By Mbatjiua Ngavirue
WINDHOEK
No one can blame Affirmative Action farmers alone for the problems they face in repaying the loans on their farms, because Agribank itself bears a heavy responsibility.
In particular, Agribank’s inability to understand the word “guarantee” or its wilful misinterpretation of the word has had disastrous consequences for Namibia’s agricultural economy.
The most severely affected programmes are Agribank’s own Affirmative Action Loan Scheme (AALS) and the government’s Land Resettlement Programme.
The failure to interpret a simple word correctly has led to prices of farmland spiralling completely out of control.
Purchasing farmland has become almost unaffordable for genuine full-time farmers, as well as the government. Ordinary farmers can now almost forget about buying a farm.
Buying a farm has become the exclusive preserve of part-time farmers such as wealthy lawyers, doctors, dentists, top government officials and executives in the public and private sector.
Although the Ministry of Lands regularly complains it cannot buy land on a willing-seller/willing-buyer basis at reasonable prices, experts in the field argue that this is a monster largely created by Agribank.
The government designed the AALS scheme to rest on a few fundamental but important pillars.
These included an interest subsidy and a three-year grace period on interest and capital repayments for full-time farmers.
The third pillar was a 35% government guarantee on the purchase price of a farm bought by affirmative action buyers.
The subsidy component provided by government took the form of the difference in the interest rate the bank charged AA farmers and the long-term interest rate.
The original policy provided for full-time farmers to start repayments between Years 4-6 at an interest rate of 1,98% at a time when the long-term rate at the time might be 11% – meaning government subsidized 9,02%.
In Years 7-8 the rate charged to AA farmers would rise to 3,93%; 7,75% in Year 9, and top out at 9,5% in Year 10, with government again subsidizing the difference between those rates and the long-term-rate.
For more established and part-time farmers moving from communal areas, the bank charged an escalating rate – depending on whether the person earned non-farming income – of up to N$100 000, N$100 001-N$200 000, N$200 001-N$300 000 and N$300 001-N$400 000, and then those earning above N$400 000.
Ministers, chief executive officers at parastatals, executives in the private sector and other well-heeled blacks – who all presumably earn above N$300 001 – paid the top rate of 9,5% throughout the 25 years of their loan.
In the latest Credit Policy adopted by Agribank on May 10, 2007, the bank increased the top rate to 12,68%, which is pretty close to the rate charged by commercial banks.
The interest subsidy was, however, supposed to be the only monetary subsidy received by AA farmers from the government through Agribank.
The government intended the 35% guarantee to serve purely as security, within the strict meaning of the word. The idea was that it would serve as collateral in the event that an affirmative action borrower defaulted on his or her loan.
Only then, would the government step in and fork out 35% of the purchase price of the farm, thereby fulfilling its obligation as a guarantor.
Through a mysterious process that no one has yet been fully able to understand – and might never be able to fathom – a 35% guarantee suddenly became a 35% cash subsidy.
Worst of all, however, the government ended up not subsidizing affirmative action farmers but white sellers of farms, who reaped a massive cash bonanza.
Apart from misinterpreting the intent of the 35% government guarantee, Agribank also started another very damaging practice. The bank systematically set about to artificially boost its own valuations of farms beyond the production value of the land so that, using the 35% government subsidy, it became more feasible for AA farmers to buy a farm.
According to one farm agent, it is now virtually impossible to purchase a decent farm in the Omaheke region for less than N$600 a hectare, meaning a minimum price tag of N$3 000 000 for a 5 000-hectare farm.
An example of how this process worked in the early days of the AALS, is that the market value for a 5 000 hectare farm in the Omaheke region with a stocking rate of 1:8 would be say N$300 a hectare, with a total purchase price of N$1 500 000.
The valuation of Agribank, based on its productive value, might however only be N$120 a hectare, leaving a shortfall of N$180 a hectare, or N$900 000.
Someone at the bank then had the bright idea that if you interpret the 35% as a subsidy, the bank could then give the AA farmer 35% of N$300, or N$105 towards the purchase price.
The N$120 a hectare valuation plus another N$105 a hectare still, however, left a shortfall of N$75 a hectare.
An own-contribution of N$75 a hectare for a 5 000-hectare farm meant the prospective buyers still had to dig into their pockets to find N$375 000.
Producing such a large sum of cash was invariably way beyond the means of the majority of AA buyers.
Agribank now had to think up another way to make the AALS scheme workable somehow.
With a little imagination they came up with a relatively simple solution to the problem – simply double the bank’s farm valuations, whether they reflected a farm’s productive value or not.
If the bank increased the valuation for the same farm from N$120 to N$240 per hectare, the white farmer could then increase the selling price to N$400 a hectare.
This not only made the seller more amenable to a sale, but paradoxically also made it more feasible for an affirmative action buyer to purchase a farm.
At a valuation of N$240 a hectare, the contrived government subsidy increased to N$140 per hectare, making for a total of N$380.
This left the affirmative action farmers with only a shortfall of N$20 a hectare, or the significantly lower amount of N$100 000 as own contribution.
Through this type of financial flimflam and smoke-and-mirrors, it suddenly became more feasible for an AA farmer to buy a farm of N$2 000 000 than a farm of N$1 500 000.
What no one seemed to consider was that they were at the same time making it virtually impossible for AALS farm-buyers to ever repay their loans.
Cynics have pointed out that at the time, Permain Erlank headed the bank as Managing Director, with Frikkie Mouton as an Executive Director.
The allegation is that both knew perfectly well who they were empowering – and they were certainly not affirmative action farmers.
Approached for comment yesterday, Agribank CEO Ambassador Leonard Ipumbu, said he could not comment at such short notice without knowing specific details of the allegations made.
Ipumbu said his door is always open to the media but, if he does not agree with the contents of the article, he reserves the right to respond.