For Zimbabwe, reviving agriculture is the only way out
Posted On : November 3rd, 2012
Agricultural revival in Zimbabwe is the trigger for creating a virtuous
cycle of wealth creation not only in Zimbabwe, but in the SADC region as a
whole.
Let me begin by beseeching my patient readers to forgive me for a rather
longish article. The subject matter herein is of national importance and
security. It therefore requires that I dispatch my thoughts on it in one
sitting for your benefit. Kindly tolerate my indulgence.
It is unbelievable when you begin to appreciate the opportunity in and the
potential of Zimbabwe’s agricultural sector. I say opportunity because, you
simply cannot imagine the value which we are currently sitting on, and how
quickly we can correct the prodigious blunders of ZANU (PF). The unintended
consequences of past actions based anger and political expediency, like a
nightmare, continue to linger in our brains and truly arrest the potential
of our country. It’s time to be proactive.
Zimbabwe has about 15 million hectares of arable agricultural land, of which
an estimated 4 million was bought by serious black farmers, on a willing
buyer willing seller basis before 2000. Around 11 million hectares,
currently sit under the control of our government as a dead asset. Yes, a
dead asset, because that land has no commercial value to anyone whatsoever.
This is simply because; we do not have a land tenure act that allows
occupiers of that land to hold unencumbered title and use that as collateral
to borrow funds for working capital. The government has the sole discretion,
on who can stay on that that land and you can lose it “at the discretion of
the minister”. This applies whether you have a permit, or an offer letter
for any piece of agricultural land in Zimbabwe. The obvious effect of this
is that, nobody in their right mind is going to further develop that land,
nor is any bank going to lend anyone money to farm on it. Around USD10
billon or more of value, sits on the country’s balance sheet, dormant and
unrealizable.
Now let me put it simply, imagine you have a title deed to the land on which
you have built your house, and the state walks in and says; “Hey this land
does not belong to you anymore so move off but don’t worry, we will pay you
for the developments that you have done in the future at a value which we
deem fit. Unfortunately we don’t have the money now, so you are going to
have to wait.” Of course, this is regardless how you may have acquired that
land in the first place or, and in the case of farm land, whether you had
made some improvements or are just about to harvest a crop that you invested
your lifetime savings in or borrowed funds to do so. Overnight you are
evicted and, you are worth zero. Now that is traumatic. Isn’t it?
If you had borrowed money from the bank to build your house, to make
improvements or to buy inputs, it would mean that the bank that lent you
that money ends up with nothing and you too end up with nothing plus
incredible stress. Now you tell me which bank, local, indigenous or
international, would lend money to anyone who is in farming? What framer
would continue to invest his time and money in such a situation? The
consequences are that; in 2000, the financial sector had around USD2 billion
invested in the agricultural sector, compared to a mere USD100 million in
2010. In addition, real GDP fell 40% from $6.6 billion in 2000 to $4.1
billion in 2010. It is estimated that about 2 million families employed in
the sector lost their jobs and livelihoods. Surprised?
Further imagine that, you are an international or local investor, who is
looking for an opportunity to invest in; would you invest in property or any
asset in a country like that? Would you also consider investing in a country
where companies are being taken over in almost the same manner, without even
the new owners paying fair value or having the competence to manage and grow
the company? You would not only be insane but downright stupid to do so.
The sacrosanct cornerstone of free and profitable enterprise upon which any
successful economy is built namely; the legal protection of private property
ownership has been disregarded to our extreme prejudice. That is our
fundamental problem.
For the benefit of my black South African brothers and sisters, who are now
baying for the same “Zimbabwe solution” and taking over what’s “rightfully
theirs”, let the inevitable consequences of their aspirations be evident
herein;
Investors will move out or go elsewhere, land and property values will
collapse and the economy will experience a serious contraction. Industries
will close, unemployment will increase and liquidity will dry up while
inflation will increase, especially if the country decides to print money
since it can no longer borrow from any bank anywhere. Any individual with
any savings or investment will be ruined, as happened to millions of
pensioners, insurance policyholders, asset managers, currency speculators
and others. The banking sector will collapse as loans to the agricultural
sector become unrecoverable. The impact is catastrophic. Overnight, we
wiped off billions of US dollars of value from the country’s balance sheet,
and caused unprecedented trauma to every Zimbabwean, black and white.
These inescapable interrelated consequences are NOT as a result of sanctions
or a devious conspiracy by the West. They are the workings of simple
economics 101 ignored. We created our own spider’ web and remain caught in
it up to today.
I am reliably told that, before 2000, for every USD1 invested in agriculture
in Zimbabwe, USD3 was invested in related and downstream industry. Meaning
that; the potential “multiplier or knock-on effects” on the economy of
investing in a stable and viable agricultural sector, underpinned by a land
tenure act that respects private property have since disappeared to our
disadvantage.
Let me be very honest: without correcting the devastating past mistakes ZANU
(PF) with regard to land ownership redistribution (to use a civilized term)
and now indigenization of private companies, our economy will never recover.
That is the inconvenient truth that we must all accept regardless of the
color of our skin or political leanings.
For the benefit of my tolerant readers and detractors alike, please note
that, I am neither supporting the racially skewed ownership of land which we
inherited at independence, nor am I disrespecting the purpose of the armed
struggle and the sacrifices made by all during that time. I certainly do not
support the skewed ownership of land by black Zimbabweans, where a select
few pick and choose multiple lucrative land assets because they are ZANU
(PF) praise singers. Especially where there is no demonstrable evidence of
their ability or a keen interest to use that land to the benefit of the
country and ensure our food security and employment creation.
Believe me, I agree with Mugabe on his principle that ALL black Zimbabweans
must own and manage a majority stake of agricultural, mineral and industrial
assets. The problem is the methodology being applied to achieve that
objective and the hyenas and vultures that are circling around him.
The solution to our land ownership conundrum for me is very straightforward.
We must revive these dead assets first, by ascertaining their fair value
through a land audit and compensating the holders of the title deeds for the
improvements they did on the land. This must be independently ascertained
and if necessary, arbitrated upon. That is the right thing to do, despite
our anger and the harshness of our colonial history.
Second, we must then fund the “ownership” of this land by new black farmers,
who are committed and experienced, and who comprehend that farming is
neither a part time national hobby nor is it about boasting on how many
farms you have in a pub conversation. Third, we must create value by having
a land tenure act that allows the new farmers to borrow against the land
they occupy. Lastly, we must capacitate the new farmers, and draw the
expertise of experienced white and black farmers, so that we can accelerate
the productive capability of this dead asset, within the shortest possible
time.
There are billions of funds awaiting their entry into Zimbabwe and all they
need is our serious attention to the above matters. We must take
responsibility and all work hard towards creating a stable and democratic
political environment.
If we do that, we would have suddenly created value on the country’s balance
sheet and we will certainly see international financiers coming back.
Property and asset values will increase (including commercial and
residential property.) This would mean that we can further create access to
new credit for all property owners, related industries and then some.
Our industry, which is hugely dependent on agriculture, will begin to
recover; employment will improve so will liquidity and therefore, disposable
incomes in the economy. On top of that, Zimbabwean blacks will now own a
significant and productive portion of the economy in agriculture and related
sectors. We will be able to feed ourselves and the region once again. We
would have triggered a “virtuous cycle of wealth creation” to the benefit of
not only Zimbabweans, but the SADC region as a whole.
Agriculture is therefore the “red button”, for re-launching the Zimbabwean
economy into the stratosphere.
Interestingly enough, I explained this to my fourteen year old son the other
day and he simply said: “Wow dad, it sounds quite an obvious and simple
solution, why isn’t it getting done?”
“From the crooked timber of humanity”, I answered him, “no straight thing
was ever made.” (Quoting Immanuel Kant, the German philosopher)
In conclusion, I must also quote Albert Einstein, as I often do, that “The
significant problems we face can not be solved at the same level of thinking
we were at when we created them.”
Pray, somebody out there; are you hearing what I am saying?
Vince Musewe is an independent economist currently in Harare. You may
contact him on [email protected]