COMMERCIAL FARMERS’ UNION This presentation was given by the CFU at the Zimbabwe Investment Appraisal Summit recently held at the Celebration Centre in Harare on 24 and 25 August 2009. THE WAY FORWARD FOR INVESTMENT IN ZIMBABWE’S  FARMING SECTOR    Introduction  This presentation contains recommendations on creating the right investment climate to promote substantial improvements in output of the main agricultural commodities produced in Zimbabwe. The downstream benefits will be much better food security for the population and enabling the sector to regain its former position as the number one contributor to overall exports and employer of labour once again. As for all productive sectors, in agriculture certain conditions need to be in place before any meaningful investment will occur. The environment must be conducive to investment by farmers and industries and service providers associated with agriculture. Of fundamental importance one must consider that very little investment is likely to take place in agriculture unless all the potential investors mentioned have confidence that the capital that they have expended in their respective businesses will be secure and will reward them with whatever returns they have envisaged from making the outlay. It is well known that whatever status our sector is in it has a tremendous impact on the rest of the economy because of the downstream links that exist. However in this presentation I will only be concentrating on investment as it affects farmers directly. Two main prerequisites must exist to generate the confidence necessary to expend large sums of money in a farm business, whether the capital is raised by reinvestment of profits or borrowing.  Firstly, a farmer must feel assured that the business will survive long enough and generate sufficient income to fully pay back the monies invested especially in long term capital investment. There must be an established legal framework in existence that meets international standards that guarantees respect of property rights. If long term security does not exist there is no point in undertaking the investment. In farming the principal factor of production is land and if there is no respect of security of tenure farmers will shy away from making permanent improvements to their properties. Credit providers will also not provide funds if farmers do not own assets with enough collateral value to cover loans. The second requirement is that economic incentives are necessary and must be in place if farmers are to invest in increased production. If the outlook is that financial yields from certain farming operations are sufficiently rewarding over a long enough period they will be motivated into building up their businesses by expanding output of the commodities concerned. Again farmers require that the economic prospects in the medium to long term will be favourable if they are to gain sufficient confidence to make the necessary investments. Matters concerning land reform and the productivity status of agriculture in Zimbabwe have been well publicized for several years and it is not my intention to dwell on past developments other than to mention that the overall contraction of agricultural output since 2001 by well over 50% for most of the major commodities presents considerable scope for recovery and growth. However, in turn achieving growth is dependent on the appropriate conditions to production expansion being in place, and these are discussed in the proposals that follow. At this stage it is as well to summarise and state why new investment is so important for agriculture.  

Overall objective

 The main goal is to initiate the process of rebuilding agricultural productivity as rapidly as possible by instilling enough confidence amongst all farmers so that the necessary investments are made to achieve substantial and sustainable growth in the agriculture sector. This target can be achieved if the following steps are taken. 

• Actively remove the conflict associated with the ownership of land.
• A moratorium to be immediately actioned on any proceedings associated with land resettlement pending the formulation of an equitable legal and administrative framework to deal with land matters
• Create an enabling environment for all persons wishing to involve themselves in agriculture as a profession.
• Establish a stable, attractive business environment for investment and production.
• Encourage wealth creation in the sector so as to stabilize the economy and promote growth.

These main steps are outlined in greater detail in the sections that follow which are separated into those associated with LAND MATTERS and those relating to PRODUCTION and the ECONOMY. A series of actions are recommended.  

Part 1 – LAND ISSUES 

1.       Initiate actions immediately to stabilize the land resettlement programme by imposing a moratorium on further land reform proceedings. Actions called for to assist in achieving this goal are:- 

• To cease all offer letters being issued
• To end all further evictions of productive farmers
• To halt all prosecutions relating to land in our sector
• Honour all property rights under the SADC treaty 

2. Re-establish proper Law and Order and justice must be seen to be done where any transgressions have taken place.  Proper meaning – not selective and non partisan  

• Respect and action Court Orders on land-related matters;
• Thoroughly investigate all criminal acts and prosecute the guilty parties;
• Establish an independent judiciary which must be allowed  to operate autonomously;
• Pass sentences on offenders that are appropriate to the crime committed. 

3. Institute urgent consultations between all those involved in agriculture as a vital pre-requisite to the formulation of an equitable and non-partisan land policy. A comprehensive official statement should follow that fully clarifies all issues concerning property rights, including a declaration on how minority citizens will be treated.  There should be no discrimination on the basis of race, gender, social class, political affiliation, religion, and any other factor that might distinguish one group from another.  

• Commission a land audit to establish complete details (who, what where) of all allocations of land including whether the land is being fully utilized or not. 

4. Review the Zimbabwe Constitution and other legislation to ensure that property rights are contained therein and are both respected and enforceable through the courts.   

• Domestic property rights laws need to be in compliance with international standards and all treaties (SADC, COMESA, etc) to which Zimbabwe is a signatory to.
• Amend the Constitution where necessary;
• Promulgate a new Land Acquisition Act that meets all international and SADC related standards;
• Repeal the Land (Consequential Provisions) Act and cancel the provisions;
• Repeal
• the Farm Equipment and Material Act
• Ratify and respect all BIPPAS and foreign investment rights; 

5.  Secure tenure to all beneficiaries of rural land.   

• Put in place a title-deed tenure system for all agricultural land;
• Issue appropriate, and legally-binding, tenure documentation to all farmers;
• Establish an impartial National Land Board to administer the land tenure system. 

6. Displaced farmers who wish to return to farming should be allowed to do so, and be given access to resources to carry out farming operations

• Re-engage skilled farmers to facilitate the recovery process;
• Allow displaced farmers who wish to return to farming to do so; 

7. Pay fair compensation to owners where land and/or assets have been expropriated, or moveable property has been damaged or stolen.         

• Complete realistic valuations of immovable and movable property;
• Draw up a properly structured compensation program that is agreed upon by all parties, especially the title holders;
• The program should be based on a recovery or replacement system;
• Payments of compensation to be completed within a given time frame, indexed, and adjusted to prevailing inflation levels;
• An appropriate compensation package for all expropriated farms and assets would engender confidence and instill internal and international  financial and material support;
• Where applicable, seek international funding to support this programme.
• Ways of declaring compensation “tax free” should be sought. 

8. De-politicise the administration of rural land by entrusting this role to the National Land Board (NLB).   To do this the NLB ought to:- 

• Be allowed to expand its operations by taking over the administration of all land from Government;
• Be representative of ALL stakeholders in agriculture;
• Set up arbitration mechanisms to deal with land-related disputes;
• In the longer term, manage the transition to a uniform land-tenure system for all rural land in Zimbabwe. 

9. Finally ensure that land reform achieves the main objectives of improving production and food security are met.  

• Long term security of tenure will encourage increased investment, productivity and co-operation between farmers;
• A properly-instituted tenure system should unlock donor and private funding and other assistance. 

Part 2 – IMPROVING THE ECONOMIC AND PRODUCTION ENVIRONMENT FOR AGRICULTURE  1. Take urgent measures to offset food production deficits that may develop in the 2009/10 summer cropping season

• Take steps as a matter of urgency to ensure that all farmers’ financial and input requirements for the coming season are met.
• Ensure that input manufacturers secure enough foreign exchange to cover their imported raw material and spares requirements. Where production capacity and time constraints are such that will not allow them to manufacture enough product to satisfy farmers’ requirements, sufficient foreign exchange must be made available to import finished inputs to offset manufacturing shortfalls.
• Maize seed imports must be put into action because of current shortages.
• Make certain that there is sufficient foreign exchange for imports of inputs not manufactured locally (e.g. chemicals, fuel, spares, etc).
• Exemptions from income tax and import duties should be considered for implementation during the recovery phase as incentives, and discontinued thereafter;
• Concessionary interest rates should be considered as a means to facilitate the recovery process and help rebuild lost capacity, but must eventually be phased out so that financial markets can operate without subsidies;
• Pursue exchange rate policies that provide fair returns to producers with prices being aligned to border prices.
• Allow market-driven exchange rates to continue so that farmers producing export commodities will derive prices that are not taxed by the over-valuation of the Zimbabwe dollar;
• Promote market driven prices and make certain that there is no return to controlled pricing.
• Ensure that quasi-fiscal activities undertaken by RBZ in the agricultural sector in the past does not recur. 

2. The creation of a free-market agro-industrial environment that utilises all existing human skills should achieve a quick restoration of optimum productivity levels.  

• Improve communications between all stakeholders so production problems are identified and resolved quickly;
• Improve access to credit, inputs, and farm machinery and equipment and ensure that they are available in sufficient quantities when needed; 

3. Encourage public and private sector infrastructure development and efficient service delivery so farmers can attain high levels of productivity.

• Provide support to Parastatals (e.g. ZESA, NRZ) so they operate much more efficiently;
• Re-establish cost-effective research services and crop and livestock disease control programmes that meet on-going requirements;
• Improve veterinary controls so that exports can resume to take advantage of lucrative external markets;    
• Improve and expand agricultural training programmes;
• Facilitate the manufacture and procurement of all inputs required by farmers. Suppliers should be provided with sufficient foreign exchange to import necessary raw materials and finished products to fully service farming;
• Encourage the service sector (e.g. banking, transport) to become fully involved in providing the services required by farmers. 

4. Promote better support for the Farming Sector

• Farmers organizations are best equipped to articulate farmers needs. The Farmers’ Licensing and Levy Act needs to be amended in such a manner that greatly improves FO’s access to subscription and levy income, so that they can service the industry better.

CONCLUSIONIn an ideal setting for investment to promote agricultural production growth the following must be in place:-

•  Property rights should be respected and protected by the constitution which follows international standards
• A land tenure system that confers long term security and allows farms to be traded and provide collateral for credit as well as promoting investment.
• Rural land resources being managed by an independent and impartial entity which has representation from all stakeholders.
• Access to rural land afforded to all persons wishing to farm without prejudice to any segment of the population
• Rule of Law observed and enforceable by an impartial and independent judiciary and police force.
• A market driven economy with state interventions limited to providing social protection to the poor
• Macroeconomic policies followed that promote real growth in all sectors but especially the agricultural sector.

 If policies are pursued and appropriate actions are taken that actively encourage farmers and other entrepreneurs to invest in their businesses with confidence within Zimbabwe and this continues on a sustained basis then international support in the form of foreign investment will be more readily forthcoming.The CFU and its membership stands ready to play its part when called upon.  Government must now create these opportunities and also allow all Zimbabwean farmers to once again invest in the agricultural sector.Finally, why I am still here?  Well I believe Zimbabwe has entered a new phase with many opportunities developing for the country.  Just like there are opportunities developing for I.T. communications, human skills, tourism and business.  Whatever we can think of there are opportunities developing for agriculture.  Agriculture has an infrastructure despite the last ten years of turmoil still intact.  Agriculture has the skills base despite many commercial farmers finding themselves working all over the world.Agriculture has a very highly trained labour force still in the country and waiting to play their part.  Agriculture has the learning institutions still in place.Given the right environment, agriculture has the seed houses, training institutions, marketing and research, climate and soil conditions known worldwide.  Its farmers are the best.All it now needs is support and sound policies from its Government.  When this is in place, investors will follow. THANK  YOU