Compensation will cost at least US$10bn

Farm compensation to cost at least US$10bn

The Zimbabwe Independent by Political reporter Nyasha Chingono

10 May 2019

Ben Gilpin

Government's decision to offer RTGSS53 million in compensation to white farmers who were dispossessed of their land has been met with mixed reactions. While some of the ex-farmers who are now in dire straits after being plunged into poverty at the turn of the millennium, the younger white farmers are carefully considering the prospect of being re-allocated land under the Zanu PF government — which now appears a possibility as soon as the authorities complete a land audit.

According to the Commercial Farmers' Union (CFU), full compensation will cost the government US$10 billion, a figure which is way beyond the capacity of a government already struggling to rescue a deteriorating economy. Political reporter Nyasha Chingono (NC) this week sat down with CFU director Ben Gilpin (BG, pictured) for a wide-ranging interview as the compensation battle rages on. Below are excerpts of the interview:

NC: How many farmers have been registered for compensation and what have you agreed with the government?

BG: A list has been submitted to govern­ment and at this stage they are a little under 900. For now we have submitted that list and that is what is being worked on. Preliminary notice was sent at the beginning of April and farmers who had their farms taken were given an opportunity to apply.

There are about 3 500 in that category and we appeal to those farmers that since it's a limited fund of RTGSS53 million, we appeal that those who don't need it need not ap­ply. Basically those who feel that there is need to apply have applied while those who think they can get have not applied. The payment that government has agreed is RTGS$55 million and, when that is paid, that amount will be converted into US dol­lars on the interbank rate of that time. That amount will be deducted from any final compensation that is agreed. Those num­bers have not been agreed.

NC: Is there consensus on the farm eval­uation and how many farmers are eligible for full compensation for land lost during the 2000 land reform programme?

BG: About 3 500 farmers of individual businesses are due compensation. It's dif­ficult to know. Government has been pay­ing compensation for improvements done on the farms and this S53 million that was there was targeted to do the same. This is as a result of an appeal to spread this money over many as interim relief for this large number of people than to compensate for a smaller number of people.

Dialogue has been going on with govern­ment for compensation and in that process from our side as farmers we have three par­ticular areas to this process. We have our own valuers, a consortium of valuers. Most farmers are registered with the consortium of professional farmers. They pooled the data that they had done from their clients; they have now updated and standardised that data.

Over time they have built data for most farmers who lost their farms and most farms are registered on that. That is the ba­sis of our professional back-up to the com­pensation that we have. We have mandated the Compensation Steering Committee to engage with government and to do the nitty gritty with government. When they come up with a proposal, we do further diligence and recommend to our members and say "this deal is now there and we suggest you take it". This was used to get to this interim relief.

Government has acquired seven million hectares. Some of that has been paid al­ready, some of that is still in operation by some kind of agreement with government. At this stage we expect that farmland on the database needing payment is five mil­lion hectares.

NC: In your deliberations with govern­ment, what constitutes full compensation and what are your sentiments towards the figure announced by government?

BG: If you are to look at international best practice, you look at compensation for consequential losses as well. We are not going for consequential losses, it is too sub­jective. Because we have a troubled past, there were consequential losses in the past and there are consequential losses now. [A consequential loss is an indirect loss resulting from the inability to use business property or equipment.]

Whatever was on the title deed was a piece of land which they occupied and improvement that is what the state acquired.

The state has cited the constitutional provision to pay for improvement and they want to find external parties to that, par­ticularly former colonial bodies or those entities that came forward assisting Zim­babwe with its land reform programme process to maybe come and settle the bill. The problem with us commercial farm­ers is that the improvements and land are one document — the title deed. In order to bring settlement, you need to settle the whole thing one time.

At this moment, the discussion relates to the fact that we will be happy to work with government with regards to the assessment on improvement, thereafter we want to find ways to settle the land bill so that we get a clean transfer to government and end the conflict over those titles which will free government to offer fresh instruments without the danger of conflict coming back. Around 60% of land was transferred on an open market after Independence, much of it with government approval.

I never owned a farm before Independ­ence, I only bought a farm after 1987 and yet it's acquired. Government can say it's history but I can say it's not history because this farm was bought. This makes it com­plicated. This is the reason why we should find a way forward. We are very keen on finding a way forward. The constitutional provisions currently mean that any white Zimbabwean is only due compensation to improvements.

Zimbabwe protects foreign citizens more than its own citizens and that is one of the concerns that we have. We understand that white Zimbabweans, most of us are chil­dren of people who settled here at some stage or another, but that's the reality.

NC: Government said it was looking for lines of credit to finance the compensation programme. Do you think government is capable of paying the full amount?

BG: They are looking for lines of credit to finance the programme because the gov­ernment is broke. It's a tough question be­cause Zimbabwe is broke and we want to be paid. Even if Zimbabwe accepts full liability, it needs support internationally.

Government has accepted its liability to­wards improvements but that it can't pay. If we had a functional economy where we had generated reserves before anybody will lend anybody money.

Our biggest desire is to see Zimbabwe re­cover. Recovery means you have a vibrant economy. If you take land away from some­one with the right to occupy, hypothecate and transfer owning and give to someone just the right to occupy, in a normal en­vironment it's like not having a marriage certificate for your wife. Until government also makes progress with its own policies with regards to property rights, it's going to be very difficult to get any financial insti­tution locally or internationally to finance anything. So your banks, they don't want to finance agriculture.

One of the big issues is that all the joint ventures that are there, most of the joint ventures are being signed off with banks that lent money to farmers that were un­secured. They can't recover that money so now they have permission for then-clients to be farmed out of debt.

Our concerns are that it doesn't solve government's liability, it only solves liabil­ity created by beneficiaries who are now in debt to banks, it doesn't solve the problem.

To pay me, government has to take mon­ey from the taxpayers. Wouldn't it be ok that instead of excluding me from farming, you give me a land lease where I pay mon­ey to the state to meet its obligation?

NC: If government fails to pay the com­pensation, are you comfortable with get­ting land as compensation?

BG: It would make sense to government, but that's their policy decision. Clearly, they have indicated slightly the policy dynamics.

President Mnangagwa came in saying there is no distinguishing on race and we would hope that they would engage with commercial farmers. That would just mean that if you are a good farmer you should get access to land. If you are a bad farmer, it means you should go.

Does that mean that the only route to en­gagement should be joint ventures? I think that is discriminatory and it should end. I think there is a great opportunity for gov­ernment to embrace Zimbabwe citizens of competence on a non-discriminatory basis. And say if you are a farmer and we owe you money, let's offset this by giving you access to the land.

NC: Are white farmers keen on benefitting from the likelihood of land redistribution?

BG: If you look at the age of farmers when they lost their land, they were 55, some older. Most of the elderly are not in­terested but parts of the younger generation are just looking for opportunities to farm. It has happened in other parts of the world. This is one way of dealing with it. It's a win-win. If it can be done, why can't it be one of a menu of options?

NC: What are the benefits of trading land on an open market and how would it im­pact the country's agricultural sector?

BG: A market would help immensely. Agriculture needs long-term capital and the rights that go with that. The less rights I you have, the lesser the value of that land. What drove Zimbabwe's agricultural in­vestment was secure property rights where people were prepared to work a lifetime.

The state owns vast tracts of land, meaning the state has acquired all the land and destroyed its collateral value; you can't borrow against something that you don't I own. So this is the debate that is going on between government and banks as to the bankability of the 99-year leases. The 99-year leases are not a problem but if it's not a marketable lease, then it's not going to be something that the banks can hold on to. A market is normal; to not have a market is not normal.

NC: Zimbabwe is facing a food deficit this season owing to the El-Nino-induced drought. What measures can the govern­ment employ to weather the effects of re­current droughts?

BG: There is more than one problem. Farmers are the world's best risk tak­ers. They go out there and depend on the weather. Our country is dependant mostly on dry land agriculture. We need to im­prove our agricultural extension so that our farmers are skilled.

We need to improve the investment en­vironment so that our farmers can improve their ability to harvest water and mitigate against risk. These are some of the benefits that come when there are rights. Our crop prices need to be viable. When government introduced the (maize) price of US$390 it was double the regional price. That price caused people to flood the market. There is no policy consistency.