Commercial Farmers' Union of Zimbabwe

Commercial Farmers' Union of Zimbabwe

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The Role of the Private Sector and Trade Opportunities in the Revival of Matabeleland – A SWOT Analysis

The Role of the Private Sector and Trade Opportunities in the Revival of Matabeleland – A SWOT Analysis


Presentation made by SACFA to the Economic Co-operation and Food Security Sector of the Delegation of the European Union to the Republic of Zimbabwe – 31 January 2012.

Good Afternoon to you all, Ladies and Gentlemen.  My name is Christopher Jarrett, Chairman of the Southern African Commercial Farmers Alliance, an organisation representing the views of most commercial farmers in Matabeleland and not a few elsewhere in Zimbabwe.  Since being expelled from my farm in Nyamandhlovu in 2002 I have had some considerable time to ponder upon the remarkable decline in the economic fortunes of this country’s Private Sector. My views are shared by those that SACFA represents.

What we are about to present may be regarded as seditious by a few of those here having regard to the Distribution List which we were sent.  This List includes representatives of the past and the present government.  Public pronouncements continue to portray the Fast Track Land Reform Programme as an intelligent and successful policy and it is of concern that there has been no real contrary view by any of the new coalition partners in government.  The Fast Track Land Reform Programme has not been successful, and what we have to say will show unequivocally how deeply it has impacted on the Private Sector.  To this day the policy impedes that sector’s ability to operate effectively.  Revival of trade is linked to and dependent upon rebuilding a healthy and productive Private Sector.  This is to be the focus of our presentation.

We need to engage our minds and examine why it is that a country not at war has suffered such a catastrophic economic decline; why it is that Zimbabwe is now regarded as the third poorest country in the world and the second most difficult place to establish and carry out an economic endeavour.  We trust that what we have to say will be taken in the spirit it is given – there is an urgent need to put an end to this stalemate which with rare exceptions continues to impoverish us all.

Without wasting time on a lengthy detailed history of what happened and what the effects were let me summarise briefly: –

Agriculture was the largest sector of the economy and vital in keeping downstream segments in vibrant good health.  Forced acquisitions of commercial farmland resulted in its destruction.  Not only was large scale commercial agriculture ruined but steep declines in the agricultural output of the communal sector came about as a result of the severing of vitally important but largely unseen linkages between the two divisions.  The sharp drop in the production of food and other crops resulted in a substantial shrinkage in export earnings.   This in turn led to the country being unable to service its debt; its credit rating collapsed; lines of credit were withdrawn and suppliers demanded cash up front.

The collapse of agriculture caused an economic “cascade failure” and progressively the rest of the economy failed.  Tourism, mining, commerce, industry and electricity generation all followed in agriculture’s footsteps.  Tax revenues tumbled and this revenue shortfall led to government frantically increasing borrowings from the markets.

Government brought in unrealistic fixed exchange rates and when these did not stem the slide in the value of our currency they added price controls into this poisonous economic concoction.  In order to profess adherence to normal economic practice they pegged interest rates at minimal levels.  This was a pretense mechanism to themselves and lenders of an ability to service their ballooning debt.  These rates being seen by the market as unattractive they had to force all institutions with any funds (pension funds, banks etc.) to lend to them at these marginal rates.

This forced lending at negative interest rates contributed to the erosion of the commercial banking sector’s working capital and that of the pension funds. Coupled with inflation the capital resources of the Private Sector were well on the way to being wiped out entirely.  The Reserve Bank accelerated this wipe out by helping themselves to all foreign currency in private bank accounts. In an effort to dress this theft as a normal commercial transaction they replaced the forex with rapidly depreciating Zimbabwe dollars calculated at laughable official exchange rates.  Credit balances were not allowed to be withdrawn from the banks in cash so as to preclude the owners from repurchasing their hard currency on the streets.

When the country’s resources were effectively exhausted no discernible attempt was made to reverse the policies which had so obviously failed.  Instead it was decided to source alternative fictitious capital to on lend to government enabling them to continue down their ill-chosen path.  The Reserve Bank resorted to printing money in vast quantities.  This plethora of local currency funded strange initiatives designed to repair the productivity in agriculture and industry which they had just ruined by the procedures outlined above.  This money also found its way on to the streets where it was used to buy some of the hard currencies needed by government.

Sustained excessive use of the currency printing presses brought about hyper-inflation and the total collapse of our currency.  Just prior to the extinction of the Zimbabwe dollar the value of our currency was halving in slightly over 24 hours.

Twenty five noughts were officially removed from our currency by the Reserve Bank and we finally had a note denominated One Hundred Trillion Zimbabwe Dollars (100 followed by twelve noughts).  This note was initially worth about US$7 but soon lost all its value.  So the only conclusion that can be reached is that the destruction of agriculture through the Fast Track Land Reform Programme removed 39 noughts off our money and left us all penniless.  Do you not agree that if you took 39 noughts off the fortune of the richest man in the world, Bill Gates, he too would have no money left?

Current propaganda would have us believe that it was not the self inflicted stupidity of government actions that brought about our economic demise but “illegal sanctions”.  What I have sketched above clearly demonstrates that official policy was entirely to blame. No bank lends to such clients and shuns any dealings with those practising such irrational policies.

We now come to the meat of the matter.  How are we going to fix this mess so that the Private Sector can again fill its core role of generating employment whilst at the same time generating wealth for all and taxes to fund an insolvent government?

It has taken many years of recession but slowly some in government are arriving at conclusions and measures they believe will tackle the heart of the problem and get the economy going again.  They however seem reluctant to grasp firmly and state the obvious.  They skirt around the perimeter and use verbal gymnastics so as to incorporate some sort of accommodation with plainly failed government policies.

Agriculture holds the key to Zimbabwe’s recovery.  In 2002 the value of production from commercial agriculture was some US$3.4 billion growing at about 10% per annum.  This would bring its contribution in 2012 to US$8.82 billion.  Put another way commercial agriculture alone would have added US$63.02 billion to the country’s GDP from 2002 to 2012.  Instead we have had a pitiful contribution under the Fast Track Land Reform Programme.  GDP generated has been unable to service and repay the national debt.

We must face up to it that neither government nor anyone else has the depth of finance necessary to bankroll annually an agricultural system structurally incapable of funding itself.  Commercial agriculture used to fund itself through a robust and powerful banking sector using title to the land as collateral.  This funding did not cost the taxpayer anything.

Now we have a crass system where very little can be produced except from beneficiaries’ limited own resources.  The taxpayer through government is thus obliged to provide finance for inputs most of which funding is never recovered.  Those who benefit from these hand outs have no binding obligation to pay. There is no sanction such as loss of security of tenure lurking in the wings should these so-called “loans” not be repaid.  There is no need to repay because there is no effective recourse and this adds to our collective impoverishment as our taxes are wasted.

It is no coincidence that the five richest countries in Africa were those which had freehold title, and in the case of Botswana which only has about 4% freehold, they have proper long term leases over vast areas which are tradeable.  These oblige government to pay full value for any improvements made should the Botswana government cancel or decide not to renew a lease.  Political leaders throughout the African continent have progressively and systematically set about destroying secure title and in so doing have made economic progress for their citizens very much more difficult.  In other words this policy has been designed to keep the general population poor and subservient and no threat to the status quo.  The Far East, although having different standards of tenure looks forward, not back to their colonial era.  They have prospered mightily.

The agricultural industry has to establish mechanisms to fund itself.  This demands the security of title to the land; that is secure and inviolate property rights.  We in SACFA have made it clear that we do not just promote and sponsor these conditions in order to restore our own rights but we believe they should be extended into the Communal Areas.  The economic factors that underscored and supported commercial agriculture’s ability to generate wealth will do the same for all communal land farmers once put in place.  What is more they will confer numerous new economic alternatives and opportunities to communal land dwellers many of whom would prefer to trade their rural rights for a dwelling with secure tenure in the cities.

Under the present system those attempting to farm both on commercial farmland and in the Communal Areas are crippled by a lack of finance for their operations.  They cannot borrow because they have no real property right in the land they farm which otherwise could secure their borrowings.  Farm land is no longer used as collateral.  The banks too are hamstrung and illiquid partly because that vast store of wealth used by bankers in the past to multiply their liquidity – the underlying capital tied up in commercial farmland – now has no economic value.

Politicians are starting to advocate that those on the land must be given secure tenure.  What they do not realise is that this is impossible whilst the owner still holds ownership and proof thereof in the form of his title deeds.  Government being quite unable to service the interest on the national debt, let alone repay any of the capital, is clearly incapable of compensating owners in order to take over their real rights in the land.  No one can transfer a right which they do not possess.

A number of us joined with Mike Campbell in the SADC Tribunal to contest the ongoing seizures of our properties and lack of payment of compensation to those whose farms had already been taken.  The Tribunal ruled that Constitutional Amendment 17 which supposedly authorised the wholesale nationalization of commercial farms was illegal in that it breached this country’s obligations under the SADC Treaty.  The Tribunal also ruled that those who had already had their property taken must be fairly compensated.

Public International Law (the law applied by the SADC Tribunal and other international courts) is quite clear on what fair compensation comprises. Furthermore, when it came to the refusal of government to pay compensation for the land itself, the Tribunal stated that no state can hide behind domestic law to evade their international obligations.  To legitimately obtain title to the commercial farms, government will have to put the owners in the same position they would have been in had the expropriations not taken place.

International law defines that this means compensation for the land; the improvements; the disturbance losses being moveables, consequential losses and loss of income up to the date that Constitutional Amendment 17 took effect on 14 September 2005.  Finally, this compensation was due and payable when the expropriations took place.  At the very latest it should have been paid when Amendment 17 came into force.  Compensation was never paid.  Because it was not, there is now interest accruing on the debt day by day and this is what makes a solution all the more pressing.

In order to establish exactly what types of damages, compensation and interest were due by the Zimbabwe government under international law comprehensive loss documents were drawn up for the three farmers who had been awarded “fair compensation” by the Tribunal.  These were submitted to Windhoek for the Tribunal’s ruling.  The Tribunal notwithstanding its first six month’s suspension was obliged and entitled to hear this application as a pending matter.  These pending matters were not affected by the terms of the suspension.  Deviously the application was never heard because the SADC Secretariat saw fit to sabotage the Tribunal’s workings.  They did this by refusing the funding for the Tribunal Judges who are scattered around the SADC Region to travel to Windhoek to hear the case.

It was clear to all from a perusal of the loss documents that however the Tribunal decided to rule on this compensation application the national debt of the Zimbabwe government was about to increase by a factor of several times.

To solve this problem, the SADC Summit chose not to enforce the terms of the SADC Treaty.  Instead they decided to shut down its policeman, the Tribunal, which had had the temerity to rule against one of them.  Other contrary rulings were ominously already in the pipeline.  Of such things is expedience made and the ramifications are wide.

That was not the end of the matter – the argument that closure of the Tribunal breached the Treaty simply went another rung up the ladder.  It is now before the African Commission in Banjul, the Gambia.  No doubt if justice is not properly dispensed there by the African Commission of Human and Peoples Rights it will head upwards yet further elsewhere.  The point to digest is that the land seizure problem is not going away with the passage of time.  It is impossible to confiscate people’s property without fair compensation being paid.  There are numerous examples of countries which have tried going down this same route, but there is not one country to our knowledge which has managed to hold on to the spoils.

We continue to see the ramifications of large scale property seizures which even now are ongoing.  Zimbabwe wallows economically.  No investor willingly takes his money to a destination where he knows he will lose it.  Economic laws were not invented of late by Zimbabwe politicians running this country.  They have been built up over centuries and any country breaking these rules does so at its peril.  Zimbabwe is busy learning this hard lesson.

So we shall have to face up to reality.  It was the seizures of land that initiated the economic collapse in this country and to get the country up and running again and confidence back we will have to deal with them.  Neither this government, nor any future successor will be capable of paying fair compensation for the assets expropriated.  It is no good trying to fool ourselves by pretending the bankrupt government who took the properties need only under Zimbabwe domestic law pay a highly discounted sum for improvements as and when things may get better.

Perhaps the best government can do is to mitigate their losses by returning seized land and go cap in hand to rich donors for grants to assist in the restoration of productive capacity.  This would include resources to finance the granting of title to the communal lands as the EU has done for Namibia.  A government unable to pay its current interest bill is surely irrational should it persist in its insane desire to farm the entire country.  A government that refuses to acknowledge such obvious limitations will doubtless continue to suffer under “illegal sanctions” until it gets its thought processes in order.

May we point out to your august delegation, and we must thank you for coming to our city of Bulawayo in the heart of Matabeleland, that whilst this denial of reality continues we need your ongoing assistance.  The make believe that things are heading in the right direction has continued far too long.  We need you never to condone the continued denial of human rights by this government both in regard to commercial farmers, their largely voiceless workers and everyone else.  We need you to continue to apply pressure on our administration that this artificial state of play ends and that normal enterprise by the Private Sector is allowed to return and function unimpeded.  You should not deal normally with a government which breaches international law, international treaties and norms, disregards international judgements and continues to believe that crimes against humanity have no consequences.

The Private Sector will never thrive whilst denial of property rights continues.  Qualifications that rights will only be respected under conditions that require allegiance to a particular political party will not suffice.

Sanctions actually need more muscle to jolt minds back to reality.  The World Bank and IMF need your influence to convince them that to assist Zimbabwe now or in the future with developmental aid whilst denial of property rights and lack of the rule of law persists is immoral if not criminal.  Nor should the EU consider funding those in possession of other people’s property.  We head towards a new election which using present rules will sadly be as lethal as the last. Gukurahundi and successors need no repeat.  We will be in need of effective peacekeepers.

Here is a plea from us all; please do not prop up the present system in any way.  Do not deal with this government on the basis that there is a cheap shortcut to the resolution of the real issues.  Please adhere to the underlying principles.  Otherwise this will only perpetuate the Private Sector’s sojourn in the doldrums. Rather help by bringing the ongoing stalemate to an end.

As to the future, we are often asked what plan we have when reality is faced and sane, sensible policies are implemented.  SACFA is of the belief that market forces must be allowed to operate unfettered.  A study we have done in Nyamandhlovu shows that already by 1993 33% of all commercial farms had been bought by black owners or had been sold to government on a willing seller, willing buyer basis for resettlement.  CSC and Forestry own 27% of the district and white ownership was down to 40%.  This trend accelerated thereafter.  There was thus no need for government to interfere in an orderly process. Government’s core function is simply to establish the environment under which the Private Sector can operate efficiently.

The Fast Track Land Reform Programme was the primary source of all our economic woes; it cannot succeed as it stands because it is structurally flawed; its failures will have to be faced.  Your Delegation seeks recommendations for a regional economic strategy and partnership avenues for development partners and twinning arrangements.  We are of the view that until and unless property rights are addressed the Private Sector will not revive.  Consequently a further regional strategy is not possible now, nor is there a sound basis for development partners and twinning arrangements.


30 January 2012.


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