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Collateral-free farming loans set the stage for significant growth in agricultural output

Agribank is not the first local financial institution to develop a collateral-free loan scheme but it is certainly the first to do so exclusively for part-time farmers.

In my view, the product is unique in the sense that it is tied to full-time employment.

Initiatives such as this are commendable. It is perhaps the only relatively safe in-between step for the bank to exercise its mandate, and to mitigate loan risks at the same time.

One of the agricultural bank’s main problems, is defaults. When the bank started its ambitious Affirmative Action loan scheme more than 15 years ago, it was punted as the final solution to all our land problems and disputes. The intention was that two back to back, four-year amortisation holidays would enable most farmers to get on their feet.

In the meantime reality has manifested itself in a myriad of Affirmative Action loans that went sour, to the point where the bank now leases back farms to its former white owners just so that the interest on the Agribank loans can be serviced. If it were not for this intervention, Affirmative Action would have bankrupted the bank.

The bank’s new collateral-free product may still turn out to be its saving grace. It rests on a very solid principle namely a steady income for the loan recipient decreases the risk of default. Technically speaking, the loan is not collateral-free since the condition of full-time employment, doubles as the deemed collateral.

It is also an encouraging sign that the bank’s new generation of loan schemes automatically include such standard features as life insurance on the life of the debtor. Although this is standard practice in conventional lending, I believe it is vital for this also to be part and parcel of agricultural lending.

The only feature I found lacking, is a type of insurance against unemployment. For instance, this could easily have been arranged with the Social Security Commission, where debtors for a small fee, can take out unemployment insurance, even if only for a limited period, to cover the Agribank loan when the debtor is either temporarily unemployed or between jobs.

Although the bank was not keen on making it explicit that full-time employment is a condition to get one of these loans, the fact that a salary deduction must be signed by the employer, implies that it is only for part-time farmers with full-time employment. However, I do not find this an impediment, instead it is one of the features that makes it a feasible scheme.

A long time ago, when there was much debate around the effectiveness of the Affirmative Action loan scheme, I was told by a then Agribank official that their most dependable clients are all people with full-time jobs. The definition of what exactly is a bona fide full-time farmers, was then also part of the often heated differences in opinion on who exactly qualified for an Agribank loan and who not.

I think we should not let traditional views block our progress on steady land reform, and on improving agricultural output in communal areas. If a man or women is a competent farmer, but the operation is too small to carry a conventional loan, let he or she take up a permanent job and only farm part-time, especially if some funding will help to bring that farm to higher production and output.

In a sense, a loan scheme for what bona fide farmers will derogatively call, “hobby farmers”, is essential to help them cross that bridge from small, informal farmer, to big commercial farmer. In the end it is about empowerment and agricultural output, not about personal labels.

A loan scheme for a part-time, small scale communal farmer, is also a form of creating a remittance channel where previously there was none. Communal farming communities typically have much surplus labour in the family and in the clan. It is therefore, in my mind, irrelevant who actually tends the cattle or the fields. As long as there is a breadwinner in the family who also has access to funding, it improves the prospects for the entire family, and by implication for whole villages.

Agribank’s no-collateral loan product is an ideal mechanism to channel capital to the communal farmers without exposing the bank to undue or unmanageable risks. And if such a small scale farmer proves him or herself capable of managing both the full-time job and the farming operation, then that person will be the ideal candidate to later qualify for a conventional farm loan, exit the communal area, and take up his or her rightful place in the commercial farming sector, without defaulting.

I hope the central government this time supports Agribank with capitalisation and liquidity. The collateral-free route, based on employment, is in my view the correct way to approach agricultural lending for individuals who do not have access to conventional funding channels.

In a roundabout way, it is the beginning of a systematic, practical approach to address many ancillary issues like food security, rural poverty, productivity and community development.

About The Author

Daniel Steinmann

Brief CV of Daniel Steinmann. Born 24 February 1961, Johannesburg. Educated at the University of Pretoria: BA, BA(hons), BD. Postgraduate degrees are in Philosophy and Divinity. Editor of the Namibia Economist since 1991. Daniel Steinmann has steered the Economist as editor for the past 29 years. The Economist started as a monthly free-sheet, then moved to a weekly paper edition (1996 to 2016), and on 01 December 2016 to a daily digital newspaper at www.economist.com.na. It is the first Namibian newspaper to go fully digital. Daniel Steinmann is an authority on macro-economics having established a sound record of budget analysis, strategic planning and assessing the impact of policy formulation. For eight years, he hosted a weekly talk-show on NBC Radio, explaining complex economic concepts to a lay audience in a relaxed, conversational manner. He was a founding member of the Editors' Forum of Namibia. Over the years, he has mentored hundreds of journalism students as interns and as young professional jourlists. He regularly helps economics students, both graduate and post-graduate, to prepare for examinations and moderator reviews. He is the Namibian respondent for the World Economic Survey conducted every quarter for the Ifo Center for Business Cycle Analysis and Surveys at the University of Munich in Germany. He is frequently consulted by NGOs and international analysts on local economic trends and developments. Send comments to daniel@economist.com.na

Following reverse listing, public can now acquire shareholding in Paratus Namibia

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20 February 2020, Windhoek, Namibia: Paratus Namibia Holdings (PNH) was founded as Nimbus Infrastructure Limited (“Nimbus”), Namibia’s first Capital Pool Company listed on the Namibian Stock Exchange (“NSX”).

Although targeting an initial capital raising of N$300 million, Nimbus nonetheless managed to secure funding to the value of N$98 million through its CPC listing. With a mandate to invest in ICT infrastructure in sub-Sahara Africa, it concluded management agreements with financial partner Cirrus and technology partner, Paratus Telecommunications (Pty) Ltd (“Paratus Namibia”).

Paratus Namibia Managing Director, Andrew Hall

Its first investment was placed in Paratus Namibia, a fully licensed communications operator in Namibia under regulation of the Communications Regulatory Authority of Namibia (CRAN). Nimbus has since been able to increase its capital asset base to close to N$500 million over the past two years.

In order to streamline further investment and to avoid duplicating potential ICT projects in the market between Nimbus and Paratus Namibia, it was decided to consolidate the operations.

Publishing various circulars to shareholders, Nimbus took up a 100% shareholding stake in Paratus Namibia in 2019 and proceeded to apply to have its name changed to Paratus Namibia Holdings with a consolidated board structure to ensure streamlined operations between the capital holdings and the operational arm of the business.

This transaction was approved by the Competitions Commission as well as CRAN, following all the relevant regulatory approvals as well as the necessary requirements in terms of corporate governance structures.

Paratus Namibia has evolved as a fully comprehensive communications operator in Namibia and operates as the head office of the Paratus Group in Africa. Paratus has established a pan-African footprint with operations in six African countries, being: Angola, Botswana, Mozambique, Namibia, South Africa and Zambia.

The group has achieved many successes over the years of which more recently includes the building of the Trans-Kalahari Fibre (TKF) project, which connects from the West Africa Cable System (WACS) eastward through Namibia to Botswana and onward to Johannesburg. The TKF also extends northward through Zambia to connect to Dar es Salaam in Tanzania, which made Paratus the first operator to connect the west and east coast of Africa under one Autonomous System Number (ASN).

This means that Paratus is now “exporting” internet capacity to landlocked countries such as Zambia, Botswana, the DRC with more countries to be targeted, and through its extensive African network, Paratus is well-positioned to expand the network even further into emerging ICT territories.

PNH as a fully-listed entity on the NSX, is therefore now the 100% shareholder of Paratus Namibia thereby becoming a public company. PNH is ready to invest in the future of the ICT environment in Namibia. The public is therefore invited and welcome to acquire shares in Paratus Namibia Holdings by speaking to a local stockbroker registered with the NSX. The future is bright, and the opportunities are endless.