Zim shifts posts on US$3,5bn land deal

Government has reportedly come up with new payment terms to compensate white former commercial farmers whose farmland it acquired under the fast-track Land Reform Programme, which began at the turn of the new millennium, Business Weekly can exclusively reveal.

According to the Global Compensation Deed signed in July 2020 between the Government and the former farmers, the latter were supposed to receive US$3,5 billion as compensation for improvements made on the farms.

The land, which constituted about 70 percent of the country’s arable land, was acquired from the more than 5 000 white former commercial farmers for the purposes of resettling landless Zimbabweans who were working and living on largely unproductive ecological regions characterised by poor rainfall patterns.

It also emerged that under the country’s Constitution, two types of farmers were supposed to be compensated for both land and improvements on farms and these included (1) a group of “indigenous” Zimbabweans, or black farmers and (2) white farmers who had land protected by Bilateral Investment Protection and Promotion Agreements (BIPPAs).

BIPPAs are agreements signed between countries, which protect the investments of foreign citizens. Zimbabwe has, according to the Ministry of Foreign Affairs and International Trade, ratified at least 12 such agreements. The countries with which Zimbabwe has such agreements include South Africa, Germany, Denmark, the Netherlands and Switzerland, all which had significant numbers of farmers operating in Zimbabwe before the land reform programme was instituted.

Government has also agreed to offer back to the white farmers some of the acquired land as compensation, but locally-based farmers, who account for the biggest number of the affected farmers, were not considered in this deal and are the ones expecting compensation under the US$3,5 billion deal.

Business Weekly is, however, reliably informed that the new terms proposed by the Government sought to change the initial payment schedules outlined in the Global Compensation Deed signed in July 2020 to compensate for improvements on the farms.

Under the deal, the farmers are set to receive a total of US$3,5 billion.

Half the money was supposed to have been paid in the first year (2020), followed by four US$437,5 million annual instalments.

However, it emerged the Government has not yet fulfilled its pledge, according to the affected farmers and is infect proposing a new arrangement yet to be disclosed.

According to Commercial Farmers Union (CFU) president, Andrew Pascoe, Government’s new proposal on payment terms was received last week and would be presented to members for their perusal and comments.

Said Pascoe: “It’s completely different from the original terms . . . we need to examine it to see if it is acceptable (to members) so that we can start negotiations with the Government.”

Pascoe, however, declined to disclose the new Government proposals, arguing members needed to be appraised first before the proposals were made public.

No comment could be obtained from Finance and Economic Development Permanent Secretary George Guvamatanga, while Clive Mphampbela, spokesperson for the Finance Ministry told Business Weekly in an interview that: “I am not yet aware of the latest development.”

However, a source close to the matter, said for the State to come up with new payment terms totally different from the initial Global Compensation Agreement provisions means; “there is still no trust among international investors to participate in any of Zimbabwe’s fundraising initiatives.”

When signing the deal, the Government hoped it would raise money from global investors to finance the compensation. In April last year, the Government appointed London-based NewState Partners as transaction advisors to help raise the money for compensation purposes.

“Coming up with new payment terms completely different from those in the agreement means they have failed to fulfill of the original agreement,” said the source.

Finance and Economic Development Minister Mthuli Ncube said in the 2023 Budget Statement in November this year that the Government was still on course to raise the funds.

He said U.S dollar Treasury bonds would be issued next year to raise US$3,15 billion.

The bonds will have maturities ranging from six to 20 years with a zero percent coupon rate in the first four years and one percent starting from the 5th year, said Mthuli.

The coupon payments will be made on a bi-annual basis in March and August in United States dollars.

He said nearly US$300 million will be raised from funds raised from the operations of Kuvimba Mining House, a local mining company in which the government has 12,5 percent shareholding.

Zimbabwe embarked on the land reform programme at the turn of the millennium, an exercise that several analysts blame for decimating the country’s agricultural sector.

However, the Government argued that the programme was meant to correct colonial imbalances since only 5 000 white commercial farmers, at the time the exercise commenced, owned vast tracts of fertile arable land at the expense of local people, 20 years after independence.

The land exercise triggered massive disapproval from western countries, who responded by imposing economic sanctions on Zimbabwe. While President Mnangagwa’s administration has maintained that the land reform programme is irreversible, in line with the constitution, compensation for farm improvements is seen as critical in mending acrimonious ties with the west.

“Failure by Government to pay farmers is a major setback in the re-engagement agenda that the Government is pursuing,” Carlos Tadya, a Harare-based analyst said.

Economics professor Gift Mugano told Business Weekly in an interview the deal was being used as a carrot to show the new administration respected the property rights, and used that as a basis for pushing the removal of the sanctions on Zimbabwe.

“It is a blow to re-engagement efforts because we have failed to raise the money,” said Prof Mugano.

“There is still no trust because the global community is looking at how we are dealing with various issues such as constitutionalism. It goes beyond the compensation agreement; the LIMA agreement (to repay the foreign debt) and the debt strategy that was in Mthuli’s TSP programme all failed.

“Everything is failing and now need to start robust conservation on why are we failing.-ebusinessweekly