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Farm compensation key to

THE agricultural sector has been dealt a major blow by the ongoing Covid-19-induced lockdown despite having been declared an essential service whose operations must proceed unimpeded, albeit with maximum caution. Finance minister Mthuli Ncube recently pleaded for funding from international financial institutions to cover a US$1 billion gap, which includes US$200 million unplanned Covid-19 expenses. In his desperate plea for assistance, Ncube said it was important to avert economic implosion, whose consequences could be devastating for neighbouring countries. As the economy reels under this heightened turmoil, the agricultural sector has not been spared. Zimbabwe Independent senior reporter Tinashe Kairiza (TK) spoke to Commercial Farmers’ Union (CFU) director Ben Gilpin (BG, pictured), who revealed that the sector needs a staggering US$30 billion to get back on its feet. Below are excerpts of the interview:

TK: How important is resolving the long-standing question of compensating dispossessed white farmers who lost their land during the land reform programme of 2000?

BG: First of all, it is important to recognise that finding an enduring resolution to the land issue in the country is something essential for the nation. The fact that 20 years after Independence it remained unresolved was in part the trigger to the events that unfolded in 2000, however, that it remains unresolved 40 years after Independence is tragic. The nation has paid heavily for a process that was needed, but that was delayed and conducted without adequate care for the consequences. We hope that the process, which is not reversible, can be rationalised and brought to a just and enduring conclusion for the good of all Zimbabweans.

That white citizens who had embraced Zimbabwe and invested into the agricultural sector with positive encouragement by authorities from the earliest days of Independence were the primary target of the fast-track land reform programme, which is often touted as the prime reason that the country was isolated from international support.

However, this serves only to polarise the debate. It is essential to note that it was not only white farmers that lost land during the fast-track land reform programme. Roughly 20% of the approximately 1 400 black commercial farm owners also lost their farms. There were also a number of foreign-owned farm businesses that were taken in spite of pre-existing bilateral investment protocols being in place. At the same time, it should also be noted that not all white farmers lost land in the process; we would estimate that around 300 have continued to farm throughout the period since 2000 though very few remain in full possession of the property they owned at the outset.

Further to the direct impact on property owners was the disruption to the lives of large numbers of farm workers and their families and the onward impact on the upstream and downstream industries that serviced and relied on the sector for inputs.

The major challenge to the land reform process remains the conflation of judicial and political interests, such that investments made in the country prior to the start of the fast-track land reform programme, which were entered into in good faith and which were protected through due process of law, were subsequently targeted by a changing array of politically-led initiatives which were generally turned into law without recourse after the event.
The whole sector has suffered from uncertainty ever since and the capacity of commercial agriculture to produce and develop has been undermined by the loss of property rights and skills that previously empowered that industry.

Former commercial farmers paid a premium for the rights to the properties they owned, knowing that they could use, include or exclude, mortgage or pass on their farms. This encouraged them to take long-term decisions on the development of the properties and ensured that, provided their projects were viable, the banks would be happy to lend the short, medium and long-term money needed by farmers, with the full knowledge that in the event the farmer defaulted, they could recoup their losses through putting the farmer’s assets, including the farm, into the market. For years, these farmers were committed investors and the country benefitted.

Land reform signaled an end to the market and to this day it remains problematic for beneficiary farmers to finance their activities, largely because the financial institutions have no way of recovering non-performing loans. Whilst contracting has emerged, the reality is that to a very large extent the government has stepped in to provide finance under various schemes since the fast-track land reform programme.
Frequently it has been the taxpayer that has picked up the tab when money has not been recovered. In the past, the market saw to the selection of farmers whose entry into business was generally the result of a long period of gaining skills and experience as sufficient capital was built up to finally enable a farm purchase.

Thus the investments that farmers made were real and were the result of hard work over long periods of time and made in good faith. Around 60% of all commercial farms acquired by the state since 2000 actually changed hands in the market post-independence, many with certificates of no-present-interest issued by the state. Whilst there has never been any argument with the right of the state to acquire assets for the public good, that does not negate its responsibility to pay fair recompense within a reasonable time.

Government is at last making moves to tackle the issue of compensation for farms long acquired by offering land back to owners who were covered by Bilateral Investment Promotion and Protection Agreements and to those classified as “indigenous”. It remains to be seen how many farmers will pursue this option and also if such a process might be extended to white citizens.

Settling this long-standing obligation to compensate , which is also covered in the constitution, would go a long way to opening the space for new development and investment; it would certainly send a very positive signal that Zimbabwe respects its investors and its citizens, both critical at an international level.

TK: A number of figures has been thrown around. How much, exactly, would be needed to foot the compensation bill and how many farmers stand to benefit?

BG: There are many figures ranging from US$30 billion down to around a tenth of that which have been put into the public domain over the years. Generally, the higher figures have tended to include losses incurred over and above immovable property such as loss of moveable assets, interest and disturbances, which are generally accepted under international best practice. In reality, there is little expectation that such a liability can be met. The Constitution of Zimbabwe specifically excludes much of the above and in particular the payment for land for a class of citizen effectively identified by race, and transfers this liability to a third party, namely Britain.

However, this provision comes without any prior agreement from the third party and with no ability of the farmers who are affected to attain payment. Whilst there may be a contextual rationale for this for properties purchased prior to Independence, this is certainly not so for those purchased, where transfer was effected post-Independence, particularly as the farmers bought the properties prior to the adoption of such criteria.

Over 80% of affected farmers have had their properties registered on a composite professional database for valuation. This database has focussed on immovable property and uses the accepted methodology of depreciated replacement cost for improvements and also has a component that values raw land; in aggregate these figures give farm value. This database is currently being used in dialogue with government officials and it is hoped that a basis for agreement that covers not only improvements which are covered by constitutional provision but also land which in general comprises around 30% of value can be found.

The necessity of this comes because the title deeds that gave ownership include both land and immovable assets attached to the land. Further, the reality on the ground is that there is considerable variation across the country when it comes to the proportion of value attributable to land and improvements. In the traditional ranching areas, a payment for only improvements discriminates heavily against farmers whose prime asset was actually the land area to carry livestock and not the improvements per se. A professional approach to this composite value puts the total at close to US$10 billion.

Nonetheless, for most of the roughly 3 500 local farmers and businesses that are owed compensation, there is a strong desire to see finality to be brought to the matter as soon as possible. There is need for a balance to be struck between achieving what is best for the common good at national level and direct compensation, and the restoration of rights for those affected. Many farmers are elderly and certainly are looking for a resolution that will enable them to live with the dignity a fair settlement would afford. For the younger generation, the reality is that the loss of farms and the consequent exclusion from the sector has been a bitter experience that requires addressing by more than simple compensation.

TK: Currently, the government is disbursing relief funds to affected farmers. How much are they getting? What is the purpose of those funds?
BG: Efforts by the government to re-engage with the international community have been accelerated since the initial inauguration of President Emmerson Mnangagwa in 2017. His commitment to settling the farm compensation issue was highlighted at his meeting in Davos in 2018 and again prior to and following his election in 2019.
As a part of the commitment to that process and whilst dialogue towards a consensus-based agreement is reached, the government in its November 2018 budget made an increased allocation towards the payment of compensation for acquired farmers. Given the limited funds available and the large number of claimants, it was suggested and subsequently agreed that the funds initially set at US$53 million could be disbursed as an interim relief payment to the neediest farmers. In May 2019, a scheme was launched and around 750 farmers were signed up to receive the now ZW$55 000 each. This money will be deducted from any future compensation that is due. To date, almost a year since agreement, around 100 are still to be paid. Joint efforts by government and farmer representatives are underway to resolve the mostly administrative or bank account related problems associated with this. The process has brought some relief to the farmers concerned but, given the constantly eroding value of the payments, this has been of limited value in the direct sense. It has however revealed much in terms of the administrative and practical processes etc, that need attention in overall resolution. It has also improved the working relationship between valuers, government and farmer representatives.

TK: How important is the issue of farmer compensation in relation to Zimbabwe’s ability to attract investment?

BG: The establishment of a good credit rating at any level is essential for anyone seeking to borrow; this applies to individuals, companies and countries. Investors always ask, “Can we do business here, will our investments be safe?” The payment of compensation is one ever important signal that Zimbabwe needs to send if it is to attract investment.

TK: As we speak, government is virtually broke. How is the compensation fund going to be resourced?

BG: Zimbabwe needs to rejoin the international community to find the resources needed for comprehensive national recovery and not simply compensation. We believe the international community is anxious to see the country recover. However, it will be contingent on implemented reforms and the effective settlement or re-negotiation of existing liabilities before significant new assistance, including support towards compensation, will become a reality.

TK: A number of white farmers died during the violent land seizures. Are there discussions to also resolve this matter?

BG: Many people have suffered in Zimbabwe over the years and an exclusive focus on the loss of life of some farmers and their employees is not forgotten. All such matters need to be dealt with in the context of a comprehensive and inclusive effort at national healing. In this regard we have a working relationship with the National Peace and Reconciliation Commission. Individual farmers’ families may nonetheless be looking for more direct resolution.

TK: In the short term, how much would be needed to revitalise the agricultural sector?

BG: The primary need for the revitalisation of agriculture is an empowering and consistent policy environment that is subject to legal certainty in regard to property and investor rights. For too long the recovery of the sector has been left in the hands of politicians concerned primarily with ensuring access to land on a political basis rather on any market-related basis or accountability.

Zimbabwe needs to put a reasonable focus on what encourages investment into the mix of its land tenure so that farmers and financers can engage without fear or favour. Recovery will take place as soon as independent “patient” capital and skills are sure they can invest in an environment where their rights will be upheld and protected appropriately. These measures can be effected with limited cost through consistent policy and proper reform.

TK: Do you think dispossessed white farmers would be prepared to invest in Zimbabwe again?

BG: Citizens want to feel the protection of their country is serious. For many, the perception is that Zimbabwe looks to protect the interests of foreigners ahead of its citizens, this certainly needs to be corrected. The current constitutional arrangements that derogate the rights of white citizens to own land are surely an unfair discrimination 40 years after independence and need review. Nonetheless there is a strong appetite amongst farmers and their families to invest in the country and there is no doubt that a comprehensive compensation settlement would see many farmers keen to reinvest in the development and recovery of the country.

TK: How important is the just-concluded land audit exercise in terms of reviving commercial agriculture in Zimbabwe?

BG: Conservatively, the cost of land reform to Zimbabwe goes way beyond the simple cost of compensation; the use of the land and its contribution to the economy from a productive point of view is important. At the same time, for years the loss of secure property rights over a relatively small portion of the country (around 5,5 million hectares of a total area of 39 million hectares) has catapulted the country into economic decline for years as well as regular food deficits. Given the country’s population is now approaching 15 million, there is no way that a policy of endlessly parceling out land is sustainable, a comprehensive transparent audit process is essential to bring about recovery. Although the country has given access to around 145 000 families through A1 settlement and close on 16 000 A2 farmers, there is limited accountability for this redeployment of the country’s best agricultural land and assets. Many of these beneficiaries have gained access to significant asset value and still rely on the state to fund their use.

The audit needs to ensure that use and accountability result from the process so that those that have gained access are properly empowered by rights and step up to the responsibilities they shoulder for the nation. For A2 farmers in particular, this should extend to proper cost recovery to the state and not simply the resort to extractive joint venture arrangements with former farmers.

TK: Lastly, what has been the impact of the raging coronavirus to agricultural productivity?

BG: The sector has benefited from an exemption as an essential service sector. However, the impact has been significant. First, it is positive that agriculture is classified as an essential service and so work has been disrupted less than in other sectors. Our farmers are acutely aware of the risk that Covid-19 is to their workers and every effort is being made to mitigate the risk of spread on farms through the implementation of safety procedures and education.

That said, it is still affected. It is difficult to put figures on the costs at this time and we note the impact can vary considerably dependent on the type of business.

At a local level the disruption to normal marketing as a result of lock down has been significant for many producers. For instance, dairy production has seen a massive cut back in consumption. For dairy farmers this has had an immediate impact on cash flow. Dairy farmers are used to a regular income and any disruption to cash flow impacts immediately. Cows need milking regardless and milk cannot simply be turned off and any disruption leads to immediate losses.
For other livestock sector producers there has been a similar disruption in off take of poultry, eggs and pork and beef. Cold rooms are filling up and it will be a long-term impact as the whole economy takes a down turn.

This is partly the result of logistical issues such as a cut back in opening hours by the major supermarkets but also an indication of the cut back in consumer spending because of the restrictions in economic activities.

Cattle sales, etc, have also been suspended, although the first one was held yesterday.

On the horticultural side, exports have been disrupted because of the cut in air freight. Until tourism rebounds this is likely to remain a problem and the world does not have adequate cargo planes to service demand, passenger planes are not suitable to transport horticultural products except in the hold and this cutback is significant. Some product is being transported via road and sea via Cape Town but this is not possible for flower producers as flowers are not classified as essential in SA. In general, flower producers have been hit very hard and had to ditch production especially as the traditional markets in Europe have largely crashed. As recovery takes place, the big challenge will be the cost of freight, there is a slim margin and it is likely that producers are already looking at simply trying to survive rather than expand or profit this year.

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