Agribank needs N$500m annually to make impact
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09 November 2018
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Minister of Finance, Calle Schlettwein, recently appointed a new Board of Directors for Agribank. The, board, whose term runs from 1 September to 31 August 2021, is led by Michael Iyambo (MI), with Dagmar Honsbein as Deputy Chairperson.
Other members are Michael Humavindu, Phanuel Kaapama and Peyavali Hangula.
Iyambo is a successful commercial farmer, with a focus on horticulture. He has won numerous awards including Namibia Business Awards’ Award for Excellence (2011), Large Scale Horticulture Producer of the Year (2014) and Freshmark Supplier of the Year (2016).
He has served as Chairman of the National Horticultural Task Team, Vice Chairman of the Karst Area Horticultural Association, Vice Chairman of the Potatoes and Onions Producers Association and he recently was appointed Chairperson of the Namibia Agronomic Board.
This week, the Windhoek Observer’s Chamwe Kaira (CK) asked Iyambo about his appointment and whether the government will continue supporting Agribank.
CK: What is your mandate as Agribank’s new chairperson and what was the brief from the minister?
MI: As you know, Agribank is a Development Finance Institution (DFI), primarily focused on affordable financing of the agricultural sector in Namibia.
Its mandate is to assist the industry to produce more through access to financing as well as to add value to the basic produce so that we can create agro-processing industries, create jobs for citizens and improve agriculture’s contribution to the economy.
The brief is therefore clear – improve productivity and add value by creating value chains for agro-processing through affordable financing. Also ensure you turn-around the culture of poor repayment by clients.
CK: Your appointment comes just after the recent land conference, which was held in Windhoek. What role will the bank play in fulfilling some of the resolutions passed at the conference?
MI: We see an increasingly bigger role for the bank in land reform. In our definition, land reform involves both financing the acquisition of land by previously disadvantaged groups as well as assisting them with skills to bolster productivity. This is why more funding is needed to fund loans.
This funding needs to be relatively cheap for it to be affordable as not to place too heavy a burden on loan beneficiaries. The bank also needs grant funding, from the shareholder and other development partners, for purposes of expanding its training and mentorship reach.
We are positioning the bank, after the land conference, to play a bigger role in coordinating the skills available in the agricultural sector to train and mentor emerging farmers.
In addition, there are two government schemes that require review to better serve previously disadvantaged and resettled farmers. These are the Affirmative Action Loan Scheme (AALS) and the Post Settlement Support Fund (PSSF).
The first was established in 1992 while the second was launched in 2009. The environment has changed in the intervening period. For the AALS, specifically, the barriers to entry for new clients are now quite high, specifically because of farmland price increases over the years.
The beneficiaries are required to contribute 10 percent of the purchase price, which is high these days. As far as the PSSF is concerned, we think the qualifying amount and some of the qualifying criteria need revision.
The custodian of the AALS is the Ministry of Agriculture, Water and Forestry is while that of the PSSF is the Ministry of Land Reform. Agribank is simply an implementing agent.
The bank will play an active part in structures that will review these schemes to make them more impactful for land reform going forward. In short, the bank will play an active role in reviewing the two schemes, source more funding to fund acquisition and productive use of the land by previously disadvantaged Namibians, fund agro-processing and extend training and mentoring services to more emerging farmers to improve productivity.
CK: The bank has recently taken bold decisions, including repossessing farms from those in arrears. Is this a measure that the board and the government will support going forward?
MI: Yes, indeed. The shareholder and the board have been one on this matter; and remain so. The bank advances loans for clients to produce and repay their loans. If repayment is not happening, then there is no circular flow of funds back into the kitty to enable the bank to fulfil its mandate.
The bank has always preferred that clients make repayment arrangements if they are unable to honour their obligations on time. What has been happening for years is that some people used the fact that the bank is state-owned as an excuse not to pay back anything at all.
Such an approach severely limits the bank’s ability to serve its purpose. It excludes new beneficiaries because where does the bank get money from to keep lending? I am myself in commercial farming. I fully appreciate the challenges that come with farming, but I also know the opportunities and what is possible. With focus and honesty, clients can produce for the market and repay their loans.
If for some reason a client is not able to cover their annual instalment fully, that can be discussed and catch-up arrangements can be made, but at least they would have paid something – not pay nothing for years. When continuous non-payment happens, the bank must act to recoup the loans made.
CK: What are some of the challenges facing Agribank at the moment and how do you hope to resolve them?
MI: A high level of arrears is one. To resolve this, we have started the process of changing the non-payment culture with actions to collect. Of course it will take time to normalise this situation given the amounts involved, but we will get there over the next few years.
The diminishing levels of funding from the shareholder are another. We are constantly engaging the shareholder on this. Of course we know that the shareholder’s fiscal position is also tight at the moment, but we are hoping that with renewed focus on land reform, national expenditure will be reprioritised to give effect to the resolutions of the land conference.
CK: The CEO said at the land conference that the bank requires consistent funding at sufficient levels from the shareholder and strategic partners. What are the required funding levels?
MI: Our assessment indicates that the bank requires a minimum of N$500 million annually over the next five years to make the desired land reform impact. After that, funding levels can reduce to N$300 million annually to be supplemented by the bank’s own cash-flows. We think these levels will help the bank make the necessary impact in land reform while meeting the demand in the market.
CK:  What are some of the challenges facing the agriculture industry at the moment and what can be done to resolve them?
MI: Climate change is real for the world. This will remain a challenge for agriculture. What farmers need to do is adopt climate resilient methods. They must diversify their activities on the farm so that they can make an income from different activities such as wood, charcoal, crops and livestock.
They must also try to increase the carrying capacity of the land through bush control. Farmers need to practise good rangeland management. The industry is also largely focused on primary production. The way to complement this is by developing value-addition capabilities. We need some pioneers in this space.
 
 
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