WINDHOEK – The Agricultural Bank of Namibia’s Affirmative Action Loan Scheme (AALS) is said to have been used as a gateway for many farmers to purchase agricultural land, which is thought to have contributed to the high price of farmland.
A report on the study of agricultural land prices in Namibia states that Agribank indicated that farm prices had spiralled out of control mainly because its loan scheme granted affirmative action farmers access to large amounts of money. It further allowed farmers to apply for excess amounts exceeding the value of the farms they bought, leading farmers to pocket the surplus.
The report was released on Monday by the Minster of Lands and Resettlement, Alphues !Naruseb, together with Food and Agricultural Organisation (FAO) representative, Babagana Ahmadu, who assisted with the study.
“A big error has exited with a wrong formula used to calculate the loans for buying commercial farms, which neither the government nor Agribank picked up. This formula is believed to have pushed up the price of farmland as it granted affirmative action farmers huge loans,” states the report.
It is alleged an error also arose because “35 percent of security guarantee added to the estimated value of farms made it impossible for new farm owners to repay the loans as the total amount loaned was higher than the income expected to be generated to be paid back.
“The total amount of loans was determined by evaluating the carrying capacity of the farm, which in turn determined the potential stock value to be accommodated on a particular farm and the profit to be achieved.”
This resulted in the Agribank board referring back some AALS applicants in 2005 to renegotiate the prices of farms, resulting in some getting farm prices reduced by 10 percent because government had withdrawn its 35 percent guarantee on all AALS loans and prospective beneficiaries were then expected to produce 10 percent of the purchase price to qualify for the scheme, elaborated the report.
It continued that Agribank found that the AALS had neither been sustainable or affordable to a significant number of purchasers because the loan amounts far exceeded the respective production values.
The report further found that the interest subsidy, which had been enjoyed by the AALS buyers, had particularly increased the demand for land and hence drove up the price.