An alternative model for Land Reform Resettled farmers are in need of capital to retool their farms for better productivity
Resettled farmers are in need of capital to retool their farms for better productivity

Resettled farmers are in need of capital to retool their farms for better productivity

Political Mondays with Amai Jukwa
ECONOMISTS are in agreement that funding for agriculture will remain limited as long as farmers do not have transferable title to land — a prerequisite if such land is to serve as collateral.
On the other end sits an understandably cautious Government, wary of the political ramifications of allowing transfer of title, which would in effect allow beneficiaries of the Land Reform to sell land that was freely given.

On closer inspection, Government’s concern seems to be two-fold: Allowing transfer of title in the hope of unlocking collateral will inadvertently allow the sale of land.
In consequence, and perhaps more worrying, this opens up the dangerous possibility of well-funded groups gradually mopping up vast tracts of land.

Notice that the anxiety of policymakers is not over transfer in itself but the dangers that arise from uncontrolled transfer.
Specifically, concern surrounds the potential injection of foreign capital, via surrogates, in a way that could undermine the policy of absolute indigenous control. Apart from that, there is nothing controversial about land moving from the hands of indigenous person A to indigenous person B.

It is possible to reconcile these concerns with the legitimate need for collateral expressed by the banks.
I accept that there are potentially several dozen models that could work and that this is merely one such possibility.

Whatever shape such policy eventually takes its pillars will invariably be the merging of these two seemingly conflicting goals, preventing the sale of state owned land while still enabling farmers to borrow against that land.

A1 and A2 leases must be made transferrable but subject to a number of qualifications.
Such transfer should only happen between a registered commercial bank and a farmer.

In this way it would not be possible for individuals to trade in land.
If an individual defaulted on a loan the bank would be able to hold the title to that piece of land and attach a value to it based on the value of the loan.

But here comes the tricky part. The bank would not be able to sell that lease although it could trade it with another bank. The Ministry of Lands would be obliged by law to find an indigenous ‘buyer’ for that lease (the price being the equivalent of the defaulted loan) within a specified period after which the debt would immediately transfer to government necessitating prompt payment to the bank.

Consider a farmer with 300 hectares of land who borrows $50 000 and fails to service that debt thereby leading to the aforementioned seizure of title.
If the Ministry of Lands were to today float a $50 000 offer for that same piece of land on a 99-year non-transferable lease to indigenous Zimbabweans, demand would outstrip supply. There is a very real demand for land.

A number of potential problems immediately jump out at you.
The assumption here is that the debt would be at a value the indigenous buyers would be able to meet upfront. What if an individual maliciously borrowed a million dollars with no intention of farming and ran off?

It is possible that no indigenous buyer would be willing or able to fork out such a large sum?  Legislation classifying such conduct as fraud would be helpful but it still would not answer the question of the sincere farmer who fails.

The establishment of a Land Market by the Ministry of Lands could help create floating benchmarks for the maximum loan size for any given piece of land.
Such a market could operate by inviting individuals to bid for land and make deposits to secure land that matches their bids if it becomes available. Assuming a default rate of 16 percent (arbitrary), the equivalent percentage of land under secured financing would be floated on the market.

If the average bid for 100 hectares of land were $35 000 this would be the maximum a bank could lend to a farmer with a lease for 100 hectares.
This is a gross simplification of what would be a complex system but the underlying principle is quite straightforward. In essence what this system simply does is leverage demand for land by indigenous Zimbabweans and use that as collateral.

The Government would retain overall control of resettlement policy — by wielding the power to decide who can take over repossessed land — while the banks would have confidence in the transparent mechanics of the system.

Whatever the Government decides to do, it must do it quickly.
The eventual policy, however robust, will not immediately result in unrestrained inflows of capital. Investors will remain cautious until the system is tested, a process which might take a few years.

The sooner we start the better.

Ndatenda, ndini muchembere wenyu Amai Jukwa.

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