Govt depriving private sector with excessively borrowing from the local economy – CTPD

The Center for trade policy and Development Executive Director Isaac Mwaipopo has advised government to restructure the financial sector in a way that will attract venture capital investors.

And Mwaipopo has advised government not to limit the amount of money that farmers can redeem under the Farmers input suppot programme.

In an interviews, Mwaipopo observed that investors prefer to lend resources to government and not to small business enterprises because of security guarantees.

“The biggest problem we have is actually not the resources in terms of finance for small business enterprises to access, but I think it’s been an issue of how our economy has been structured, especially the financial sector. One of the things that we have observed over time is that most of the players within the financial sector have actually some kind of preference when it comes to business, and those preferences that we have seen have tilted towards lending resources to government. I’m sure you might also find yourself in that space. You may try to ask yourself why despite the fact that the Bank of Zambia has time and again been working around modalities of reducing the monetary policy rate, so as to ensure that there is enough liquidity in the economy, we continue to see a trend where most business enterprises still have big challenges in terms of accessing the resources,” Mwaipopo observed.

“If we are to actually get to a point where we deal with issues around creating job opportunities, if we are to deal with poverty, one of the things that we might first have to deal with is the financial architecture in terms of the way it is structured. There will be great need for government to commit to behave in a certain way. We need to create an environment where the financial players become more flexible and begin to have consideration for entrepreneurs, small holder farmers, and all those that got ambitions of projects that can eventually become bigger ventures that can create job opportunities.”

He observed that the government was excessively borrowing from the local economy.

“If we leave this situation unchecked, we are still going to experience a similar trends where on the other side you are working tirelessly to ensure that the policies that you are putting in place are policies that are targeted at small holder farmers but there is no trickle down effect, simply because what is happening now, there is a big competition between entrepreneurs, small businesses that want to get involved in the economical activities with the government. Government is excessively borrowing from the local economy, they are also borrowing from foreign markets and on face value, the banks will prefer to work with the government, to lend money to government, they are more guaranteed that if government fails to pay back they can surrender assets. So there is more that needs to be done especially on government’s side to ensure that at least, there is a trickled down effect when it comes to trying to improve the environment in which our business players operate,” Mwaipopo said.

And Mwaipopo has advised government not to limit the amount of money farmers can redeem under the Farmers input suppot programme.

“If you look at the financing structures, there is actually limited resources that go to small holder players that are in the agricultural sector. It’s like the agricultural sector is treated more of a risky business where guarantee of returns is not there. But if you look at countries like China that have made progress, one of the things they have is that they actually have specific institutions, institutions that are targeting at lending to business men and women that want to venture into the construction sector. We have got institutions or banks that have specific targets to support men and women that are interested in the agricultural sector, but the lack of specialization and consideration of these other sectors makes us to lag behind,” he saida

“And even when you look at statistics wise, one of the things you find is the despite the fact that you have sectors like the mining which is attracting a lot of Foreign Direct Investment, in terms of employment creation we still find that sectors which are not attracting a lot of FDI like the agricultural sector, are actually posting a lot more numbers. So there would be need for deliberate efforts of putting in place measures that ensure that there is improved access to finances in the Agricultural sector.”

Mwaipopo advised government not to limit the amount of money that farmers can redeem under the input support programme.

“Even the state led programme, the Farmers input support programme, which is being implemented under the innovated e-voucher, there has been serious problems in terms government ensuring that they honour the part of their deal in terms of disposing resources. But not only that, you find that when the farming season started, at some point they even put a ban indicating that beyond this point you cant access the finance. But if you are interested in ensuring that there is diversification, that fund should be open throughout the year and people can be able to do various other things. If they missed the season for growing maize they can go on and use that money to redeem feed and probably rear chickens as they wait for the other season. By the time it’s coming, they will have enough to contribute towards the scheme but they will also have some resources to purchase other things. That way, they would have achieved some level of diversification.”

         

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