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December 09, 2008

Lack of credit hampers Mozambican agriculture

Almost no Mozambican farmers producing food crops have access to credit, according to Fernando Songane, coordinator of the government's National Agricultural Development Programme (PROAGRI).

Addressing a Maputo workshop on "Overcoming the Challenges of Agriculture in Africa," Songane said that, apart from a few vegetable producers, "we can say that no producer of food crops - such as maize or cassava - is able to obtain credit."

About 70 per cent of the Mozambican population lives in the countryside, the great majority of them scratching out a living as subsistence peasant farmers. They live entirely outside the orthodox financial system.

Songane said that agricultural credit in Mozambique is available to just five per cent of the producers, and only for cash crops such as cotton and tobacco. Much of this credit is supplied by the companies that market the crops, and is provided in kind rather than cash. Thus cotton producers receive seed and other inputs from the companies, and the money they owe is deducted when they sell their crop to the companies after the harvest.

But the food producers received nothing at all, said Songane, not even credit in kind.

But that may be about to change. He said that during the present agricultural campaign, launched officially in October, some producers will receive credit - but mostly from the government, rather than from commercial banks.

This will take the form of the government providing oxen for animal traction, or even tractors, and other inputs, at a subsidized price. The producers will repay this credit over a lengthy period.

Tractors have been acquired by the Ministry of Agriculture, and are being handled by the Agriculture Promotion Fund through a credit system. Each tractor (complete with plough and trailer) costs 1.5 million meticais (about 61,500 US dollars). The beneficiaries must make a down payment of five per cent of the cost of the tractor, plus the insurance, and then have five years to pay off the rest.

This form of credit is among the activities in the National Food Production Action Plan, approved by the government in June, and intended to reduce drastically the country's dependence on imported foodstuffs. The government hopes, for example, that within three years it can eliminate imports of rice.

The workshop also heard Mark Cackler, of the World Bank's Department of Agriculture and Rural Development, warn that African counties are grossly under-investing in agriculture. The African Union summit in Maputo in 2003 agreed that governments should spend 10 per cent of their budgets on agriculture. Cackler said that African governments are not living up to this promise, and so far are, on average, only spending four per cent of their budgets on agriculture.

"Poor countries spend little on agriculture, and when they do spend it's in the wrong way", he said.

The major challenge these countries face, he said, is that of increasing productivity, particularly of small producers, and using this as a means of reducing the disparities in development between urban and rural areas.

Mozambican Agriculture Soares Nhaca admitted that currently Mozambique only spends six per cent of its budget on agriculture, but said this figure will rise to eight per cent in 2009.

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