’99-year lease no guarantee for funding’

By Omega Ukama

FBC Holdings chief executive John Mushayavanhu says banks’ acceptance of 99-year leases as collateral does not serve as a guarantee of funding to the holders.

Mushayavanhu pointed out that 99-year leases are no guarantee for funding and farmers should take into account individual bank’s lending processes which consider other things apart from collateral security.

“It is very true that banks have agreed to accept 99-year leases as collateral security, what we must bear in mind is that banks have never lent money on the basis of security alone. As a standard requirement, farmers should have a viable business proposition and then security will come as additional insurance to the bank,” he said at an analyst briefing last week.

“So if you are a farmer and you bring a 99-year lease, as FBC Holdings, we will be able to assess your proposal by accepting that99-year lease as security, but that document is no guarantee that you will get financing from the bank,” Mushayavanhu said.

A 99-year lease is a legally binding agreement between the Lands and Rural Resettlement ministry on behalf of the government and the A2 model beneficiary or farmer in which the farmer agrees to lease a piece of land for an agreed rental for 99 years. The Lands ministry says “the 99-year lease agreement is issued to the land beneficiary as a form of long-term lease hold of tenure.”

The lease agreement first emerged in June 2004 when the then Land Reform minister John Nkomo announced that land was to be nationalised with the introduction of the 99-year lease.

The idea was to convert ownership to 99-year leases, which could be used as collateral for loans to develop land and the government envisaged that banks would treat the leases as title deeds. The lease agreement however, never stuck with bankers as collateral for loans.

Since 2004, government has been in a laborious back and forth with bankers for farmers to be able to get funding using the leases as one would use a title deed in the process of borrowing funds.

Last year, the government represented by the Lands ministry was involved in negotiations with the Bankers Association of Zimbabwe which finally resolved the issues around the leases that had been a subject of contention between the parties for more than 10 years. — The Financial Gazette