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The way forward for investment in Zimbabwe's farming sector
Commercial Farmers' Union
August 24, 2009

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This presentation was given by the CFU at the Zimbabwe Investment Appraisal Summit recently held at the Celebration Centre in Harare on 24 and 25 August 2009.

Introduction

This presentation contains recommendations on creating the right investment climate to promote substantial improvements in output of the main agricultural commodities produced in Zimbabwe. The downstream benefits will be much better food security for the population and enabling the sector to regain its former position as the number one contributor to overall exports and employer of labour once again.

As for all productive sectors, in agriculture certain conditions need to be in place before any meaningful investment will occur. The environment must be conducive to investment by farmers and industries and service providers associated with agriculture.

Of fundamental importance one must consider that very little investment is likely to take place in agriculture unless all the potential investors mentioned have confidence that the capital that they have expended in their respective businesses will be secure and will reward them with whatever returns they have envisaged from making the outlay. It is well known that whatever status our sector is in it has a tremendous impact on the rest of the economy because of the downstream links that exist. However in this presentation I will only be concentrating on investment as it affects farmers directly.

Two main prerequisites must exist to generate the confidence necessary to expend large sums of money in a farm business, whether the capital is raised by reinvestment of profits or borrowing. Firstly, a farmer must feel assured that the business will survive long enough and generate sufficient income to fully pay back the monies invested especially in long term capital investment. There must be an established legal framework in existence that meets international standards that guarantees respect of property rights. If long term security does not exist there is no point in undertaking the investment. In farming the principal factor of production is land and if there is no respect of security of tenure farmers will shy away from making permanent improvements to their properties. Credit providers will also not provide funds if farmers do not own assets with enough collateral value to cover loans.

The second requirement is that economic incentives are necessary and must be in place if farmers are to invest in increased production. If the outlook is that financial yields from certain farming operations are sufficiently rewarding over a long enough period they will be motivated into building up their businesses by expanding output of the commodities concerned. Again farmers require that the economic prospects in the medium to long term will be favourable if they are to gain sufficient confidence to make the necessary investments.

Matters concerning land reform and the productivity status of agriculture in Zimbabwe have been well publicized for several years and it is not my intention to dwell on past developments other than to mention that the overall contraction of agricultural output since 2001 by well over 50% for most of the major commodities presents considerable scope for recovery and growth. However, in turn achieving growth is dependent on the appropriate conditions to production expansion being in place, and these are discussed in the proposals that follow.

At this stage it is as well to summarise and state why new investment is so important for agriculture.

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