he government through Reserve Bank of Zimbabwe (RBZ) has responded positively towards giant sugar producer Tongaat Hulett Zimbabwe’s (THZ) and made an about turn to exonerate sugarcane farmers after the latter’s decision to announce suspension of advance payments to sugarcane farmers for the 2022-23 farming season.
The company argued that the credits they used to offer farmers are financed through loaning systems from financial institutions and thus the pronouncement by President Emmerson Mnangagwa to suspend banks from giving credit facilities to both the public and private sectors.
Last week president Emerson Mnangagwa said his government was putting in place measures to restore macro-economic stability, boost confidence in the economy, increase the appeal of the local currency, preserve value for depositors and investors and deal with market indiscipline.
Among an array of measures to regain confidence, President Mnangagwa also introduced the suspension of lending by banks aimed at minimizing the creation of broad money that is prone to abuse for purposes of manipulating the exchange rate for financial gains and to allow current investigations, lending by banks to both the Government and the private sector until further notice.
In response to these measures, Tongaat Hulett Zimbabwe (THZ) which is the country’s sole sugar producer took heed of the government policy and suspended advance payments to farmers for the 2022/23 season, which was going to bring the sugarcane industry to its knees.
THZ Chief Operating Officer James Bowmaker wrote to farmers on May 12, 2022, informing them that they have suspended the advance system following government directives of suspending loaning systems.
“It is with regret that the millers advise of the immediate suspension of advance payments until further notice. We normally fund the advances from loan proceeds that we access from the banks. Following the recent suspension of lending by banks, we find ourselves unable to continue offering advances,” wrote Bowmaker.
Having noticed that they had created an economic turmoil, the RBZ wrote on its twitter account, on the 12th of May 12, at around 22:32 hours, notifying that the recent suspension does not apply to marketable commodities.
“Suspension of lending facilities does not apply to marketable commodities such as tobacco, cotton, sugar, maize etc. all banks have been advised accordingly,” wrote RBZ.
Over the years, THZ was paying farmers in advance way before their sugar was sold, so the company financed this programme through loaning system, while most farmers were growing their sugarcane through loans from banks, which implies that government policy of banning loaning system had brought the country’s sugar production to its knees.
As a follow up to implement President’s directive, Reserve Bank of Zimbabwe’s (RBZ) Director, Bank Supervision, P.T Madamombe wrote to all banks on May 9, 2022 on the new measures to restore confidence, preserve value and restore macroeconomic stability to be put in place with immediate effect.
The indefinite decision by government to suspend lending by financial institutions has been labeled ‘disastrous’ to an already ailing economy and likely to deal a heavy blow to the banking sector.
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