Land reform: A case for creative compensation for acquired farms

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TELL a pianist to try playing our national anthem in the key of c-major; suddenly, the power and pathos of that sacred hymn dissipates.

The Brett Chulu Column

C-major is a white-keys-only musical scale. Solomon Mutsvairo penned the words of the national anthem in black and white. Fred Lecture Changundega set these words of Mutsvairo to a melody masterly crafted in the key of G. Beauty of sound unsurpassed.

Key of G is played in black and white keys. You can just about play any Negro spiritual on black keys only.

Beautiful simplicity leaps into the ear. But that means always making use of just five of the eight keys of the musical scale. Composers have more range and options when crafting melodies in black and white keys.

Our economy is a piano. We can choose to compose in white keys only. We can choose to do it in black keys only. We can choose to create the melodies of our economy in black and white scales. There is a strong case for the latter. I deploy the metaphor of black and white as a symbol of creativity, not as a simplistic code for race. I thought to put that in black and white.

Here is why it is not black or white but black and white.

First, intrinsic value of farm land is in the present essentially locked. It is a dead asset. Dead asset, unfortunately, is an oxymoron, but one I purposely hire. Farmers on the land right now cannot leverage on land to borrow. They cannot even collaterise investments on the farms to get short-term financing.

Farming as a business depends on financial markets to fund short-term, medium-term and long-term investments — farmers need structured financial packages with tenors varying between one and 25 years. Farmers right now cannot put up land as collateral for medium-term to long-term investments. We are playing our piano in keys of one colour.

I am afraid, the sound has not been that pleasing to the ear.

Second, there is no market for land. A market for land is a great screening mechanism — it weeds out hobbyists.

Those who enter the land market do so mainly with a business mentality. They are rarely acquiring farms for ornamental purposes. A market for land gives a soft landing for those struggling in the farming business. That way those with the capabilities remain in the farming business, sustaining productivity. A dead land market takes away the pivot of profit-making, demoting farming to a not-for-profit pursuit. Once the profit motive is expunged, it does not need an economics wonk to decipher that the economy will grow in reverse. I am afraid, our piano is out of tune when it comes to the market for land.

Third, the scale of compensation for acquired farms is beyond the capacity of our government, present and future, to fund. Credentialed experts in valuation place conservatively the quantum of compensation, land and developments, at just under US$10 billion.

Even if land is excluded from the compensation as stated in the Land Acquisition Act and our constitution, compensating for developments still runs into billions of dollars. Present and future governments will struggle to raise funds from the fiscus to compensate for these acquired assets. We are told that our national debt has risen to almost US$12 billion from the figure of US$10,7 billion stated in the Lima Plan. National debt, it would appear, does not include the compensation pledged in the Land Acquisition Act and in the constitution as the valuation exercise has not been finalised. Put politely, our national debt is much higher than what is currently stated. I am afraid, if we continue playing our piano in keys of one shade in resolving the compensation issue, we will continue facing the music and singing the blues.

There is a way out. I am afraid, it lies in playing our piano in black and white. The impetus for a creative solution to funding compensation comes from our economic history; every fresh dollar invested in agriculture multiplied three times as it was spent downstream in agriculture-dependent industries. It makes a lot of sense for our economic revival to have its central cog as agriculture. This is the smartest way to expand the economy whose benefits will be felt by all. That is playing the piano in black and white.

Let us sample a few ideas being suggested by various stakeholders. Farmers can be compensated by government first acknowledging a definite value constituting debt. In tandem, government would have to restore the market for land.

This will allow anyone with a risk appetite for farming to acquire land and run it as a business.

A market for land will allow local banks to get lines of credit from the international financial wholesale market to on-lend. That would unlock the intrinsic value of the land. The acknowledged compensation debt can be turned into interest-bearing bonds which farmers can sell to local and international investors. This way, farmers who no longer want to farm can cash out, and invest elsewhere. Farmers could live off the coupon paid by the compensation bond.

International financial institutions such as the International Monetary Fund and the African Development Bank can be roped in to oversee a bank dedicated to agricultural revival. Donors would have to come in to provide initial funds to be managed by a dedicated agricultural revival bank. Britain and other members of the Paris Club can provide a huge chunk of funds in grant form to seed this agricultural recovery plan. That is playing the piano in black and white keys.

The agricultural revival bank will be expected to administer grants to revive agricultural research and skills development. In short, compensate in the context of rebuilding and upgrading the agriculture cluster. This means that even resettled farmers with a passion for farming can be assisted to go hi-tech — after all, Israel’s hi-tech farms are generally no larger than resettlement plots.

I do not profess that these ideas are a magic wand. Nor do they capture the entire complexity of the compensation issue. That is why we need to play our economic piano in black and white keys — collective creative imagination.
My one-year-old son sometimes cries when I am sitting behind the organ at home, wanting to lay his tiny hands on the keys. He vigorously pummels the poor keys, black and white, giggling while at it, making a joyful but definitely not a sweet noise. I am afraid; that is how we have been playing our economic piano. We have a choice: harmony or harm.

Chulu is a management consultant and classic grounded theory researcher. He has published research in an international peer reviewed academic journal. — brettchulu@consultant.com

2 thoughts on “Land reform: A case for creative compensation for acquired farms”

  1. mugadzaweta says:

    no whites no agriculture fullstop. the monkeys on the land have been given everything but have nothing to show for it.

  2. C Frizell says:

    When you nationalize the land, it instantly acquires – zero value.

    What so many Zimbabweans conveniently forget is that without Title Deeds (acknowledgement of legal ownership) not only does land have no value but also those on it do not own it. Many are finding this out to their cost. It is like Feudal Europe (actually, worse) where the kings and barons could take whatever they wanted.

    Land is a finite resource and as such must be utilized. I said many years ago that the “new owners” need to pay the original and legal owners. This transfer would then be viewed as a Forced Sale, which is legal if in the national interest.

    So every “New Farmer” needs to make arrangements to pay the legal owner, say over a period of 20 years? The land would then be rightfully and legally theirs. If they cannot pay (perhaps because of being poor farmers) then the land must be re-sold to a more efficient farmer who CAN earn enough to pay.

    This rational solution would not impose any debt on the government (which actually means all the people of Zimbabwe). It would also ensure that land was used productively and not collected as a sort of hobby, or place to hold weekend braais. If this is NOT done then there is no hope whatsoever for our agricultural sector, which used to support the entire country,

    Remember, what is acquired for nothing – has no value. It was extremely rash and short-sighted of the government of the time not to do as I have suggested. I suggested it way back then as well.

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