Turning farmers into businessmen

Compared with industry, agriculture has been something of a Cinderella sector for the Czech economy. But there are now moves to try and give it a more dynamic character and encourage farmers to process more of the goods they produce and boost local employment in the process.

Photo: archive of Radio Prague

One feature of the Czech borderlands are massive lorries loaded with the latest felled trees heading off towards Germany and Austria for processing. The timber is processed abroad and a few months later will likely make a return trip to the Czech Republic but this time as wood pellets, furniture, or other finished goods.

Czechs will have provided to raw material but the extra value and jobs resulted will have been created abroad. The same scenarios for wood is repeated for other products such as barley, corn, and oil seed rape. It’s little surprise then that agriculture as a whole contributes less than 3.0 to wealth creation in the country and employs around the same proportion of the workforce. And farms are rarely the dynamic hubs of local economic and community life that they are in other countries although a quarter of Czechs live in what might be described as rural communities.

It is a weakness that the Czech Ministry of Agriculture would like to remedy with the roll out of a much more ambitious programme of help for farmers which is aimed at encouraging them to process at least some of the raw materials they produce.

Vladimír Suchy is one of the top managers of the small state-controlled support and guarantee fund for farm and forest firms which the Ministry of Agriculture would like to be one of its main instruments for transforming farmers into processors and small businessmen. He explains the goals that have been set. “Up till now we have not supported processing in the farm sector. We now have a programme for that. Let’s say someone is producing smoked meats or something like that and wants to buy some new equipment. Hitherto they did not get any support but now they could be offered soft loans. They will not be given direct aid as such but we will help make the loans affordable.”

Photo: Jan Rosenauer

For example the aid could mean that a loan which would normally have an interest rate of five percent could be cut to around three percent. A similar programme will offer help for forestry companies to buy equipment as well. Another aspect would help those processing companies that employ the disabled.

Under a proposal advanced by the Ministry of Agriculture around 500 million crowns could be available for such help in the first year but the proposal still needs to be given the final green light from the Cabinet.

The support and guarantee fund itself has been up and running since 1993, providing loans for farmers to buy land, and providing cheaper insurance against harvest failures. To date around 150 billion crowns in soft loans have been paid out. The peak years of activity were between 1996 and 1999.

Those sort of figures should be put in the context of a Czech agricultural sector that was for many years in the early 1990s actually in contraction as private farmers struggled to emerge from the ashes of the old collectivized system. Money was tight and many land ownership issues were confused and up in the air. Six or seven years after the collapse of communism, production from the agricultural sector had shrunk to 70 percent of its size before that event and it is still trying to recoup some of those losses.