Land reform programme: The curse of dead capital

WHEN Zimbabwe embarked on the chaotic land reform programme that resulted in white commercial farmers losing large tracts of land to indigenous people, little did architects of the populist exercise know that the transfer of ownership of farms would ruin the economy and become mired in serious complications for such a long time.

Agriculture, formerly the mainstay of the economy, plunged into an abyss and dragged down the economy. Jobs were lost as President Robert Mugabe’s supporters displaced the minority white population and became multiple farm owners without production.

After years of haggling over the intrinsic value of the land, which is now effectively nationalised, there seems to be a meeting of minds between financial institutions on one hand and the government on the other.

While this on paper appears to be a major milestone, analysts say it is too late to pop the champagne bottle in anticipation of a turnaround in agriculture.

An estimated 7 000 farms or 11 million hectares of land were acquired during the programme.

The fast-track land reform programme heavily weighed down on the economy, costing the nation US$12 billion between 2000 and 2011, Commercial Farmers’ Union past president Deon Theron said in 2011.

So contentious was the issue of using land acquired by government as collateral security that the central bank would over the years change the tone of re-engagement from moral suasion to coercion. The authorities did this to ensure that the land reform programme would not be discredited as a Barmecide feast.

While the new development is expected to improve the agricultural output in the medium to long term, analysts say political and economic reforms are the main ingredients which could deliver a turnaround.

Wanton destruction of key infrastructure and high bank defaults by mainly politically exposed persons could be major stumbling blocks when banks demand collateral from new farmers.

Government figures show that Zimbabwe’s once vibrant agricultural sector now requires US$2,5 billion annually to produce enough for domestic consumption and exports. Total bank deposits, according to the Reserve Bank of Zimbabwe, stood at US$5,91 billion as at June this year.

Concerns raised by banks included uncertainty over security of tenure, repossession of land by the state as well as abrupt termination and cancellation of leases by government.

After several heated meetings with government, banks finally agreed that they would consider extending loans to farmers who own houses, sheds and mounted irrigation equipment. However, most farmers have offer letters and not 99-year leases.

Lands and Rural Settlements minister Douglas Mombeshora said A1 permits state that the land belongs to the farmer, while the 99-year lease states that land is being leased to the farmer for 99 years and is renewable.

The country has to deal with its toxic politics and attendant policies in order to attract investment at the farms as well as conclude the land reform programme which is still ongoing after almost 16 years.

Damaging policies such as indigenisation which compels all foreign-owned companies to relinquish majority shareholding to Zimbabweans has also driven away investors.

Zimbabwe, which used to be a net exporter of grain, is now depending on imports from neighbouring South Africa, Zambia and Malawi as well as Brazil to feed its 14 million citizens.

The country requires nearly 1,5 million tonnes of maize each year and is currently importing 700 000 tonnes, which is almost half of its annual demand after the demise of the country’s agricultural system.

Economist Vince Musewe said while the resolution of the 99-year leases is commendable, local banks currently do not have the underwriting capacity to meet budgetary requirements for agriculture.

“That would be a positive development for the economy. However, the country does not have adequate financial resources given the country risk and lack of access to new capital,” he said.

“Until that is addressed through a political solution which brings stability and predictability in policy, the agricultural sector will not perform at its full potential.”

Zimbabwe is currently facing one of its worst economic crises since ditching the local currency for a basket of multi-currencies dominated by the United States dollar.

The Bankers’ Association of Zimbabwe (Baz) in a statement said banks will only offer loans that do not exceed the forced sale value of collateral to protect both borrowers and lenders.

“As banks we have agreed that for farmers to get loans, they must have stable and assured stay on the land for as long as the farmer is productive and has access to assured and stable markets for produce,” Baz said in a statement recently.

Bulawayo-based commentator Dumisani Nkomo said the country needs broader economic reforms that encourage investment and production in agriculture and the real sector.

“It is a good move for as long as the land goes to deserving and able people,” Nkomo said.

Another economist John Robertson said it is too early to celebrate the turnaround of agriculture following the conclusion of negotiations on 99-year leases due to the current state of the sector.

“It is too soon to measure if the move signals a turnaround in the agricultural sector, we are getting into another year (2017) of food shortages and we will have to import because the inputs as well as fertilizers came late, therefore there are chances that command agriculture will not be successful,” he said.

Robertson also said it is time government put an end to the land invasions as it continues to erode investor confidence.

“It is indeed high time for the land invasions to stop. At those farms, employment was created and tax was contributed but all that is lost when land is grabbed. We have lost many farmers who specialised in cotton, citrus fruit, flowers, soya and many other crops which contributed to our economy,” he added.