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Rules of the game: Land tenure and the commercialisation of smallholder agriculture
Dale Doré, Sokwanele
November 12, 2013

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This paper is part of the Zimbabwe Land Series

Summary

The debate on land tenure has reached an impasse. A nationalist narrative based on the customary tenure system and state control over agricultural land has taken root. The purpose of this paper is to move the debate towards a more developmental approach that focuses primarily on reducing poverty in communal and resettlement areas. History, of course, matters. The paper therefore begins by providing a brief stylised account of how land rights evolved. It then presents an economic critique of how smallholders have become entrapped in a tenure and farming system which offers neither them nor their children much hope of escaping a life of poverty. From there, the paper presents an alternative land tenure policy and institutional framework as a foundation for reducing poverty by commercialising smallholder production. It posits two main arguments. The first is that security of tenure is a necessary condition for the commercialisation of agriculture, but not a sufficient one. Efficient smallholder farm production and commercialisation also require the transferability of property. The second argument is that enclosing common property or converting it into individual holdings is a necessary step towards ensuring environmental sustainability.

1. The evolution of property rights

Esther Boserup - in her classic exposition, The Conditions of Agricultural Growth - showed how the pressure of population on land drives changes both to property rights and technical innovation, leading to agricultural intensification and growth. She argued that as populations grew and land became relatively scarce, it first became necessary to use more labour to maintain production levels. Then, as population continued to grow, production levels could only be maintained by introducing technical innovations such as crop rotation and, later, by applying fertilizers and hybrid seeds varieties. However, Boserup made the crucial point that this process of technical intensification was necessarily accompanied by the institutional evolution of land rights. In other words, whereas initially households were allowed only to continuously cultivate land, they were later able to bequeath and sell it. Eventually, this evolutionary process of institutional development produces a unified system of land documentation and registration, backed up by the state’s enforcement of property rights.

My central argument is that the customary system of tenure, which worked perfectly adequately in a pre-industrial era when the country was sparsely populated, has not been allowed to evolve. Customary rules have been frozen in time, first by the Rhodesian authorities and later by the Zimbabwe government. The fundamental problem is that population growth has not been accompanied by the necessary changes in the rules governing property rights to maintain productivity. As a result, technological innovations have not only failed to take hold in communal areas, but under conditions of population pressure, capital is eventually squeezed out of the agricultural system. Inevitably, most communal areas have stagnated into pools of poverty that are environmentally unsustainable. And worse, the spread of this tenure system into the resettlement areas will eventually reproduce the very poverty and environmental degradation we see in the communal areas.

2. What's the problem?

Start with population. As estimated 1.2 million households – nearly half Zimbabwe’s population – live in the communal areas which cover 16.4 million hectares, or about half of Zimbabwe’s agricultural land. The defining feature of these areas is a customary land tenure system whereby local leaders allocate arable land to households and their families on a usufruct basis. This means that households have use rights, but no rights to rent or sell their land. Another defining feature is that households are entitled to use common property resources, such as water for household use and irrigation, woodlands for firewood and building, and pastures for grazing cattle and other livestock. So, what’s the problem? There is no problem when the population is very low. But when the customary system is faced with an unprecedented growth in population and livestock numbers, debilitating diseconomies make themselves felt in the absence of changes to property rights. So how does the system conspire to perpetuate poverty?

2.1 Arable land

First consider arable land. Because it is allocated rather than sold, the system grants households access to land for cultivation that carries no cost to the user. In other words, land use is fully subsidised. This may seem like an advantage. But in the absence of a price mechanism or market signal, there is nothing to constrain demand for this limited and scare resource. This has four economic ramifications. First, it distorts the allocation of inputs (factors of production) which reduces the efficiency of farm production. Second, an ever-growing population under a traditional system of inheritance sees plots being continually subdivided into smaller and less viable units of production. Third, when most of the best land has been occupied, families in search of land spill over into more marginal areas, leaving in their trail exhausted soils and a denuded landscape. And, fourth, the usufruct basis of communal land rights precludes the use of land as collateral, thus restricting the ability of communal households to gain access to credit.

Let us consider in a little more detail how these processes create inefficiencies, squeeze out capital, and perpetuate poverty.

The economic principle of optimal factor combination holds that the efficiency of farm production requires land, labour and capital inputs (the factors of production) to be used in such proportions that output is maximized for a given cost. But, because land is free and labour is relatively much cheaper than capital, households will prefer to cultivate more land rather than using capital – notably fertilizer – thus reducing soil fertility. This inherent bias against capital inputs is aggravated by population growth. Because the tenure system offers no mechanism for farmers to consolidate plots into larger more viable units, plots are gradually subdivided into smaller and less viable holdings. The result is obvious, as Figure 1 shows. As plots get smaller, households’ farm surpluses and cash earning gradually fall. With less cash to buy fertilizer, improved seed and equipment, output falls still further. Households thus remain trapped in a subsistence farming system that is underpinned by customary tenure.

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