LIVINGSTONE MARUFU
Zimbabwe could turn to the African Development Bank (AfDB) to raise US$3.5bn as it seeks to quicken the payment of compensation to former farm owners that lost their land during the fast-track land reform programme.
Insiders said turning to the Abidjan-headquartered group is one of the options on the table as Zimbabwe races against time to pay the compensation after previously missing deadlines.
Business Times heard this week that Finance minister Mthuli Ncube recently told a meeting of creditors that Zimbabwe could rope in AfDB to speed up the process.
“Mthuli told creditors that in his discussions with Dr Adesina [AfDB president Akinwumi] some ideas came up in which the bank [AfDB] can be helpful in putting some financial structures that will enable earlier payment before the 10 years,” a source said.
The AfDB lifeline comes as the Treasury is exploring other options to ensure former farmers are paid within 10 years.
“Though we have agreed to compensate former farmers within 10 years, we are exploring more options to pay former farmers soon for us to successfully engage and re-engage,” Ncube said.
He said besides the re-engagement processes, the government is moving towards quick payments due to the age profile of the former farmers.
“We scaled back the tenure of these bonds to 10 years from 20 years that was proposed before due to the age profile of the former farm owners. Whenever the government can do so, it will speed up the payment. “We don’t have to wait for 10 years, we don’t,” Ncube said.
Ncube said Zimbabwe acknowledges that addressing the compensation of the former farmers remains a key step towards a successful engagement and re-engagement process.
The government has been making interim payments to the former farm owners since 2019.
“The government has also attached certain assets that will enable us to pay as well. We have agreed with the former farmers that these assets can be disposed of to the benefit of the farmers to enable faster payment.
“We have a schedule of how these payments look from 2023 up to 2032 should the bond last 10 years but we intend to pay faster. In the first 3 years, we will pay 10% of the principal amount which is US$350m which was circled because of the age profile,” Ncube said.
Since the inaugural structured dialogue in December 2022, the government has made a revised offer on the settlement of the US$3.5bn Global Compensation Deed.
The deed entails the issuance of two to ten-year US$-denominated Treasury bonds with a coupon of 1% per annum.
The former farmers’ representatives are now conducting consultations with their colleagues on the offer.
Contacted for comment, Commercial Farmers Union president Andrew Pascoe said he was in a meeting and not ready to give details on the farmers’ referendum on the government’s offer.
The Treasury said the US$ bonds will be paid to an account of the former farmers in any jurisdiction in the world.
“Any payments subjected to these payments will not be subjected to taxation including income capital gains or inheritance tax in Zimbabwe. All taxes are suspended as far as these payments are concerned.
“The treasury bonds will have the following features which include prescribed asset status that will allow anyone to invest in these. A farmer may want to discount his bonds or whatever they wish to do will make sure that this will allow institutions to participate in investing in these instruments to the relief of the farmers.
“They also have the liquid asset status which will go a long way in ensuring that they are tradable instruments within the market,” Ncube said.
The Treasury boss said they will be tradable in the secondary market and also having a coupon is critical that helps the bond to be tradable and attractive because it’s paying some annuities stream of income.
In this case, 1% per month is based on the full value of the liability therefore it’s US$35m on an annualised basis.
The coupon rate is 1% rate per annum which works out to US$35m per year.
“As the government, we have a track record on treasury bonds, we have never defaulted on TBs. We have done our numbers and we know that we can sustain this kind of liability on the back of our revenues. The coupons will be paid on time so long the principal falls due,” he said.
