Zim defaults on US$1.75bn payment

…Tables 20-year bond to ex-farmers

August 4, 2022

LIVINGSTONE MARUFU

 

Former farmers have rejected a 20-year bond that would have seen the government paying US$70m per year as compensation for assets expropriated during the fast track land reform exercise after Harare defaulted on the US$1.75bn it was supposed to pay last month.

Two years ago, Zimbabwe tabled a US$3.5bn offer to the former farmers.

Of that amount, US$1.75bn was supposed to be paid in July this year while the balance would be paid in installments of US$437.5m per year for the next four years.

In a virtual meeting with the former farmers last week to discuss the contentious matter, Finance and Economic Development Minister Mthuli Ncube said the government will pay within its means.

“We will honour our promise of paying you [farmers] US$3.5bn but under the circumstances and in a more realistic way we will pay U$35m in six months starting January 2023 and  another US$35m in July 2023 to make it US$70m  through platinum royalties,” Ncube said.

“With that arrangement we can guarantee you that we will pay the farmers without difficulties.”

Ncube said the bonds are securitised by international financiers who guarantee payments in case the government fails to pay within the prescribed time.

The government provided a copy of the proposed bond to all former farmers.

“We will give you a period of four months to vet our proposal then give us feedback,” Ncube said.

One of the Commercial Farmers Union (CFU) executives, Charles Tuff advised farmers to give the government a chance.“Let us give the government a chance, four months is not a long time,” Tuff said.

But, that did not go down well with the other former farmers who said they have lost trust in the current government which failed to honour the deal in the past two years.

“We have lost confidence in the government as  it has failed  to honour the promises of the agreement  during the past two years. How can we believe them now,” one farmer said.

Another farmer said: “Minister look around at the average age of farmers here, they are 70 year olds plus. How can we wait another 20 years, we will be dead by then. How can they honour our sons when they can’t honour us?”

The farmer said the government has issued more than four bonds since independence but “failed to honour all, resulting in most beneficiaries dying in poverty”.

It is not the first time that the government has defaulted on the obligation.

Last year, the government failed to pay the initial payment of US$1.75bn saying Covid-19 was ravaging the economy.

It pushed the date to July this year.

The government’s delay in compensating former commercial white farmers had been cited as a breach of property rights.

At least 4 000 white farmers were forcibly evicted from farms during the land redistribution programme in the early 2000s.

Analysts say the offer was critically important as it marked an important step to end Zimbabwe’s costly two-decade isolation by powerful western nations that imposed economic sanctions on the country after the land reform programme.

The analysts said honouring the deal could see them lifting the sanctions on the southern African country, which was once the bread basket of the region.

Several economists told Business Times that Zimbabwe, which is in arrears with international financial institutions, would find it difficult to meet its commitment.

The government set up a joint resource mobilisation committee to work with the Ministry of Finance and Economic Development to raise funds for payment of the global compensation figure.

The land compensation deal was signed by Ncube, CFU representative Pascoe, South African Commercial Farmers Alliance (SAFCA) representative Cedric Robert Wilde and Anthony Nield Purkis representing Valuation Consortium (Private) Limited (Valcon).

The CFU represents the interests of commercial farmers operating in Zimbabwe while SACFA the interests of commercial farmers in Matabeleland and Valcon the interests of all commercial farmers registered with them, some of whom are not members of either the CFU or the SACFA.

The government wanted to issue a long term debt instrument in international capital markets, to mature after 30 years, the compensation document said.

The land dispute has been haunting the government.

In 2018, a World Bank-affiliated international appeals court – the International Centre for Settlement of Investment Disputes (ICSID) -dismissed Zimbabwe’s application to annul an award granted to a former commercial white farmer.

The ICSID had in July 2015 awarded the Bernhard von Pezold family the return of their property in Manicaland Province plus their full legal costs and interest, or alternatively the Zimbabwean government was to pay the family US$195m in damages.

In October 2015, Zimbabwe sought the annulment of the award but lost.

The compensation agreement is expected to bring closure to the emotive issue which speaks to property rights.

 

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