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Zimbabwe Report

Zimbabwe's land acquisition--a blunder that defies belief

April 7, 2003

Originally published on March 19, 2003

The magnitude of the Government's land acquisition blunder defies belief. It also defies all attempts to measure its likely impact or even the level of destruction so far. However, with each passing month the evidence is mounting that Government's actions will rank among the most destructive in the history of Africa. That is, unless they are swept aside before too many more months have passed.

At this stage, in the early months of 2003, the country could still embark on an effective recovery course that could yield the beginnings of a recovery in 2004. But a delay of months beyond about mid-2003 could delay by as many years the start of any possible upturn. The key starting point is to secure the 2004 food and export crops.

We know now that most of the crops hoped for in 2003 have been lost already or were never planted. This year's meagre food harvests will certainly be retained and consumed by the few hundred thousand growers. This adds weight to the already-agreed fact that the balance of the 12-million Zimbabweans will be dependent on food aid until the 2004 harvests. But unless dramatic changes take place in 2003, the harvests in 2004 face every prospect of being equally poor.

To ensure that reasonable crops can be harvested in 2004, large-scale commercial agriculture has to be resuscitated. This is unavoidable for two major reasons:

· The state does not have the resources to fund the inputs, training and subsidies required by the hundreds of thousands small-scale farmers who have been resettled on formerly commercial farmland;

· Unless they are extremely capital-intensive and highly specialised, small-scale farms are inherently non-viable, particularly in drought-prone areas on fragile soils in the tropics.

Even in temperate regions with dependable rainfall and good soils, the farmers need subsidies if their areas under cultivation are too small. This remains true even when the farmers have ready access to training, advice, the latest technical advances and bank finance.

Farm subsidies are the most contentious issue in the European Union, despite the fact that the member states of the EU are among the wealthiest nations on Earth. If they find it difficult to carry the burden of subsidies, the idea has to be a long way out of the reach of relatively very poor countries like Zimbabwe.

The resettlement of Zimbabwe's large-scale farms destroyed nearly 90% of the country's commercial farming businesses, which used to number about 5 000. This number constituted a high proportion of the productive enterprises in Zimbabwe, and can be compared to a similar number of manufacturing companies and about 400 mostly small mining companies.

Outside the spheres of agriculture, mining and manufacturing, most businesses are in the commercial, professional and other service sectors. However, a high proportion of the manufacturing and service sector companies also relied on commercial agriculture. Many factories either supplied products to farmers, or depended upon farmers for their own inputs. Farmers made considerable use of transport and communications services, building and engineering services, banking, insurance and legal services, and were major customers of the fuel and electricity suppliers. In return, they generated agricultural outputs that were more than enough to pay for all the products and services. They produced about 38% of Zimbabwe's total exports, the revenues from which helped to fund the importation of essentials for every other commercial and industrial sector in the country.

Commercial farmers produced a high proportion of the food crops, growing about 40% of the maize, almost all of the wheat and soya beans. They also produced almost all of the sugar, coffee, tea and horticultural crops, almost all the citrus and deciduous fruits and almost all the beef, pork, poultry and dairy products. They were also responsible for a high proportion of the non-food crops, producing most of the tobacco and timber and about 30% of the cotton.

They employed the largest proportion of the country's workforce, paid wages totalling Z$3 billion a month, provided housing for 350 000 families, schooling for 500 000 children and basic health care for more than a million people.

The commercial farming industry also gave rise to most of the business activity that sustained the country's small towns. This was through the steady flow of supplies to or from the farms, the demand for workshop, transport, construction, financial and insurance services and the purchasing power of the farm-workers.

Incredibly, this is the industry that government has decided to close down. Into its place, they have extended the largely subsistence agricultural practices of the communal farming sector, areas that have remained under-developed and impoverished for most of the past century for the very same reasons now imposed on the former commercial farmland.

These reasons are the absence of collateral value for the land, the consequential isolation of the farmers from the financial services sector, their dependence on state subsidies and patronage and their ability to disregard with impunity the exigencies of the marketplace. But as it was always impossible to ring-fence agriculture to prevent repercussions on other sectors, farming is by no means the only casualty of the rolling disaster.

As a result, Zimbabwe is in crisis. Food shortages are forcing the country to appeal for aid as it no longer has the money to pay for food it has failed to grow. A severe shrinkage of manufacturing and mining output has resulted from the lost agricultural exports as well as from the adoption of a fixed exchange rate. This policy is in defiance of the effects of inflation, which has soared to more than 200%, the highest level in the world today.

Shortages of essential imports such as petroleum products are destroying business efficiency along with tourist inflows, hundreds of thousands of jobs have been lost, hundreds of thousands of children have lost their school places and the health services are in an advanced state of disintegration.

Zimbabwe's domestic debts are so crippling that government believes its only option is to confiscate the country's pension funds and other savings through massively negative real rates of interest. It is in arrears on its foreign debt service obligations and therefore does not qualify for World Bank or IMF funding. And its prospects appear more dismal by the day as, with each reaction to each new instability, government takes measures to more deeply entrench the policies that caused the problems.

These policies started with government's attack on agricultural property rights, essentially to "legalise" the dispossession of commercial farmers through constitutional amendments and to nationalise their land. Claiming that the move was to redistribute land to land-hungry peasants, to aspiring new farmers and to war-veterans, politicians, party-supporters and veterans of the war in the Congo, the government appeared to be content with the assumption was that farming skills were instinctive and intuitive.

But farming is an exacting business. Farmers have to pit their wits against the hazards of drought, flood, wind, hail, soil erosion, insect pests, crop diseases, fungi, and a wide variety of animals from birds to rodents to big game. Organised raids by humans hungry for food or profit can be added, but these additional threats do not complete the picture. Equally serious, but less tangible hazards have to be factored in, such as possible changes in interest rates, price controls, exchange rates, labour costs, world market prices, transport costs, fuel costs, electricity costs, import duties, subsidies and consumer buying power.

The process of getting good at farming is a long haul. It entails getting to grips with all the issues involved and using one strategy or another to minimise the risks. All the challenges have to be met with investments of time and money, in education and skills development. And all these strategies call for long-term planning and yet more money, more time and more effort.

All of these components of the business of farming can be leveraged up to much more powerful levels if the farmers can gain access to information on market preferences and price trends. They can further enhance their prospects of success by learning how futures and options markets might reduce uncertainties.

Of course, if everything always goes right for all the farmers, they won't have to be nearly so well trained, so well prepared or so well informed. If, every season, the seed and fertilisers are readily available, if the ploughing and sowing present no problems, if rains are good and right on time, if the weeds don't choke the crops, if the insect pests and crop diseases don't attack, if the wildlife stays away from the crops, if the harvesting goes smoothly and the workers are content with their pay, if transport to markets is easily found, if the prices are good and if revenues are comfortably above production costs, everyone will be happy and well-fed and the farmers as well as the country will be prosperous.

But that is a lot of "ifs" in a row. Life is not like that -- anywhere. In particular, life is not like that in a drought-prone tropical country that has fragile soils and is subject to the full selection of tropical extremes and hazards. Add to that the range of risks from the financial, marketing and distribution uncertainties, and the reasons fall into place for the years of careful planning and investing needed to ensure that at least some production and distribution can continue even if feared hazards materialise.

It is this process that accounts for the successful development of commercial agriculture. In Zimbabwe, as a result of it, the industry as a whole became a highly efficient machine that could be depended upon to generate and sustain the vital flows of the country's agricultural requirements.

Zimbabwe's commercial farming industry should have been viewed as a vitally important and delicately balanced system. If it had been so viewed, more people would have appreciated that any steps taken to remove components or disable its functioning mechanisms would quickly result in hardships that would affect the whole country.

Zimbabwe's current predicament and its increasingly frightening prospects are living proof of the fragility of the system and the business relationships within it. The predicament is also proof of the need for knowledge-intensive and capital-intensive agriculture.

Zimbabwe's population has increased dramatically in the past because of the success of this industry and the growing population came to depend upon its continued success many years ago. The current economic crisis is because of the extremely damaging decision to deliberately close it down.

The authorities have taken aim at the heart of the intricate commercial farming machine and deliberately thrown their heaviest spanners into the works, completely overlooking the country's world-record-breaking population growth during the past century.

Frequent claims are made that the government has travelled too far down this land redistribution road to turn back, and therefore the restoration of commercial agriculture to its former position cannot happen. However, it is the financial survival of most of the resettlement farmers that is not going to happen. The state planners do not appear to have factored in extent to which subsidies are needed by small-scale grain farmers, wherever they are, all over the world. The prospect of a developing country successfully subsidising a large percentage of the population is precisely nil. Zimbabwe therefore faces the near-certainty that most of the resettled farmers will themselves abandon the land. The proof comes from all over the world as well as from Zimbabwe's own experience: getting a good return on expensive outlays is impossible on small-scale operations. Centuries of experience has proved that only by enjoying economies of scale can producers in highly competitive markets reach the needed levels of efficiency.

Countries cannot side-step the basic issues. The value of what is produced has to exceed the cost of the inputs that went into its production. If it does not, a loss is incurred and the producer has been engaged in the destruction of wealth, not the creation of wealth. Only very rich countries can afford to fund such extravagance. In a developing country, the inevitable result of efforts to sustain such conduct is severe inflation and deepening poverty.

Zimbabwe's economy is in very serious trouble already and it is on a course that can be guaranteed to take it into very much more. Only by making some extremely urgent and imaginative changes to this course can the country hope to support its population through the coming years. A fundamental first step is to restore commercial agriculture.

Why is it that allowing small-scale farming to displace large-scale commercial farming will be so damaging? Part of the answer lies in the fact that farming is a business. No reference need be made to race. The real issue is the business environment, and one that delivers the strong possibility of failure has displaced a business system that delivered the much stronger possibility of good results.

Dispossessing the farmers, taking the land out of the market and destroying its transferability as well as its collateral value did the major damage to the business environment. From there, the damage has been mainly consequential. Those to whom the land is allocated have no legally protected security of tenure that could encourage investment and no access to personal funding. But they face little threat of dispossession while they remain loyal supporters of the ruling party. This political hold on the land simply means that better farmers cannot displace them.

In contrast to the system in which the farmer's performance determines whether or not he can meet his obligations, this patronage-based system virtually guarantees mediocre results.

In the commercial farming system, the farmers are good because they have to be. With constant pressure on them to repay loans and mortgages, they work hard, study hard and leave as little to chance as they can. They stand to lose everything if they fail.

A farmer who does fail is quickly displaced by the very demanding and very unforgiving system. His land is placed back on the market and hopefully the new buyer will have a better idea of what to do with it. The system itself imposes the levels of competence and dedication needed to ensure the farmer's success.

This can be all too easily characterised as an unfair and even racially- motivated system that has been designed to keep out those variously defined people who do not make the grade. Using such arguments to discredit the very standards that make the system work, ruling party politicians have realised that they can more easily retain power by prohibiting the entry of such harsh ideas, using violent means if necessary, and they can retain their supporters by dispensing fear and patronage.

Offering patronage in the form of something for nothing is always a powerful tool, but for that idea to work the party needs land and other resources to give away. It also needs to make the people so dependent on the party's continuing patronage that they are cowed into submission by the threat of its withdrawal.

Capturing land and businesses from private owners and handing them out free to supporters meets the first of these, and the second is met by destroying other sources of income. For this reason, the lost industrial and commercial jobs are not defined as party failures. Affected workers can try to win the favours of the patron by showing the necessary loyalty and any that show hostility to government can be quickly shown that the protection of the law can be denied them. Thus the price for showing disloyalty can be immediately shown to be high.

These hidden layers of the purposes behind the policies expose the fallacy in the ruling party's initial claim that the land redistribution programme was to support agricultural reform. The entire exercise was purely about politics, or more specifically the politics of patronage. The process never had an agricultural dimension of any kind.

The targeted land was commercial agricultural land, but the purposes to which most of the commercial land had been applied deserved to be emulated, not reformed. And the only farmers who needed to be reformed were those who were farming by obsolete or inappropriate methods, suffering failing yields and causing land degradation -- the communal farmers on communal farm land. A genuine land reform programme would have identified the system as the principal point at issue. An examination of the options would have shown that it is not the colour of the farmer, or where the land is situated, but whether the system was driven by collective ownership, or whether it relied on market-driven individual freehold title that was backed by title deeds and legally supported ownership rights.

Consider the differences between the farmers in East Germany and West Germany before the Wall came down. People of the same race in the same country were farming very comparable soils on either side of a political divide. To the west, was one of the richest countries in Europe; to the east, one of the poorest. South Korea might be similarly compared to North Korea.

The indigenous population of this country, now at about twelve million people, is 25 times as big as it was about a century ago. This record rate of increase was made possible and was sustained by the changing nature of the country's economy. All over the world, industrialisation has permitted the growth of prosperity as well as populations.

Having built up Zimbabwe's population with the support of more efficient industrialised methods, the country has become dependent on sustaining these methods if it is to sustain this population. And to remain competitive in world markets, it has to keep on improving its performance, simply because producers in dozens of other countries will never stop trying to capture Zimbabwe's markets.

But instead, Zimbabwe has chosen to destroy its commercial farming business sector and to put at risk thousands of other companies as well as the jobs of perhaps half its working population. With them will go businesses that earn more than half the country's foreign exchange and provide government with more than half of its tax revenues.

In short, Zimbabwe is in the process of cutting its economy back to about half its previous size. It will no longer be able to sustain twelve million people at the previous average standard of living. Without the support of the industries that will die, the economy will barely accommodate six million. But the surplus six million has nowhere to go. So the consequences for everybody in the country will be appalling.

This style of land tenure, amounting to State ownership and conditional rights to cultivate, is the very antithesis of empowerment. It has impoverished many countries in the past and it is in the process of impoverishing Zimbabwe now.

With minor variations, it is the same system that has been in place in Zimbabwe's communal areas. There, the chiefs and headmen allocate the land. In the new resettlement areas the government-driven process is somewhat less structured, but the same severe limitations apply, resulting in the same poor results. The system itself imposes the limits on what can be achieved.

If they do not soon change these destructive policies, Zimbabwe's population should brace itself for the onslaught of waves of new evidence as one entirely predictable failure follows another. Food shortages are with us already. Hunger is growing worse by the day and showing every sign of generating civil disturbances before long. The country's export earnings are already down and will fall further as the volumes of our principal exports continue declining.

As more commercial farms close, more of the businesses that supplied their needs or depended upon their output will also shut down. Hundreds of thousands of jobs in, manufacturing, retailing, transport, financial services, construction, insurance services and engineering as well as the professions will come to an end.

Looking at the implications of the Zanu PF policies, it is hard to imagine that even the supposed direct beneficiaries of the land redistribution policies would have supported them if they had realised the consequences. When, in time to come, the people add up the costs in terms of the millions of lost jobs, lost incomes, lost accommodation, lost schooling and lost opportunities for the rest of their lives, the few genuine direct beneficiaries of this rolling disaster will be very hard to find.

All letters published on the open Letter Forum are the views and opinions of the submitters, and do not represent the official viewpoint of Justice for Agriculture.