…Business models must continuously evolve to survive: Chitando

Ngoni Dapira

THE Agricultural Finance Company (AFC) Commercial Bank, formerly Agribank, is in advanced negotiations with the Industrial Development Corporation of Zimbabwe (IDCZ) to access cheap capital financing for agro-processing projects, Easterntimeszim has learnt.

In a side interview after the recently held 2021 Zimbabwe National Chamber of Commerce (ZNCC) Manicaland business awards held in Mutare where he was the guest of honour, AFC Commercial Bank managing director Ken Chitando said they are hoping to revive the country’s breadbasket status and revive agriculture as the mainstay of the economy by supporting new and ailing agro-processing projects so as to create jobs and turn around the economy.

ZNCC Manicaland and Chiredzi regional manageress, Ms Perpetual Guwila (left) and AFC Commercial Bank MD Ken Chitando at the 2021 ZNCC awards.

“We are still working on an MOU (Memorandum of Understanding) with IDCZ, but it looks fruitful as we will be able to get affordable, low-cost capital financing to help resuscitate our agriculture sector,” said Chitando, a reputable banker and former founding managing director of the National Building Society (NBS), who was appointed at AFC Commercial Bank this year in September.

President Emmerson Mnangagwa in April rebranded Agribank to AFC Holdings. AFC Holdings, which is 100 percent Government owned, has four subsidiaries namely, AFC Commercial Bank, AFC Insurance, AFC Land and Development Bank and AFC Leasing Company. The new institution is expected to provide funding across the whole agriculture value chain from communal to large-scale farmers. Agribank was established as a commercial bank in 1999, but before that it was known as Agricultural Finance Corporation (AFC), which was formerly known as the Land and Agricultural Bank — an institution established pre-independence in 1925.

The IDCZ’s role in the economy is to add value through industrial processes and capital formation (foreign direct investment) to create wealth, employment and industrial development in Zimbabwe. According to the IDBZ website, currently the IDBZ minimum loan amount is the equivalent of US$50 000 at the applicable auction rate and the maximum is US$600 000. “The loan tenure is currently 12 months for working capital and 24 months for capital expenditure. An interest rate of 35 percent per annum currently applies, with a once-off upfront administration charge of 2 percent of the loan amount. All of which are reviewable from time to time,” reads the loan limits and basic terms eligibility criteria on the website.

However, through the expected AFC and IDCZ partnership, Chitando says simplified banking and professional advice through its four subsidiaries will be given to its expected clientele, which comprises of communal farmers who are known not to be too techno savvy. During the rebranding launch in April, President Mnangagwa said the restructuring of Agribank into a Land Bank is meant to provide investment support for A1, A2 and small-scale commercial farmers that are in dire need of capitalization to improve on their output.

Chitando said supporting farmers with expertise and capital financing for quality output that meets market demands is their new thrust to revive the country’s agriculture sector.

“The Land and Development bank which is modeled along the lines of the former AFC (Agricultural Finance Corporation) is intended to take a more lenient approach to financing looking at it from a developmental point of view where we want to embrace the generality of our farmers such as the upcoming farmers, communal farmers and resettled farmers where we believe that they may not have the necessary skills, markets and funding. So some of the schemes will involve even identifying markets for them, for instance, we do value chain financing where we identify off takers and in the process assist farmers where they may be lacking in expertise, funding and markets,” said Chitando.

L-R: Manicaland Provincial Development Coordinator (PDC) Edgars Seenza, the Minister of State for Manicaland Provincial Affairs and Devolution Nokhuthula Matsikenyere and AFC Commercial Bank managing director Ken Chitando during the 2021 ZNCC Manicaland awards.

The 2021 ZNCC Manicaland awards theme was, “Managing Disruptive Change,” which Chitando said is indispensable for survival in the current Information Age era where information and technological changes continue to remap business processes and the way that products and services are delivered. He said business models must continually evolve to take into account new developments, new products and new delivery channels.

“Disruptive change is often unpredictable, with unpredictable implications on the market, current products or services. Until the advent of the cell phone, we all continued our mundane daily activities, blissfully, unaware of what would soon hit the market. Today, nearly 80 percent of the population in Zimbabwe has a handset and significant business is transacted on these gadgets,” he said.

The reputable banker added that having four subsidiaries now allows specialization and efficiency on service delivery as AFC Holdings.

“The Land Bank was not there as separate unit. What was there was Agribank which also focused on agriculture, but being a commercial bank there are regulatory requirements, so to give an explicit focus on the developmental finance requirements was becoming somewhat diluted hence the need to separate business units into standalone units that had distinct focus. For instance, a commercial bank that would focus on banking in general with a commercial orientation and the Land and Development bank focusing on agricultural development in line with NDS1 (National Development Strategy 1 [2020 -2025]) and President Mnangagwa’s vision of creating a middle income economy by 2030. Also making sure as a country we are self-sustaining in terms of our agriculture.”

Treasury injected ZW$700million into the firm after it rebranded in April. Chitando said $700 million has been a good start but it’s not necessarily sufficient to drive agriculture to the space where they want it to be. He added that there is however scope to enhance the capacity to fund and it is an ongoing process.