PROPERTY- Property rights key to economic recovery

By John Robertson

IN spite of the extremely worrying recent events in Zimbabwe, the country still has a well-educated population and good infrastructure, so we can safely say that we have good prospects of r

ecovering fairly quickly once we make a start.

As government itself has begun to suffer the consequences of its own financial policies and is running out of resources like the rest of us, we might suddenly have reached the point when a start can be made. The most promising sign is that we no longer see government and the business sector arguing about whether we have a problem.

The Reserve Bank’s recent acceptance of the need for exchange rate and interest rate changes suggests that economic developments could soon be on a much more sustainable path. But to make these early signs more persuasive, we will have to succeed in recovering the country’s former good standing in the international arena.

To achieve that, our behaviour will have to change. We will have to show all investors that their productive assets will not be nationalised and we will need to make offers of genuine compensation or reinstatement to those who have had property taken already.

Considering where it would be coming from, such requirements might seem a tall order. However, if government were to formally accept then, they would completely change our international complexion and they would yield immediate dividends. The leverage of small steps taken in the right direction would produce very large, responses from international bodies and donor countries, and if we followed through with actions that proved we intended to honour our commitments, we would soon see better inflows of investors and tourists.

Although the recovery of Zimbabwe’s full potential would be achieved only by getting experienced commercial farmers back onto the land and giving them time to restore the flows of export revenues, their return would generate the promise of better foreign earnings that would, in turn, help us to recover a reasonable credit rating. With improving access to credit, a faster recovery would be enjoyed by industry, commerce, transport and construction.

The problems are certainly numerous, but with help they can all be solved. To attract new investment inflows and to put the recovery onto a firm footing, the country has only to acknowledge the need to let market forces get back to work and to respect basic market relationships.

Perhaps the most basic of the essential economic relationships is the one that is common to all prosperous countries, and that is that land should be in the market. Where land is in a formal market and has market value, where it is transferable between individuals through the market and where legally drafted documentation – title deeds – proving ownership is acceptable to banks as security for loans, the people on that land enjoy enormous advantages that help them become prosperous.

What is true for Zimbabwe is equally true for the rest of Africa. Whatever is done with the money Bob Geldof has raised and however much debt forgiveness or grants are agreed by G8, these won’t promote the kind of prosperity that has been seen in the developed world if individual property rights remain out of reach for almost all the peoples of Africa.

For Zimbabwe and for the rest of Africa, the land question should have the same answer: If you want a piece, buy one. If you don’t have the money, bankers can lend it to you and you can use the property you are buying as collateral for the loan to buy the same property. It is a magic formula, the magic formula that made the West prosperous.

Property rights are taken for granted so completely in the western world that few people have ever become inclined to analyse their importance. We in Zimbabwe could become a case-study for what happens to a country that does not appreciate their importance.

*John Robertson is an economist.