By Vitalio Angula
WITH reference to the article titled, ‘Agribanks Dilemma, A farmer’s Conundrum’ published in the Confidente Newspaper of 7 June 2018 I hereby present counter arguments to the previous article which are inspired by an in-depth interview with the Chief Executive Officer of Agribank Mr. Sakaria Nghikembua.
Agribank as an institution has a mandate to advance money to persons for the promotion of agriculture and related activities through the provisions of the Agricultural Bank of Namibia Act, No. 5 of 2003. The banks mission is to ‘promote socio-economic development through affordable and innovative agricultural financing solutions’.
In order to fulfill this mandate and ensure that the bank executes its mission it is imperative that the bank runs a sustainable business model which requires it to manage its resources prudently for its current stakeholders and future clients. Such an approach includes but is not limited to managing the bank’s loan-book efficiently in order for it to be able to raise its own funds and not be reliant on government bail outs.
According to Nghikembua, Agribank did not receive any government subsidy for the year 2016 and in 2017 they only received N$ 30 million which can be attributed to the tough economic times the nation is facing which has seen government cut spending across all sectors. This makes it more important for the bank to be self-sustaining.
Agribank, in its mission to fulfill its primary and long-term objectives needs to be able to borrow money on the capital and money markets such as commercial banks, regional and continental lenders such as the African Development Bank where money is limited and interest rates are high depending on the risk. This risk is directly attached to the bank’s ability to collect debt owed by its clients. In a nutshell, Agribank’s ability to borrow in order to execute its mandate is judged on its ability to collect what is due to it.
Herein lays Agribank’s dilemma of being a developmental bank which is required to be self sustaining at the same time.
Acknowledging the possibilities
As a developmental bank, Agribank has made strides and significant gains by going into areas where commercial banks would not ordinarily venture into. A product that serves a niche which has been excluded for far too long is the no-collateral loan product for communal farmers which has allowed employed persons in the rural areas such as teachers, nurses, police officers, regional and constituency councilors etc to borrow from the bank against their pay slips. It has always been evident that these salaried employees could walk into any commercial bank and purchase a motor-vehicle or other assets which are financed through monthly deductions from their pay slips but when it came to accessing finance for their farming needs such as installing boreholes, mending fences, buying tractors and purchasing farming implements and inputs such as seeds and fertilizers no such financing products had been available. Agribank has been successful in identifying and subsequently serving this niche-market.
A holistic approach towards agricultural development
Modernising the agricultural sector in Namibia from basic production to value-addition is a formidable challenge which requires a level of commitment to which Agribank has committed itself. As the CEO of Agribank, Nghikembua would like to see a diversification of farming activities which are not limited to diversification within basic production only but extend into value-addition, such that products produced on farms in Namibia could be processed and packaged in Namibia and then be sold through retail stores in Namibia. This is the dream that Nghikembua envisions for the agricultural sector to spearhead development in terms of employment creation at all points in the value chain.
To paint a precise picture on farm management, diversification and striking a balance between livestock and agronomy/ horticulture within the agricultural sector a 3000 hectare farm in an area with good underground water such as Tsumeb is limited in output capacity if the farmer farms exclusively with cattle which is the traditional norm with most Namibians.
In this instance a farmer with slightly more than 300 head of cattle may be able to sell enough production on an annual basis to ensure a turnover of at least N$ 1 million. However if this same farmer were to reserve 70 hectares of this same land and diversify into horticulture production he has the potential of realizing a turnover of N$ 10 million, employing around 70 permanent workers and during the harvesting season approximately another 100 temporary workers can be employed per harvesting season.
A farm should not be regarded as a lifestyle asset
“A farm is an area of land that is devoted primarily to agricultural processes with the primary objective of producing food and other crops; it is the basic facility in food production”.
In the Namibian context it serves the purpose of feeding the country, supplying the market and serving the broader developmental agenda of the nation state.
In accordance with the above definition it is prudent that farming be undertaken in accordance with business principles.
As an institution, Agribank has a responsibility to safeguard the interests of all its stakeholders including its employees. It is somewhat disheartening for all those concerned be it the future farmers, the government at large and the population in general that there are a few privileged individuals within our society who are lucky enough to have acquired farms using Agribanks loan facilities that deem it as not of importance to commit to their loan repayments in accordance with their contractual obligations.
Agribank has made been rather lenient in dealing with its defaulters and has extended avenues whereby those in arrears can approach the bank to re-negotiate their payment plans.
This has been done because the bank does not want to take anyone’s farm away but would rather want to see its clients make a plan so that they can be successful, however its lenience can only go so far.
Farmers who are in arrears with the bank have been given an option to come into the bank and make affordable payment arrangements and it is in this light that Nghikembua would like to see them make use of the opportunity accorded to them. Staying away leaves the bank with no other option but to implement normal credit management processes such as listing debtors. Making a repayment plan does not mean the client simply gets what he/she demands or that an exception is made for him/her.
One of the reasons that farmers usually rely on in order to draw sympathy is the recurring drought which is a condition that Namibia as a semi-arid country has to contend with however the effect of drought on farming varies from one area to another.
Another bone of contention is that there are individuals who approach the bank and are successful in re-arranging their payment plans but then go and mislead others not to pay which is unfair and in bad spirit.
A cultural mind shift is needed and with regards to Agribank, the institution has resolved that they have an obligation to the state and the Namibian nation at large to fulfill its mission to ‘promote socio-economic development through affordable and innovative agricultural financing solutions’ for the long-term and this requires the bank to have a sustainable model that ensures self-sufficiency in the medium and long term to ensure that future generations also benefit from the bank.
Vitalio Angula is a Socio-Political commentator. The content of this article is drawn from an in-depth interview with the CEO of Agribank Mr. Sakaria Nghikembua
Confidente. Lifting the Lid. Copyright © 2015