral, instead of land, to secure loans to expand their herds or cater for production expenses.
What should only be ensured are safety issues, by making sure that the livestock is healthy, vaccinated on time, and the law can also provide that only insured livestock is acceptable as collateral.
There also has to be a concrete way to track and prove inventory, to avoid people fraudulently using a similar herd or cattle that does not belong to them as collateral to obtain multiple loans. Technology such as biometric identifiers can therefore be considered. If livestock was such a joke, we wouldn’t be having the accounting discipline actually coming up with standards on how to treat biological assets in the books of accounts.
International Accounting Standard 41 actually provides for a comprehensive framework on how to treat live plants or animals as assets. We have local companies such as Padenga Holdings with millions worth of biological assets as part of the balance sheets.
And they can actually borrow loans based on the strength of the net assets of such balance sheets, of course among other factors that banks may also consider.
Folks, it is good to come up with strategies that are inspired by the nature of our economy, as opposed to the cut-and-paste ones lying at the back of the heads of some people dismissing the idea of leveraging on livestock as a joke.
We are experiencing cash shortages and government should be acknowledged for actually remaining disciplined about it and rather choosing to find genuine solutions to dealing with the challenges such as financial exclusion and liquidity crunch.
Barclays Bank chief executive Mr George Guvamatanga once made a “controversial” remark about the liquidity situation in the country that I, however, agree with.
He said the late payment of civil servants’ salaries (that has been experienced from time to time) was a good thing. What’s good about that?
Guvamatanga explained that although it’s something not worth celebrating, it was a good thing in that it shows that Government was approaching the whole situation soberly and with discipline.
He said Government could easily add more zeros at the central bank to create money that is not there and pay civil servants. But Government is demonstrating discipline by not doing that dereliction, choosing to rather pay late when real money is there.
And by coming up with supportive strategies that seek to unlock more value and also encourage banks to lend, Government should be applauded for that.
You see, banks have been cutting down on lending, as can demonstrated by the falling loans-to-deposit ratio, and most banks have highlighted that they are now very cautious when it comes to lending as they seek to avoid loan defaults.
This is why the Movable Property Security Bill might result in more lending, if all banks’ concerns around the security of movable assets are addressed. I have mentioned a few in passing that relates to livestock in this essay. In closing, the goats must be crazy-mad at some of you folks; after witnessing your school fees being paid for you up to tertiary level through goat sales, you now think it’s funny to mock them like this.
This is the message I hear from the goats as I ride my horse back to tend my goats in the country.