John Deere tractor deal is meant to modernise Zimbabwe’s farms, but can small farmers afford the terms?

(pic: Chris Scott)

By Tendai Marima

Dozens of green and yellow tractors, along with eight combine harvesters and other pieces of agricultural equipment were delivered to Zimbabwe in April as part of an audacious attempt to mechanise and modernise a farming industry currently reckoned to have a shortage of over 30,000 tractors.

The delivery was part of a deal with John Deere, the world’s largest manufacturer of agricultural equipment. Under a US$51m facility Zimbabwe will eventually receive 1300 tractors, 80 combine harvesters and many other pieces of vital agricultural equipment, which will be offered to farmers under a new model for equipment sourcing.

Since the fast-track land reform programme in the 2000s, government efforts to mechanise agriculture have been characterised by financial challenges, corruption and limited repayment of loans.

The deal, facilitated by local distributor AFGRI, which will initially train government staff and regional engineers on the equipment, is intended to benefit up to 5,000 farmers via loan arrangements with local banks which require a 20% down payment and repayment over three to five years with a low interest rate of up to 8%.

[Click to read: Cabinet nod for Zimbabwe’s US$51m John Deere farm equipment deal]

Zimbabwe previously signed mechanisation deals with manufacturers in Brazil, Belarus, China and India, which exported farming machinery at subsidised prices. With the Zimbabwean government as guarantor, equipment was bought through concessional loans that sought to promote South-South cooperation. However, forex shortages stalled plans announced in 2018 to establish a machinery assembly plant by India’s Mahindra.

In an attempt to learn from those failures, which were usually managed by a wholly state-owned asset finance company, the responsibility for assessing creditworthiness and loans issuance for the John Deere equipment will be with two local and one foreign-owned bank in the hope of improving repayment transparency and efficiency.

Pres. Mnangagwa on a new John Deere tractor with the company’s Zim rep, Graham Smith, June 2020

According to the UN’s Food and Agriculture Organisation, Africa has less than two tractors per 1,000 hectares of cropland compared to 10 tractors per 1,000 hectares in South Asia and Latin America.

Under the African Union’s 2014 Malabo Declaration, African Union member states explicitly committed themselves to making investments in “suitable, reliable, and affordable mechanisation and energy supplies” in order to double productivity by 2025.

Zimbabwe’s agricultural sector performance has been severely hampered by a lack of agricultural inputs and finance, high input costs, and recurrent droughts, and experts say that mechanisation will improve yields, land management, the quality of produce and boost employment.

While some farmers see the facility as a milestone for Zimbabwe’s agricultural recovery and development after two decades of policy drift, others remain pessimistic as the country endures its worst economic crisis in a decade.

“If you want to run a tractor, you first think twice”

Paul Zakariya, head of the Zimbabwe Farmers Union, says that spiralling annual inflation of over 730% has left many farmers financially incapacitated, leaving John Deere equipment “way out of the reach of many farmers” even with generous loan terms.

“Input prices are increasing at a rate that has never been seen before, and with that it leaves a category of farmers with decisions to downsize or not to grow anything at all. It’s not only the inputs, but it’s also the fuels. There are availability issues and the price is also going up, so if you want to run a tractor you need to think twice; how many hectares am I going to do, what is within my means? These are some of the challenges farmers are facing,” he says.

John Deere’s stand at the ADMA AgriShow, held in 2019, was a major draw

What smallholder farmers need

Toendepi Shonhe, a researcher with Agricultural Policy Research in Africa, says that the “tractorisation” of agriculture has largely focused on middle-scale farmers, but the needs of smallholder farmers are different. With limited collateral security to support a tractor loan application and a high cost of borrowing, smallholders have to resort to finding cheaper alternatives like seasonal tractor loans.

Shonhe argues that high-powered tractors are not the only solution to improved productivity for this class of farmer.

“I think there is a need to combine tractorisation and irrigation, and if you do that you will then be able to address problems like water supply and to infuse two-wheel tractors that are able to till smaller lands that are available and affordable to many smallholder farmers,” he says.

Nelson Mudzingwa, an agronomist and resettled farmer who lives on an apportioned 10-hectare farm that was previously part of a 2,000 hectare cattle ranch in Mashava, says farmers in his community would benefit from shared equipment if the financial terms were affordable. One tractor and a combine harvester could support over 400 farmers living in the Shashi block of farms, he says.

“We have a good irrigation system, because the boreholes weren’t destroyed when we occupied this ranch in 2000, but the community here could use one tractor and a combine harvester that we could share on a rotation basis,” he explains. “Most of the work we do is with our hands, but a communal tractor, although it would be expensive, would really help cut the costs of extra labour.

A harvester for those who are starting to grow wheat might be a good investment, but finding the money is the challenge.”

More support needed

Agriculture is the bedrock of Zimbabwe’s livelihood with more than 70% of the population of 14.4m directly or indirectly dependent on the sector. With the country under a coronavirus lockdown for more than three months, farmers face challenges in transporting produce to market arising from a curfew, restrictions on public gatherings and travel.

With some open-air markets closed in Zimbabwe’s main cities, Harare and Bulawayo vegetable sellers have resorted to selling produce from car boots while fruit and vegetable delivery services have grown as a new avenue for sale.

Zakariya says the Covid-19 virus has highlighted the inadequacies of the current farming system.

“Coronavirus has just exposed a lot of gaps in our production and marketing systems… running our operations as strictly business entities will require a total mindset shift,” he says.

Even with a farming community used to hasty improvisation and tough economic conditions, Zimbabwe requires agricultural policies that can deliver a sustainable recovery from the lasting shocks of the land reform programme. While mechanisation facilities offer hope for some farmers, further financial support from government and banks to enable the sustainable sourcing and maintenance of equipment will be essential if John Deere’s machines are to have an optimal impact and boost national productivity.

__

African Business

LEAVE A REPLY

Please enter your comment!
Please enter your name here