Government, which in July signed an agreement to pay US$3,5 billion compensation to white former commercial farmers who lost their farmland, should restructure the debt rather than attempt to clear such a huge liability with constrained capacity, Zimbabwe National Chamber of Commerce (ZNCC) has warned.
ZNCC proposed that a tax be introduced on farmers that benefited from land repossessed from the former commercial farmers, under the Government’s fast track land reform, to assist in clearing the huge debt.
Making its submissions for the 2021 national budget, ZNCC said while it appreciated that paying the compensation was a Constitutional issue, clearing the debt was currently not a priority, neither was it the one deterring the inflow of foreign capital.
However, that is in stark contrast to the perception of the Government, which says one of the major impediments to Foreign Direct Investment (FDI) flows into Zimbabwe, is lack of investor confidence, partly due to violation of property rights.
This is specifically the case, the Government contends, after the previous administration failed to honour commitments made under signed and ratified Bilateral Promotion and Protection of Investment Agreements (BIPPAs).
Foreign Affairs and International Trade Minister Dr Sibusiso Moyo, says since assuming office in 2017, the Government has marked a significant break from the recent past by clearly demonstrating its commitment to honour its international obligations.
He is on record saying that to promote international trade and investment, the Government’s efforts had resulted in the successful passage through Parliament of at least six of the 18 outstanding BIPPAs.
As such, and in this spirit, the Government signed the US$3.5 billion Global Compensation Deed with representatives of the white former farmers whose land was acquired during the fast-track Land Reform Programme of the late 1990s and 2000s.
The US$3,5 billion compensation reportedly translates to payment of US$875 000 per farmer, using an average of 4 000 farmers.
In terms of the BIPPA’s, Section 295 of the Constitution states that individuals whose land was acquired under the Land Reform Programme, are entitled to compensation, both for improvements undertaken upon the land as well as for the value of the land itself.
But ZNCC, one of the largest business member organisations, in its submissions ahead of the presentation of 2021 national budget due in a few weeks, said paying the compensation to the white former farmers was not a priority right now.
“The Ministry (of Finance and Economic Development) should rather engage experts for the restructuring of the compensation agreement rather and not on raising the finance because the country has committed to a high figure,” ZNCC said.
The business lobby group said resources should come from farming profits to honour obligations of US$3,5 billion agreed by the Government. It said the fiscus cannot carry the cost as it has no capacity to honour the obligation. Prior to this agreement with white former farmers, Zimbabwe’s external debt stood at about US$10,6 billion. And some observers say the external debt might be around USD25 billion.
“The obligation should not be a burden to the general tax payers. There is a need to introduce a tax to be paid by farmers who benefited from the land reform which will go towards paying the US$3,5 billion,” ZNCC said.
Further, ZNCC contends that beneficiaries should pay for the farms on 25-year mortgages, which can be used to compensate the white former commercial farmers.
Contrary to that view, the Government says full respect for property rights, rule of law and engendering full confidence in the country’s legal system to effectively promote and protect those rights was critical in pushing forward effort to improve the ease of doings in Zimbabwe.
ZNCC also said no debt should ever be procured without the involvement of the Parliament of Zimbabwe. It said the legislature must be held accountable for the stock of debt in the economy and should be availed with regular market updates on the same.
Zimbabwe embarked on an historic land reform programme that economically empowered over 400 000 people and so farmer huge success has been recorded in the tobacco farming sector that has been generating close to US$1 billion annually.
However, there are calls for a sustained and systematic support for the farming sector from Government and development partners for the farming sector to effectively benefit the economy through backward and forward linkages.