The Sunday Mail
FS Nyangore
Zimbabwe is an agrarian economy with massive potential if managed effectively. Fixing our agriculture will not require billions of dollars as purported by some but through implementation of key policies that can streamline the industry and unlock its potential.
This year, the country is experiencing a massive drought that could prove devastating because there seems to be no long-term or short-term policy regarding how the country manages its strategic food reserves and prepares for national food emergencies.
Droughts and floods in Zimbabwe are somewhat cyclical and thereby predictable to a certain degree, but time after time, our Government has been caught flat-footed with these elements of weather putting millions at risk of hunger and starvation and a huge strain on Government coffers.
Ownership
One sure way Government is going to improve yields and food security in the country is to sort out land ownership rules in the country. Land reform is irreversible, but there is a lot that needs to be done.
There are two main issues that need to be sorted out with regards to land ownership today and these are: (i) ownership of commercial farmland acquired during the land reform programme, and (ii) the status of the commercial farmland that was not acquired during the land reform programme.
Sorting out these issues will unlock a lot of potential in the farming industry and will also help fix other areas of agriculture that are lagging behind today, which I will discuss below.
Government needs to get rid of the 99-year leases and replace them with title deeds for the land that was parcelled out during the reform period.
Land development and farming is not a 99-year event but a multi-generational investment and those who have the land should be allowed to develop it without restraint of a pending sunset to their ownership.
These land titles should be bankable and freely transferable allowing the holders to pledge them as collateral to secure cheap long-term financing that can be used to develop the land and improve yields.
To help banks and the judiciary system to facilitate transferability of titles, Government should create a transparent online national land registry where ownership and liens associated with land can be tracked.
By allowing land titles to be bankable and transferable, the land can be naturally transferred from those who under-utilise it to those who can efficiently utilise it.
The national land registry should also include designated use, and historical crop yields for that land.
The assumption is that to maximise output, certain land should only be used for certain activities (for example, land in Nyanga should be used mainly for fruit growing).
Such output data can then be used to impose penalties or taxes on farmers who either under utilise or misuse the land.
The same information on yields can also help banks approximate the true value of the land to facilitate agriculture lending, for example one hectare of land in a maize-designated farmland should not attract same valuation as a hectare in a tea-growing designated area.
With such information on output, type of crops, etc Government can also use it to direct policy that balances between food security and export farming.
To ensure that land ownership will not end up concentrated in the hands of a rich minority through bank foreclosures or direct sales, Government can vet purchasers and impose maximum family ownership by number and size.
Such limits will vary from region to region depending on land use. A transparent land registry would also help ameliorate the risk of corruption and ownership violations.
Finality
With respect to farmland that has not been appropriated, Government need to either declare such land national land and redistribute it to farmers who failed to get land during the first land reform or give the current owners titles subject to compliance with size and land use restrictions.
What is not helpful is to for the country to continuously go through periodic occupations and repossessions.
Such chaos hurts tourism, FDI, our international image and farm production.
The white farmers who were spared from the land reform programme are not being efficient with their land because there is no clarity with regards to what will happen next, making long-term planning and capital deployment virtually impossible.
By taking a definitive stance on ownership of commercial farmland, Zimbabwe can take a giant step towards consolidating the gains of the land reform programme.
It is unacceptable that 15 years after the first farm occupations, the country is still going through sporadic farm disturbances, which are massively affecting yields.
Planning
Farmers who own commercial prime farmland have a national obligation to produce food for the country. Government should, therefore, come up with policy that such national resources are being used for the benefit of the nation, and not just for personal gain.
For instance, Government can designate some parts of prime farmland as “national strategic farmland” where individual farmers own the land but, Government can mandate production of a minimum amount of grain crops, failure of which will results in penalties.
For example, if weather cycles are pointing to a drought in two years’ time, Government can target to increase the national strategic grain reserves by directing farmers in “national strategic farmland” to increase their maize production in anticipation of the drought.
What is unacceptable is that prime farmland that has potential to feed the whole country is used for tobacco farming when Government has intelligible information on a pending drought.
Freebies
To transform Zimbabwean agriculture into a sustainable competitive world-class industry, Government needs to stop giving commercial farmers freebies (seed, machinery, etc).
Handouts do not work because they encourage a culture of dependency, kill innovation and promote corruption and inefficiencies.
Instead, Government should help farmers through promotion of agricultural financing by setting up State-backed entities that can guarantee agriculture insurance companies.
One way to cushion farmers from the elements of bad weather that can cause losses (drought, hail storms, floods, etc) is to promote the insurance industry to cover farmers.
Such insurances can be expensive to underwrite given the frequency at which the country experiences bad weather, but Government can act as back-stop (guarantee) to the insurers, which can help reduce insurance premiums for the farmers.
Unlike freebies that tend to be doled out on a patronage basis, Government guaranteed insurance means the benefits are available to every farmer that cares to buy insurance policy.
Crop and animal insurance will also encourage banks and other lenders to offer cheap agricultural loans because it reduces probability of farmers defaulting due to elements of bad weather.
Lending
To boost financing in agriculture, the Reserve Bank of Zimbabwe can set up independently-run credit rating agencies that can profile and develop credit rating scores for borrowers (both individual and corporations).
The rating company can sell the borrowers’ ratings and profiles to banks that use the information to underwrite loans and determine interest rates for different borrowers.
A national credit rating company can help streamline loan underwriting process especially when dealing with individual borrowers, which can result in lower interest rates. Banks can know the serial defaulters and avoid issuing loans to such individuals or demand more collateral.
Individuals with good credit history can enjoy lenient financing terms and larger loans.
In the absence of national rating systems, banks can suffer from serial defaulters who can easily take multiple loans from different banks at the same time.
Creating a credit rating system will also help promote a culture of responsible borrowing as borrowers will know that a default will taint their credit history and can affect their ability to access credit in the future.
Promoting a national rating agency will thus benefit small farmers who develop good credit history by connecting them to banks who would ordinarily not lend to such borrowers.
Implementing these policies will not require billions of dollars but commitment and time from the Government.
For instance, the size of a Government guaranteed reinsurance could start as small as US$50 million to US$100 million and naturally grow, as more farmers get insurance.
Land title registration fees and title search fees can be used to fund the online land registration system.
Banks, as main beneficiaries of a national ratings agency, can contribute to the capital necessary to set up the agency.
Agricultural policy should be constructed so that it enables competitive farmers to succeed and lazy and speculative farmers who hold the land simply to benefit from Government doled farming freebies to be flushed out.
FS Nyangore is an analyst with an interest in economics, banking and finance and he writes from his homestead in Rugoyi in Rusape. He can be contacted on [email protected]
