Compensation bill

Government faces US$30 billion bill for land

Financial Gazette  - by Tabitha Mutenga, Features and Supplements Editor

30 June 2016


Lands and Rural Resettlement Minister, Douglas Mombeshora

ZIMBABWE’S cash-strapped government could face a US$30 billion bill for compensation of land expropriated from white farmers under the country’s controversial land redistribution exercise that saw the country plunge from being a regional breadbasket to a basket case, the Financial Gazette can report.

This liability has trebled after earlier estimates had pegged the bill at about US$10 billion.

Government’s own estimates had projected compensation at between US$2 billion and US$4 billion although it is currently evaluating farms redistributed under the chaotic land reforms led by former liberation war fighters in 2000. This is meant to facilitate compensation which Zimbabwe has undertaken to do under a programme to re-integrate the country into the international community.

This also involves payment of outstanding debt arrears to international lenders.

Computations done by former white commercial farmers indicate that Treasury might have to pump out US$30 billion, which is three times the size of the country’s gross domestic product.

The bill covers all the farms taken over since 2000, and includes loss of income and interest.

The farms quantified for this purpose measure a total of eight million hectares.

Compensation just for the value of land, based on regional land values for similar agricultural properties, and the value of fixed improvements, will take up US$11 billion of the bill.

Compensation for movable assets on the farms at the time of expropriation such as livestock, crops, vehicles and farm equipment, would require US$19 billion. This would also include loss of income over the period, interest and any compensation for damages to personal belongings or personal injuries during eviction.

With no resources of its own to fund such a heavy bill, government would have to rely on the benevolence of external financiers to foot the bill and put to rest questions around the legitimacy of its land reforms, especially as it relates to the observance of property rights.

The best it could do would be to drive a hard bargain in its negotiations with the dispossessed former white farmers to reduce the bill to manageable levels or introduce financial instruments with long maturities in the hope that the country would in the intervening period develop capacity to deal with the obligation when it falls due.

Opposition Movement for Democratic Change legislator, Eddie Cross, confirmed that government was facing a US$30 billion liability for the expropriated farms.

“Clearly, this is impossible for Zimbabwe and it will be necessary for the State to negotiate compensation with each land owner or face permanent court actions over which they would have little or no control or even influence,” said Cross.

Contacted this week for comment, Lands and Rural Resettlement Minister, Douglas Mombeshora, said government did not have values yet and would be guided by the on-going valuation of the properties.

He said: “Our teams are still in the process of evaluating the properties and until the process is complete, I cannot give an exact value,” he said, adding: “It’s a long process and until the farmer has agreed and signed the valuations done, then the process will be incomplete.”

Government recently announced plans for a special fund to raise and administer the payment of compensation to dispossessed white farmers. Compensation would be for four items: the land, immovable property, improvements and movable property taken over at the time of acquisition and any legal fees incurred.

In terms of the new Constitution adopted in 2013, not all farmers would be entitled to land compensation.

In terms of Section 295 of the Constitution, all indigenous Zimbabweans whose agricultural land was acquired by the State are entitled to compensation from the State for the land and any improvements that were made on the land when it was acquired.

This also applies to people whose property rights at the time of acquisition were guaranteed or protected by an agreement concluded by Zimbabwe with the government of another country; these are also entitled to compensation from the State for the land and any improvements in accordance with that agreement. 

But white farmers whose properties were not protected by government-to-government agreements when their agricultural land was acquired by the State are entitled to compensation from the State only for improvements that were on the land when it was acquired.

Ben Freeth, spokesman for the Southern African Development Community (SADC) Tribunal Rights Watch, which represents a sizeable number of the former white farmers, said valuations for confiscated farms should include land. He suggested that valuations should be based on current land values.

Un-serviced land from expropriated farms being sold for residential purposes is fetching up to US$20 per square metre, which translates to US$200 000 per hectare, he said.

“That is what the market is prepared to pay for that land, even knowing that there are complicated legality issues with it. So a farm at this rate could go for as much as US$200 million,” Freeth said.

However, this model of valuation would even be far more impossible for government, even with assistance from donors and well wishers.

Freeth and his family had their farm in Chegutu expropriated under the land reform programme. They approached a SADC Tribunal, which ruled against the expropriation and ordered that government should compensate the farmers for their land.

“Recent cases show that property valuations between the former owners and government are highly different based on the recent Interfresh case in the Administration Court of Zimbabwe where government valued Mazowe Estate at just above US$5 million but the Judge eventually ruled it worth US$27 million, five times the amount government was offering,” Freeth said.

He said the International Centre for Settlement of Investment Disputes had ruled in the case of Bernhard von Pezold and others against the Zimbabwe government for a US$200 million compensation for losses incurred on expropriated land, whereas government had suggested values far less than that.

“What is also important in this whole debate is that the Southern African Development Community Tribunal judged that the Zimbabwe government should pay fair compensation to three farmers, Jarrett, Cummings and Kocket by June 2009. Not a cent has been offered to them despite the SADC Tribunal ruling that the government was in contempt for not paying. Half way through the argument to establish what fair compensation was, the Zimbabwe government managed to engineer the closure of the SADC Tribunal so that no compensation award could be made to those farmers,” Freeth said.

Freeth said promises of compensation were an illusion by government.

“Many elderly farmers are destitute and are being led along with the false hope of compensation. We all know that the country has no money though. There is nothing as cruel as creating false hope,” Freeth said.

Zimbabwe embarked on a land reform programme in 2000.

Although the programme was meant to ensure peasants crammed on infertile, rural land were relocated to fertile land on the expropriated farms, the land redistribution programme was mired in corruption and nepotism, with ruling ZANU-PF party elites and their cronies emerging as the major beneficiaries of the land reform programme.

The lack of security due to the land reform programme has resulted in lack of investment in the agricultural sector, which still remains the backbone of the country’s struggling economy.