Joint ventures on farms through offer letters
It is common to find a person who is not a landholder of a farm looking for bigger land on which to carry out some farming business such as crop farming or cattle ranching.
I have been asked by people, including clients, if one can sublease a farm in Zimbabwe which is held through an offer letter from the Government or if a joint venture can be entered into on such land.
I will explain this below.
Prohibition of cession
Section 28 of Land Commission Act (Chapter 20:29) in Zimbabwe, hereinafter “the Act” applies. This Act repealed the Agricultural Land Settlement Act (Chapter 20:01) and the Rural Land Act (Chapter 20:18). It also amended the Land Acquisition Act (Chapter 20:10).
According to section 28(1) of the Land Commission Act, subject to the terms of the offer letter, lease or permit in question, an offer letter holder, lessee or permit holder shall not, without the consent in writing of the Minister:
a) Cede, assign, hypothecate or otherwise alienate his or her lease or his or her rights thereunder or place any other person in possession of his or her holding or portion of Gazetted land.
b) Enter into a partnership for the working of his or her holding or portion of Gazetted land.
According to section 28(2) of the same Land Commission Act a transaction entered into by a lessee in contravention of section 28(1) shall be of no force or effect.
The same provisions under section 28 of the Land Commission Act were included in section 13 of the repealed Agricultural Land Settlement Act.
Joint ventures
Many aspiring farmers in Zimbabwe, who are not landholders, are resorting to entering into joint ventures with landholders who have offer letters from the Government.
The joint ventures are then submitted to the Ministry of Lands, Agriculture, Water and Rural Settlement (the Ministry) for approval.
The standard joint venture — the agreement template provided by the Ministry covers the following areas:
The parties to the joint venture agreement, being the landholder and the investor.
Details of the farm as per the offer letter.
Nature of the farming business and the land size to be utilised.
Capital contributions by the joint venture partners, for example the landholder bringing in use of land while the investor injects funding.
Declaration that the landholder shall not enter into another joint venture on the same piece of land.
Rights granted to the investor such as the exclusive rights to the landholder’s irrigation infrastructure on the land, use of existing and the right to build staff accommodation, water rights, permission to clear trees or timber for opening arable land.
Notice period and conditions for termination of the joint venture.
That the joint venture is subject to the approval by the Minister.
Tenure or period of the joint venture.
Details of the farming operations to be carried out.
Management of the joint venture including employment of joint venture managers.
Treatment of operating costs.
Responsibility over repairs and maintenance.
Sharing of joint venture income.
Ownership of irrigation equipment, farming machinery.
Financial accounting.
Provisions on breach.
Legal status to the effect that the joint venture agreement shall be governed by, construed and interpreted in accordance with the laws of Zimbabwe. That the joint venture agreement shall not be construed as constituting a lease or agency agreement.
General provisions.
Confidentiality.
Arbitration clause, providing for mediation, involvement of the Ministry first and arbitration.
Attachments to the Joint Venture Agreement
When the joint venture agreement is submitted to the Ministry for approval it must be accompanied by the following attachments:
A brief background of the joint venture partner or company with copies of IDS of the directors and management.
Production cashflow projections.
Projected Income / Profits share table for the duration of the agreement.
Map of the farm showing the area to be utilised.
Copy of the offer letter.
Land levy invoice and receipts.
Service by the Ministry
In my dealings with the Ministry over joint ventures for clients I have found the Ministry to be very helpful.
Conclusion
Cession of farms held through offer letters is prohibited unless approved by the Minister of Lands, Agriculture, Water and Rural Settlement.
Disclaimer
This simplified article is for general information purposes only and does not constitute the writer’s professional advice.
Godknows (GK) Hofisi, LLB(UNISA), B.Acc(UZ), Hons B.Compt (UNISA), CA(Z), MBA(EBS, Heriot- Watt, UK) is the Managing Partner of Hofisi & Partners/Commercial Attorneys, chartered accountant, insolvency practitioner, registered tax accountant and advises on deal and transactions. /He has extensive experience from industry and commerce and is a former World Bank staffer in the Resource Management Unit. He writes in his personal capacity./He can be contacted on +263 772 246 900 or gohofisi@gmail.com-herald
