LIVINGSTONE MARUFU
Government has proposed a new plan to compensate white ex-farmers with authorities saying they will issue commercial paper into the market in a frantic attempt to fund its US$3.5bn compensation deal.
In 2020, the government agreed to compensate the former farm owners in phases and the first instalment of US$1.75bn was supposed to be paid in 2021 and the balance paid in four equal instalments of US$437.5m per year.
The government has been shifting goal posts on several occasions much to the chagrin of the former farm owners fear age may not be on the side and many are pushing for the immediate action for Zimbabwe to meet its side of the bargain.
Finance and Economic Development deputy minister Clemence Chiduwa said compensation framework has not been finalised as discussions are still continuing between former farmers and the government.
“We continue to make part payments as provided for in the budget with a likelihood of paying using treasury instruments spread over the years. This is going to be decided based on negotiation outcomes that are being finalised,” Chiduwa said.
However, the farmers feel there are loose ends that still need to be tied.
Commercial Farmers Union president Andrew Pascoe said: “We have engaged our financial and legal advisors to pave the way forward but we have proposed safeguards, which we want to be included in the deal once we are done we will engage the authorities for the final decision.”
Some of the commercial papers issued by the government are Treasury Bills and bonds (TBs). Although in stable economies, TBs are considered one of the safest and go-to investment instruments as they are considered risk free and liquid due to their strong backing by government, in Zimbabwe, the commercial paper has in the past few years become a major source of economic vulnerabilities.
The commercial paper has been reportedly abused in high-profile cases that also involve politically-connected elites.
There are also concerns that the issuance of TBs worth a staggering US$3.5bn into the market will crowd out private sector lending by local banks.
The new deal comes after the government last year proposed an interim cash payment of 10% or US$350m of the Global Compensation value of US$3.5bn, over four years.
The government was supposed to pay interim cash payments of US$35m per year for three years, starting in 2023 to 2025, with the balance of US$295m being paid in 2026 from the sale proceeds of the former farmer owners’ 12.5% Kuvimba shareholding and/or sale of any other government asset.
But, that deal was rejected by farmers.
The TBs will be issued with features which include prescribed asset status; liquid asset status; tradable; payments emanating from the bonds will not be subject to taxation, including income, capital gains and/or inheritance in Zimbabwe and redeemable as and when additional resources become available to the government.
