Paltry allocation for farm compensation

Zimbabwe has pledged US$55 million to compensate white former farm owners whose farms were acquired under the country’s fast track land reform programme that started early 2000, a figure stakeholders say is significantly shy of the US$3,5 billion promised under the Global Compensation Deed.

Compensating farmers is central to a Government strategy under discussion with the key creditor, the African Development Bank (AfDB), to clear historic arrears of close to US$18 billion.

Of the allocated funds, US$35 million is dedicated to farms covered under the Global Compensation Deed signed between the Government and white former commercial farmers in 2020 while US$20 million will be directed towards the farms protected by the Bilateral Investment Promotion and Protection Agreements (BIPPAs) that were affected by the land reform process, the Treasury said.

“In line with the roadmap of the Arrears Clearance and Debt Resolution process, Treasury has allocated US$55 million for the compensation of former farmers owners, with US$35 million earmarked for farms under the Global Compensation Deed, while US$20 million is the compensation for farms that were protected by BIPPAs which were affected by the land reform programme,” said the Treasury.

Zimbabwe began to compulsorily acquire farms owned by about 5,000 white farmers at the turn of the millennium in an exercise it said was meant to redress colonial imbalances. The exercise, which attracted criticism from the West and their allies, triggered the imposition of various forms of economic sanctions against Harare.

Under the country’s Constitution, two types of farmers are supposed to be compensated for both land and improvements on farms and these included (1) a group of “indigenous” Zimbabweans and (2) white farmers who had land-protected under BIPPAs.

The agreement was signed on July 29, 2020, and provides for the compensation of former white commercial farmers for the improvements they made to their land before it was acquired by the government. The GCD agreement was regarded as a significant step towards resolving the land reform issue in Zimbabwe.

It was also considered a sign the Government was committed to respecting property rights and rule of law, a major shift from the previous administration stance.

However, the Government’s commitment to pay former farmers US$3,5 billion in hard currency over five years remains unfulfilled, with three consecutive defaults now raising concerns about its ability to meet their obligations.

The Government sought assistance from a UK-based advisory firm Newstate Partners to explore options for raising funds from the international market to support the compensation of former farmers. But the country’s high debt burden and associated risk profile presented significant challenges to securing the necessary financial resources.

“The compensation payments continue to arrive in small, irregular instalments, a stark contrast to the terms agreed upon in the Global Compensation Deed,” said a former farmer who has since relocated to the Netherlands. Moreso, the decision to accept the compensation has become a complex one, and different former farmers are making different choices depending on their individual circumstances.

“The economic pressure felt by some former farmers has led them to accept the compensation, while others remain committed to advocating for the full terms of the agreement.

“The diverse range of perspectives has, to a certain extent, fragmented the focus of the compensation cause.”

Last year, Finance, Economic Development and Investment Promotion Minister, Prof Mthuli Ncube, proposed issuing Treasury Bills to former farmers as an alternative form of compensation.

Some accepted while others remain committed to receiving the full and agreed-upon compensation outlined in the GCD agreement, he said.

In August last year, President Mnangagwa acknowledged in an interview with ZTN Prime the Government’s current financial capacity may necessitate settling the compensation debt over “generations,” implying a long and uncertain timeline.

Persistence Gwanyanya, a Harare based economist said Zimbabwe’s debt and arrears resolution strategy would faces significant hurdles due to the persisting issue of unpaid land compensation for former farmers. He, however, said the “idea of token payments is a good gesture for now until our (economic) situation improves.”

Tony Hawkins, another economist recently explained to the UK’s Telegraph newspaper while the Government could use funds from foreign currency earnings to partly pay the former farmers, farm compensation was low in the order of priorities.

“In theory it would have been possible to pay US$35 billion from exports and especially from diaspora inflows of well over US$1 billion a year, but the reality is that farm compensation is low in the order of priorities,” said Hawkins.

He suggested the GCD agreement emerged largely due to pressure from international donors and lenders that emphasised that without compensating former farmers, attracting new capital to Zimbabwe would be extremely difficult, with potential investors from countries like China, Iran, and the UAE being the only likely exceptions.

The GCD agreement provides for the compensation of former white commercial farmers for the following; the value of any permanent improvements made to the land, such as buildings, the value of any crops or livestock that were on the land at the time of acquisition, and the loss of income that the farmers incurred as a result of losing their land.

The GCD Agreement also provides for several mechanisms to ensure that the compensation process is fair and transparent.

These mechanisms include the establishment of a joint evaluation committee to assess the value of the farmers’ claims, and the establishment of an independent appeals tribunal to resolve disputes.-ebusinessweekly