Agriculture can anchor doubling of economy

08 Nov, 2019 - 00:11 0 Views
Agriculture can anchor doubling of economy

eBusiness Weekly

Lesley Ndlovu
As in many other developing countries, the agriculture sector has a crucial role to play in the Government’s ambitious plans to grow the country to a middle-income economy by 2030. Doubling the size of Zimbabwe’s economy in a decade may seem like a daunting task. Understandably, there may be some scepticism in this era of mega deals that naturally take several years to yield noticeable job creation and economic impact. Unlike relying on foreign investment, however, enhancing productivity in agriculture is within our grasp.

To double the economy by 2030, Gross Domestic Output (GDP) has to grow by at least 7 percent per annum, on average. This is completely feasible when you consider the immense resources at the country’s disposal. The agricultural sector contributes 17 percent of GDP and provides employment and income for 60 percent of our population. In recent years there has been a marked improvement from yesteryear doldrums.

I posit that a fresh policy perspective is needed to fuel the next phase of growth. Arguably, the most contentious aspect of agriculture in Zimbabwe, at present, is related to the system of land tenure. I am not going to debate the merits of the fast track land reform programme because this has been done at great lengths in the last two decades; but I will propose a bold new approach to further consolidate the current land tenure system.

During the fast track land redistribution, the new farmers were granted 99-year leases which are not transferable. It is difficult to use these leases as security for borrowing to finance production. This expeditious approach may have worked as a stop gap measure, but time has come to offer a permanent solution by granting the new farmers title deeds. Indeed, the granting of title deeds to the new farmers is the logical next step in the natural progression of land reform.

Granting title deeds would provide security of tenure and succession. The title deeds can be used as security for long term financing, which is currently a major hindrance to attaining full productivity on the farms. The current approach of relying on short-term financing linked to the production cycle of the crops, is sub-optimal as it doesn’t allow for investment in long term infrastructure. Secure financing would also facilitate the use of insurance to provide protection for the farmers’ incomes. Parametric insurance, for example, whose pay-out is based on whether a base line of crop yields are achieved, provides a guarantee on the income a farmer generates, supporting project viability.

In addition, clear ownership rules will allow consolidation in farming, which could build larger commercial farming undertakings, which benefit from economies of scale and the use of more sophisticated farming methods.

To encourage the productive use of agricultural land, the Government should levy a tax depending on the location of the land in relation to the country’s agricultural regions; naturally, land in the highly productive Region 1 should attract a higher tax rate than land situated in the arid Region 5.

The tax will compel farmers to use their land to be able to meet their tax liabilities by either farming on the land or leasing it out to those who have the capacity to farm. Anyone who defaults on their tax obligations will have their land repossessed through the usual judicial mechanism for tax defaulters, the land can then be auctioned to offset the taxes and put it back into the hands of those who wish to use it productively.

Furthermore, the land tax can be initially ring fenced and used to compensate the erstwhile owners of the land for improvements and in line with bilateral investment protection agreements. This will resolve all legacy claims on the land so that the new title holders have a clean title to the land.

While the issue of land compensation is contentious, there is no doubt that finding some level of settlement with former commercial farmers could speed up global re-engagement.

Of course, this will be beneficial on two fronts; firstly, it would help the country reintegrate into the global financial system and secondly, it would open agricultural output to more international export markets. The pros and cons need careful assessment. Its important, however, that policy adjustments are implemented at the country’s own pace not at the whims of foreign dictates.

A vibrant agricultural sector is the backbone of the economy as it provides raw materials for the manufacturing sector, which ignites the industrialisation of the country. Let’s take a bold new step towards achieving finality, certainty and clarity in the land reform programme and work to double the size of our economy in the next decade.

Lesley Ndlovu is a UK-based financier with extensive experience in insurance and asset management. He is a graduate of the University of Oxford and INSEAD Business School and can be reached on [email protected]

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