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Farm leases have no collateral value
Eric Bloch
November 24, 2006

http://www.theindependent.co.zw/viewinfo.cfm?linkid=20&id=9110&siteid=1

IT was almost five years since the government first stated that its policy on agricultural land tenure would be the issue of 99-year leases to farmers, ownership of the land being vested in the state.

Over those years, there were repeated assurances that the issue of the leases was imminent, that the leases would be available to all as would use the lands productively, that they would entrench the farmers’ security of tenure and that they would be the foundation for the long-awaited recovery of Zimbabwe’s decimated agricultural sector.

The repute of the Zimbabwe government for fulfilment of policies and undertakings has long been known to be implemented (if implemented at all) at one of three speeds: slow, very slow and stop.

However, rarely has been governmental inaction as pronounced, and inept, as has been the case of the farm leases. The government has almost 20 million hectares of land available at its disposal, albeit that despite its renowned, prolific and vociferous contentions to the contrary, most of that land was unjustly and inequitably expropriated from legitimate farmers.

Fifteen years after enacting the Land Acquisition Act, more than six years after declared intents of redistribution of the expropriated lands, 20 years after much land vested in the government as a result of purchases funded by the United Kingdom and five years after enunciating its 99-year lease policy, the government has granted 125 leases, encompassing an aggregate of less than 1% of the land supposedly to be redistributed and resettled. Big deal! What a spectacular achievement! At that rate, all the land will have been leased to farmers by about the year 2500!

Nonetheless, there was great blowing of fanfares, and much ceremonial, when a fortnight ago the first 125 leases were released to the lessee farmers. Although the government is supposed (as part of its war against inflation) to be curbing its expenditure, it unhesitatingly hosted a massive shindig at the Harare International Conference Centre, graced by President Robert Mugabe, the Minister of State for Security and Lands and numerous other ministers and dignitaries as well as a deluge from the media (mainly state-controlled).

Mugabe implied that the issue of the leases, as commenced that day, heralded the start of a new era for Zimbabwe. Not only did he contend that the wrongs of more than a century were being righted, but also that the future of agriculture was assured.

None can credibly argue that there were no wrongs perpetrated in the past. These included the abhorrent Land Apportionment Act which was law for over 40 years, unjustly and unacceptably barring indigenous and non-indigenous black Zimbabweans from land ownership.

But there were commensurate wrongs committed by the present government: its spurious, never-ending contentions that whites had "stolen" the land, now expropriated by the government, remain as specious as ever.

In fact, in its iniquitous commandeering of land ownership, devoid of regard for international precepts of justice, for human rights, for enforcement of law and order, and without fair compensation, the reality is that the government has done exactly that which it has repeatedly alleged were the offences of the past.

However, commensurate in magnitude, to that government offence, is that in committing it, the government has brought the entire economy to levels commensurate with the greatest poverty prevailing worldwide, has alienated most of the international community and, directly relevant, reduced most Zimbabweans to near starvation. That contrasts with only 10 years ago, when not only did Zimbabwe wholly feed itself but also much of the region.

The tragedies do not end there.

Key factors driving a successful agricultural economy include that the farmers have security of tenure, and that they have access to funding the development and working capital. It must be acknowledged that, to some extent, the leases may give security of tenure; prima facie, they are to endure for 99 years.

That security is an essential if lessees are to be motivated to develop and improve the farms, for none will risk capital and effort if they fear imminent loss. But, the security of tenure is not assured.

On the one hand, the government has vividly demonstrated its disrespect for tenure laws, readily overturning them, in its enactment of the Land Acquisition Act, and numerous amendments thereto, and then implementation thereof. How can farm lessees be assured that the government will not, in the future, similarly renege on its leases?

On the other hand, the government also reserves the right to terminate leases where the lessees do not properly work and exploit the farms. In theory, there is some justification for that right, but the inequity is that the government retains for itself the determination whether or not the farms are effectively used. Thus the government will be prosecutor, judge and jury while the lessees’ rights of "defence" are minimal, not even including an entrenched protection of "vis majeure", otherwise known as "acts of God".

Therefore, the assurances of security of tenure are naught but an elaborate façade, which may well result in many not proceeding on their farm development with commitment and conviction, whereupon the government can validly give effect to termination provisions!

Compounding the lease farce is the government’s contention that the leases accord the lessees collateral to secure borrowings. That contention is founded upon provisions that while the land may not be encumbered, the improvements thereon can be offered as security for funding.

Furthermore, the government states that if there is a change of lessee, then lenders can look to the new lessee for repayment of such loans as secured by the collateral of the improvements. The sad reality is that these provisions demonstrate a total lack of any realistic appreciation of private-sector provision of loan funding.

A lender needs to know that collateral is readily realisable, should realisation be necessary in order to recover unpaid loans. To achieve that, the collateral must be freely disposable, albeit usually by public auction initiated by the deputy sheriff. That is not possible in instances where a lender defaults, but remains the farm lessee, unless the improvements are wholly moveable.

Similarly, when a new lessee moves on to the farm, and notwithstanding that the government states that he will then be liable to the lender, there is no effective recourse against him unless the improvements are moveable, or the new lessee has other assets which can be lawfully attached and disposed of.

Therefore, despite everything the government has said to the contrary, the farm leases have no collateral value or, at the least, very little, and therefore the likelihood of the financial sector being able or willing to provide the new farmers with requisite finance is remote in the extreme.

Worsening the situation further, the government has now abdicated from its lawful obligation to compensate former farmers for the improvements they had effected, for it has now transferred that obligation to the new lessees. Once again the government is wiping its hands of legal and moral obligations. In the process, it is burdening many lessees with unsustainable debts.

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