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Big Saturday Read: How the land revolution decimated property rights

December 10, 2016

 

My story begins in a peasant community. Life was hard but people made the most of the little they had. The soils were poor and rains were sparse. Too many people worked on the same land. It was a crowded space. Year after year the yields dwindled and the elders struggled.

 

A few miles away, just after Wedza Centre, it was a different world altogether. There were vast and beautiful farms. As the bus negotiated its way through the meandering strip road that cut across the farms, we admired the yields and herds of cattle grazing lazily in the lush green pastures. The farms stretched as far as the eye could see and went beyond. These farms were owned by a handful of people.  

 

Growing up in such an environment of stark contrasts, there was no doubt in my mind from an early age that there was something upside down about the social order in my country. I did not think it was fair. Neither did I think it was sustainable.

 

As I went to school and learnt some history, I began to understand what had produced this skewed social order, where some people had more and better land, while the peasants were crowded in poor areas. In law school, I studied the Lancaster House Constitution, a key outcome of the 1979 independence settlement. I thought it was a poor and short-sighted legal arrangement which failed to resolve a critically important political question. It maintained the status quo, perpetuating skewed and unfair land ownership patterns defined by race. As social orders go, it was unsustainable. 

 

As such, it was plain to me from an early age that positive action had to be taken to address the inequalities over land. However, with agriculture being the mainstay of the economy, the land question needed careful handling. There were competing considerations: on the one hand, maintaining agricultural productivity and economic stability and on the other hand, satisfying the problem of land hunger among landless peasants.

 

In terms of goals, it was a competition between economic efficiency and social justice. The commercial farms were centres of efficiency, but the inequality was unjust and unsustainable. In terms of principles and values, it was a contest between freedom and equality. This latter point is particularly significant in the context of the land question.

 

As Noah Harari points out in Sapiens – A History of Humankind, freedom and equality are universally recognised values but they also contradict each other. “Equality can only be ensured by curtailing the freedoms of those who are better off,” he writes. Much of political history across nations since the French Revolution in 1789, can be seen as a series of efforts to resolve this contradiction. Contemporary political battles are often between those who favour more equality and an equitable society, which would mean taking from those who have more to help the poor and those who favour more freedoms, which means doing as one pleases, even if it results in a widening gap between the rich and the poor. The latter believe the wealth generated by the rich will trickle down to the poor but those who believe in equality argue that positive action has to be taken to ensure there is equitable distribution of wealth.

 

These contradictions have spawned two social orders – the socialist order which prioritises the value of equality and the capitalist order, which gives precedence to freedom. Others refuse both as extremes and try to strike a delicate balance between the two – recognising freedom but qualifying it in order to promote equality.  

 

The land question was at the centre of these competing demands, both of which were accepted as new values of the new social order represented by the Lancaster House Constitution. The equality of all citizens was a new value which had hitherto been unrecognised during the colonial era. The social order of the colonial era was based on a fiction of racial hierarchy, with whites at the top and blacks at the bottom. The new social order was based on the value of equality of all citizens. Freedom, however, was an important part of the old social order, even though this was enjoyed more by the white minority and was qualified for the blacks. Thus, while citizens had the freedom to vote, blacks could only vote if they met certain property qualifications. In earlier days, before the Land Apportionment Act in 1930, everyone was free to purchase land, regardless of race. However, only a few blacks were able to buy land because of poor incomes, lack of access to finance and inequality.

 

The new social order at independence was, for the first time, based on both freedom and equality, but as already pointed out, these were contradictory values and this was quite apparent in relation to the land question where there was a poor attempt to strike a balance. An example of this freedom was the right to private property, which was accorded strong protection under section 16 of the Lancaster House Constitution. The notion of freedom was encapsulated in the “willing buyer-willing seller” principle, which meant existing landowners had the liberty to keep their land unless they were willing to sell it.

 

However, the same constitution recognised the right to equality of all citizens under the law. The same provision, section 16, qualified the freedom to own property. It tacitly recognised that the freedom to own property could be curtailed in certain circumstances, where it was necessary to promote fairness and equality in land ownership. The freedom of the landowner under the “willing seller-willing buyer” principle was qualified by a requirement to make the first offer to government. The government had the right of first refusal.  The idea was that if the government bought the land, it would then use it for resettlement, and therefore promote equality in land ownership. But this depended on the freedom of the landowner. In other cases where the government sought to appropriate land, it was subject to strict requirements to compensate the landowners. This arrangement was entrenched in the Lancaster House Constitution for a period of ten years, during which government was prohibited from amending section 16. Overall, it is clear that while section 16 tried to strike a balance between freedom and equality over the land question, it weighed heavily in favour of freedom. It was not a satisfactory resolution of the contradiction.

 

Unsurprisingly, the land question remained a bone of contention long after the Lancaster House Constitution was concluded. In 1990, after the entrenchment period expired, the government started making moves to amend the law relating to land ownership. This was the latest in the series of efforts to resolve the contradiction between the values of freedom and equality over the land issue. In order to promote equality, the freedoms of those who owned land had to be curtailed to some extent. However, this faced serious resistance as landowners defended their freedom. The impasse went on for another ten years without any proper resolution. Instead, the gap between the protagonists over the land question widened and tensions rose.

 

In 2000, there was a complete rupture as government-sponsored agents began to forcibly occupy white-owned commercial farms. In between there had been sporadic occupations of white-owned farms, such as when the Svosve villagers occupied farms in Marondera in 1998. Vice President Mnangagwa has recently claimed that these occupations were sponsored by government. The courts initially ruled that the land occupations in 2000 were illegal and ordered the eviction of the occupiers. However, the government did not comply with the orders to evict the occupiers and instead, the occupations intensified. Later, with a newly reconstituted Supreme Court, the land occupations were declared to be lawful. The Constitution was amended to give legality and legitimacy to the land occupations.

 

By the end of the decade, the social order had changed so completely that it must properly be called a land revolution. Prior to 2000, there are about 4,500 white farmers occupying more than 90 per cent of the country’s arable land. By the end of the decade, less than 300 white farmers remained on the farms and up to 300,000 peasants had been resettled on the land. It was a complete change in the social order. The process was accompanied by force, chaos and violence. While the Zimbabwean government was accused of violating the rule of law, it argued that its actions were justified and in the interests of social justice. It was a violent clash between the values of freedom and equality – the freedoms of white commercial farmers in regard to land ownership gave way to the demand for equitable sharing of land. Still even after all that happened, and while land is now in the hands of a wider demographic group, the issue of equality is not yet fully addressed. Most ZANU PF elites got multiple farms in the prime areas of the country, replicating the very same situation they claimed to be fighting.

 

One of the outcomes of the land revolution is a serious decline in agricultural productivity. Once upon a time, Zimbabwe was referred to as the breadbasket of the region. This label does not apply anymore. Rather, it is now referred to as a basket case. The country now imports food, where it was once a net exporter. Many factors account for this decline. Here, I argue that the decimation of property rights is a critical factor which has significantly affected the business of farming. If Zimbabwe’s agricultural system must improve, it is important for government to address the legal architecture and create a bankable package of property rights.

 

The institution of private property is a fiction created by law. It creates a social order in which owners of private property exclude others and do as they please with it, within the limits of law, the broader fiction. The economic success of commercial agriculture revolved around this institution of private property. Private property rights gave owners untrammelled powers over their property but more importantly, it facilitated the financing of agriculture, using land as security. As a financing instrument, privately-owned land played an important role in agricultural production.

 

However, the revolution transferred land ownership from private individuals into the hands of the state. According to section 71(2) of the new Constitution, when agricultural land is compulsorily acquired for a public purpose, it immediately vests in the state. Section 71(4) provides that all land that was acquired during the land revolution is state land. The net effect of section 71 is that all those presently occupying agricultural land that was acquired by the state during the land revolution do not have any private property rights. In other words, they do not own the land. Land was nationalised. The rights of occupiers of agricultural land to occupy the land by virtue of a lease or other agreement are given some protection under section 291 of the Constitution. The rights to transfer, mortgage, lease or dispose of the land are however subject to limitations imposed by the state.

 

The issue of security of tenure was left to legislation. Section 292 of the Constitution provides that “The state must take appropriate measures, including legislative measures, to give security of tenure to every person lawfully owning or occupying agricultural land”. The government has so far resisted propositions to give full ownership rights to resettled farmers. This would mean taking away land from the state and putting it into private hands – giving priority to the value of individual freedom. The state does not want to give up its control over land and presumably its role as an agent to promote the value of equality. More likely, however, the government wants to maintain control over land as an instrument of patronage.

 

During the land occupations, the newly resettled farmers only got offer letters. However, as noted by the new Governor of the Reserve Bank of Zimbabwe in his first Monetary Statement in 2014, offer letters were not considered by banks as a suitable form of security. He urged government to expedite the process of issuing “bankable and transferable 99-year leases”. The same sentiments were echoed by Finance Minister Patrick Chinamasa in 2016. “It is not fair for someone to have a piece of land which can be taken away willy-nilly. The offer letter states that the piece of land can be withdrawn by the Minister at any time. This shows farmers do not have security. Because they do not have security, they will not invest into the agricultural land. If we continue like that, it means we cannot improve agricultural production. We want to make agriculture the mainstay of the economy, to make it productive and to give security to farmers against ourselves as government,” he said at a conference. (The Herald, 9 March 2016)

 

The government’s proposed solution to the dilemma of security of tenure was to grant 99-year leases to resettled farmers. The aim is to provide a measure of security of tenure and a bankable instrument, while allowing the state to retain residual control over the land. The government sees this is a viable resolution of the values of freedom of the farmer and equality of citizens, current and future who might also want access to land. However, the 99-year lease has not been well-received by the banking sector, which traditionally provides the financing. Nearly 25% of bank loans go to the agricultural sector, though this used to be far more than these in the glorious days of farming.

 

Bankers’ are concerned that the 99-year lease is not bankable. Writing in The Sunday Mail on 22 August 2016, banker Clive Maphambela set conditions that would make 99-year leases bankable. Among other things, he wrote that it should allow the banks or any lender to hold both movable and immovable property as collateral for loans advanced to the farmer. This is a critical issue, because without the threat of repossession, borrowers would have no real incentive to service the loans and with high risks, banks would be reluctant to extend loans. Without financing, agricultural productivity would suffer greatly. Bankers are also concerned that the conditions to the leases would require them to enter into partnerships with a third party where a borrower would have defaulted as this would mean entering into non-core business which is prohibited by the law.

 

Overall, the 99-year lease is a late realisation by government that there is need to create a legal instrument that would promote financing for agriculture. Government is realising that the land revolution was not just about taking the land, but that it also affected the legal architecture upon which the economic success of commercial agriculture was built. But it is a half-hearted effort at according property rights. A well-executed revolution would have been accompanied by clear plans regarding the legal architecture that supports the business of farming. However, because there was no planning and the process was haphazard and chaotic, land was taken but in the process the legal architecture destroyed. The reconstruction of this legal architecture is a critical part of re-imagining and reforming Zimbabwe’s agricultural sector. Nevertheless, in order to understand what needs to be done, we must understand what was lost by the decimation of private property rights in agricultural land.

 

In March 2016, Finance Minister Patrick Chinamasa commented, rather unusually that the government did not want to create “dead capital” on the farms. “We cannot allow another 14.5 million hectares of land to become another communal area, to become dead capital,” he is quoted as having said in The Herald of 9 March 2016. The notion of “dead capital” was made famous a decade and half ago by Peruvian economist Hernando de Soto in his best-selling book, The Mystery of Capital – Why Capitalism Triumphs in the West and Fails Everywhere Else. De Soto argued that capitalism fails everywhere else but the West because in those parts there is no legal process to make property systems work. Property rights, in his view, are critical in transforming capital from its “dead” state into “live capital”.

 

I used De Soto’s thesis in 2005, just 5 years after Zimbabwe began its land revolution to assess what was going on. In that article, I argued that by decimating private property rights over land, Zimbabwe had effectively transformed “live capital” into “dead capital”.  I argued that the government could still have carried out the land reform programme without necessarily destroying the legal architecture that formed the basis of success of commercial agriculture. I wrote, “Over the past five years, Zimbabwe has seen a chaotic fast track land resettlement programme that has in effect transformed land into dead capital, if the evidence of the last few years is anything to go by. Without disputing the importance of land reform, it is submitted that it is particularly crucial to ensure that land regains its status as live capital in order to promote maximum productivity and to utilise the potential it bears”. That was eleven years ago, but the same message remains pertinent today.  

 

I argued that whatever the arguments for or against the land reform exercise exercise, it was necessary to maintain a proper system of property rights because they are necessary tools which help drive financing of commercial agriculture. “Unless the State grants and protects concrete property rights, all talk of economic empowerment will remain useless rhetoric,” I argued. More than a decade later, the government’s 99-year lease is a late realisation of these arguments, but still it is a half-hearted effort which is not getting acceptance.

 

Under the pre-2000 system, there was a well-established and secure system of property rights in relation to agricultural land. Land was "live" capital in that it could be easily traded on the market, generating instant value. An owner of a farm could lease it, sell it or use it as collateral security for loans. Land had monetary value on the market. Banks were comfortable giving loans to farmers because they could always acquire property of defaulters. For their part, because land was an asset that stored value, famers who took loans had an incentive to work hard in order to repay and to avoid losing their land upon defaulting.

 

One of the arguments used against granting property rights to farmers is that they will end up selling it and it might end up in the “wrong hands” and that the wealthy will eventually hold vast tracts of land to the exclusion of others. The latter is a risk, but there is no reason why the market for agricultural land can be regulated to minimise those risks. In any event, this argument ignores the fact that millions of people already own their own homes or aspire to own homes in urban areas. If anything, people hold on to their properties for life, it being an important part of their lives. There is no reason why rural farmers would be more susceptible to sell their land than their urban counterparts whose land ownership right are not restricted. In any event, what is the value of land in the hands of a person who is no longer interested in farming? A person who wishes to venture into another field and is no longer interested in farming should be free to dispose of his property. Empowering people means they must have the capacity to deal in their land as they please. If they want to sell land to raise capital for other business ventures, they must be free to do so.

 

An important factor which the prosecutors of the land revolution overlooked is that farming is essentially a business. People looked at the successful commercial farms and put it down to arable land only. They forgot that producing a good yield is the result of a complex business process of which land is only of the factors of production. It is critical, but so is the know-how, financing, infrastructure, labour and access to the local and international markets. Any business venture, including farming requires capital. The availability of a viable credit market was part of the success of commercial farming in the pre-2000 period. Secure property rights allowed landowners to access finance through local and international credit institutions. Companies like Agricultural Finance Corporation, UDC, Leasing Company of Zimbabwe and many others were part of this critical financial architecture for financing agriculture. Farmers could get finance to buy or lease equipment on the basis of a system of property rights.

 

Now since the majority of the resettled farmers lack secure title to the land, they cannot get credit. To finance their farming activities, they have to rely on state handouts. This is not only unsustainable but it also generates a wasteful dependency syndrome. The government tried gave tractors and other agricultural equipment to political elites masquerading as new farmers in 2007. None of them paid for the agricultural equipment. The central bank which has the list of all beneficiaries refused to disclose it. Taxpayers had to carry the burden. This is a grossly inefficient system because recipients who bear no risk have no incentive to work hard to prevent losses. Whatever losses they incur, they simply pass on to the taxpayers.  

 

One of the key aspects of having secure title is that it is an incentive for long-term investment in agriculture. When a person has no security of tenure in the land that he occupies, there is no incentive to invest in crops or activities that take years to produce a yield. This is because chances are high that one can be evicted before the harvest. Growing a citrus orchard for example can take a number of years and some crops can go for years before one is able to get his first harvest. When you are not sure how long you will be on that land, such an investment is risky. A squatter will build a shack not because he doesn’t have enough funds but because there is no guarantee that a fixed structure will not be destroyed. A farmer with secure title is more likely to invest more in the business than one whose occupation is insecure and dependent on the whim of the government.  It is hardly surprising that much of the farming activities in the resettled areas have been of a subsistence nature. Where they have gone into cash crops like tobacco, the prices have let them down in recent years.

 

Finally, research and development is critical. Tobacco has been so successful in Zimbabwe due to the resilience of established institutions such as the Tobacco Research Board’s Kutsaga Research Station, which is involved in research and development. Research and development were a key part of the commercial agricultural sector.

 

Overall, the only way for Zimbabwe’s agricultural sector is up. But it’s a sector that requires forward-thinking leadership. There are many factors that must be harnessed to make it work. In this article I have focussed on one critical aspect, which is the legal architecture for farming. At the centre of this legal architecture is a strong system of property rights. The government is prevaricating over this issue. It has established the 99-year lease, which is a poor cousin of firm ownership rights. Financiers are uncomfortable with the nature of the 99-year lease. They do not think it provides them with the protection they need in the event of loan defaults. To empower people in the proper sense, they must be given more freedom with the land they occupy. It’s the old battle between freedom and equality. The government wants to hold on to the land because it believes it must further the equality agenda, but at the same time, it wants to incentives agricultural productivity by giving more freedom to land occupiers. Unfortunately, the instrument they have created is struggling to gain traction. The farmers are the losers. They will continue to rely on the state and will be at the mercy of the elements.

 

waMagaisa

wamagaisa@gmail.com

 

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