Seed Companies Facing A Financial Crisis Due To A Govt Debt Of Over US$60 Million

5 months agoFri, 22 Dec 2023 06:59:53 GMT
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Seed Companies Facing A Financial Crisis Due To A Govt Debt Of Over US$60 Million

The Zimbabwe Seed Association (ZAS) has revealed that 11 seed companies in the country are facing a financial crisis due to a debt of over US$60 million incurred by the government. The debt, which is related to seed supplied for the 2022/23 and 2023/24 agricultural seasons, has left these companies struggling to secure financial support from banks and investors.

The 11 seed producers are Arda, Easi Seeds, Farmbiz Genetics, Intaba Trading, Klein Karoo Seed Marketing, Prime Seeds/Seed Co Vegetables, Quton, Reapers, Seed Co, Tocek and Zimbabwe Technology Solutions. They all indicated that they are heavily borrowed and are failing to timely service the bank loans, NewsDay reported citing a ZSA memorandum dated December 18, 2023. Read the memo in part:

Some members have reported that they have defaulted on bank loans. Relationships with banks are now at their lowest level, seed companies cannot be trusted and hence are failing to access favourable credit facilities including the productive sector facility.

Those able to persuade banks for additional loan facilities are getting very high interest rates, which is very costly.

Companies have failed to access forex to timely import seed necessary to close supply gaps and this includes hybrid seed of sunflower and sorghums as well as parental seed which will help localised certified seed production.

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In the past few days, we submitted a request of US$15 528 334,58 from six ZSA members and so far, got no response.

The situation has been worsened by the imminent drought caused by the El Niño spell. The debt issue comes at a time when the government is also struggling to pay farmers in US dollars for wheat delivered to the Grain Marketing Board (GMB) after a successful winter cropping season.

According to a memo, the companies have been unable to import necessary seeds due to a lack of foreign currency, leading to supply gaps. The financial distress is unsustainable and could result in the closure of seed companies, jeopardising Zimbabwe’s national seed security.

The financial strain has also affected the growers, with many not receiving full payment for the seeds they delivered. Some growers are demanding payment in US dollars, similar to other sectors such as maize and wheat. ZAS has urged the government to expedite payments and consider paying part of the debt in foreign currency. They have also called for supportive financial programs and tax breaks to help the seed sector recover from the crisis.

Earlier this year, Zimbabwean seed producers highlighted that they were facing challenges such as high interest rates and limited access to funding. The current financial crisis further exacerbates these issues and threatens the stability of the seed sector in the country.

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