Land reforms erode property rights
http://www.financialgazette.co.zw
Friday, 15 July 2011 16:21
Farmers unable to access funding from banks
Tabitha Mutenga, Staff Reporter
THE negative effects of the country’s chaotic land reforms will forever
haunt farmers as they have been unable to access funding from banks since
the year 2000 when more than 33 million hectares of prime agricultural land
seized from former white commercial farmers became State land. While
everyone is agreeable that the exercise was inevitable and a necessity in
terms of correcting historical imbalances, its haphazard implementation saw
the dismantling of both property rights and secure land tenure, damaging
investor confidence in the process.
The long and short of it is that property rights have been transferred from
the hands of the beneficiaries, in this case the resettled A1 and A2
farmers, into the hands of the State. The transfer has impacted negatively
on the country’s economy because agricultural land is no longer bankable and
cannot be traded on the open market.
The lack of secure land tenure has been a major disincentive to those who
want to invest in agriculture. It has caused the poorly-funded black farmers
to neglect farm infrastructure and in some cases engage in asset-stripping.
In fact, much of the once productive land is either lying idle or producing
very little.
The Commercial Farmers Union (CFU), one of the most vocal critics of the
land reforms, said the manner in which the programme was executed resulted
in land value in Zimbabwe being lost.
Zimbabwe’s agricultural land is now dead capital: It can no longer be used
as security when applying for loans for farming activities.
As a result, funding for agriculture has dried up.
In 2000, yearly lending to commercial agriculture sto-od at US$1,87 billion
but it has since plummeted to less than US$100 million last year.
Analysts see this trend continuing until Zimbabwe starts respecting property
rights.
In contrast, land values and land-based investments in southern Africa have
increased remarkably, especially in agricultural systems that allow farmers
to take control of the collateral value of their land.
“The current land tenure system does not provide security to the farmer,
investors or the banks because of clauses in the offer letter; land permits
issued to A1 farmers and the 99-year leases given to some beneficiaries,”
said CFU.
The union, the bulk of whose members lost their farms to black farmers
during the agrarian reforms, made the observation as part of proposals for a
policy framework that could facilitate successful agricultural investment
and economic development in Zimbabwe.
Clause VII of the offer letter implies that banks cannot lend money to
farmers if they cannot redeem it in case of default. As a result, banks have
not been accepting offer letters as collateral.
It reads: “The Minister reserves the right to withdraw or change this offer
letter if he/she deems it necessary.”
The same applies to A1 permits; clause 4:2, says “the permit holder shall
not have title over the allocated land that is, he or she may not sell,
lease, hypothecate, bequeath or otherwise encumber the allocated land.”
This is therefore making it impossible for farmers to harness the collateral
potential of their land, meaning they have been disempowered.
Also, the 99-year leases do not give enough rights to the bank when the
lessee defaults.
The Minister of Agriculture, and not the bank, retain control over who has
access to the land.
The bank cannot sell the title to recover its loan.
Paragraph 20 under repossession by lessor reads:
“The lessor may, at any time and in such manner and under such conditions as it may deem fit, repossess the leasehold or any portion therefore . . . . “
In order to fund farming activities, farmers are now dependent on their
meagre resources or on State and donor handouts.
However, these have encouraged irresponsibility and dependency.
“The impact on agricultural production has been severe, domestic food
security has been dependent on don-ors for a number of years and we all know
that dependency on foreigners is not empowerment,” CFU added.
Agricultural economist and consultant, Prosper Matondi, agreed there was
need to address the issue of land tenure and land rights.
“It is a matter of policy but substantive land rights need to be defined so
that farmers are also protected in the process and to ensure that the
freehold title is not abused in the process,” he explained.
Economist, John Robertson, also emphasised the need to allow farmers to use their land as collateral while at the same time giving banks the right to
foreclosure in case of default.
“The land has been taken out of the market and it makes it difficult for
investors to place their money into something that does not give them full
control. Land rights are essential; financing the sector to its full
potential has failed in the past because banks are not prepared to accept
the offer letter as collateral. Farmers need to retain the collateral value
of their land,” Robertson said.
He added that there was need for a new constitution that protects property
rights as the current constitution had been amended in the wake of the land
reform programme to allow the State full control of the land in Zimbabwe.
“Agricultural land has to be traded on the market to allow the industry to
grow from what it is today,” he said.
Over 11,8 million hectares have been acquired since 2000, which is 99,9
percent of the commercial farming land.
Foreigners whose land was also acquired in contravention of signed bilateral
investments agreement also lost their investments in the process and were
never compensated.
International and regional laws provide for compensation when land is
compulsorily acquired but almost all the former farmers are yet to be
compensated. Local and foreign investor confidence has largely been
destroyed not only in agriculture but also in other sectors.
Agriculture development in Zimbabwe was the envy of Africa.
The system was so successful that it encouraged investment, which brought
about development.
In 1998, at the conclusion of the donor conference on land reform, all
parties agreed to the acquisition of five million hectares and poverty
alleviation through land resettlement of 91 000 families. They also agreed
to increase the contribution of agriculture to the Gross Domestic Product,
promotion of environmentally sustainable utilisation of land and to improved
sustainable peace and stability.
But the land reform was to be implemented without disrupting agricultural
output.
However, its implementation has fallen short of the original goals: The
results have proved that access to land does not mean success as farmers
need to be empowered through the collateral value of their land.