The Economic Impact of Land Reforms In Zimbabwe

Zimbabwe tobacco farmers harvesting their crops in 2013. The white-dominated Commercial Farmers Union has realized that the MDC-T will not be able to form a government inside the country., a photo by Pan-African News Wire File Photos on Flickr.

The economic impact of land reforms in Zim: Part III

December 30, 2013 Opinion & Analysis
Zimbabwe Herald

Zimbabwe has so much land and resources that more than half of its population can catapult itself to middle class status very quickly

Pranjal Bajaj

After the events of 2000 the US government placed Zimbabwe under serious and crippling sanctions, the trade deficit and forex shortages grew and inputs for agriculture and manufacturing industry could not be imported.

Since the year 1999-2000 Zimbabwe has been a food deficit country as small-scale farms could not produce enough to compensate the loss of production from big farms.

More than a million people have lost jobs in the last 15 years from private and public sectors, and currently unemployment for the formal sector is estimated to be over 80 percent.

Government spends almost US$2.5 billion on paying wages to its bloated workforce taking away more than 70 percent of budget revenue.

Almost half a million people were displaced as a result of the cleaning up exercise of cities (Operation Murambatsvina) in Zimbabwe and started living on periphery of large cities.

More than a million who lost jobs in cities or even more migrated to South Africa and Botswana.

The total maize production in 2012 was approx 1.7 million tonnes and 2013 is even less. The perils are many and have been very already widely been reported.

To my mind the real issue to deliberate is why same fertile land could not produce what it used to produce, just upon changing hands. And what have been the gains, if any from such redistribution of massive land area apart from political.

Commercial farmers before 1999-2000 were mainly of European decent and had title of land with them and could monetise the title.

They had access to cheap finance and Western technology and easy market access. They had Government support with loan guarantee schemes and funding for agricultural research.

The excellent infrastructure of rural roads built by racist regime in white-only areas remained intact after independence.

The abundant supply of cheap labour force constituted of oppressed indigenous people created the magic of record harvests by fusion with organisational and management skills of experienced white farmers, who were equipped with all required resources.

However, post-1999/2000 and after redistribution of land the farming situation in Zimbabwe was diametrically opposite.

New small-scale A1 farmers or even big A2 farmers were not given title to the land. So the land could not be monetised to get loans.

The Government revenue in post-1999/2000 dried up due to several factors.

Commercial farming had constituted one-third of GDP prior to 1999/2000 so it was impossible to replace this portion of GDP in a short span of few years after land redistribution.

The mining sector is still owned by multinationals and there are unverified reports of externalisation of earnings by the mining sector.

The support from IMF and World Bank dried due to sanctions and unserviced foreign debt. Bank coffers were empty.

So the window of loans to farmers was not available and new farmers had no money to buy inputs.

Production of food crops like maize got significantly reduced.

The hyperinflation and rapidly devaluing currency scared away investors.

The few private investors in cotton and tobacco saved these two sectors from total collapse by funding the A1 and A2 farmers with inputs and extension support.

Just after 1999/2000 the whole agricultural support infrastructure collapsed. The suppliers of agricultural equipments and manufacturers of fertilisers almost vanished or were running their plants at less than viable capacity due to lack of balance of payment support.

The decline in Government revenue resulted in support to agricultural research by Agritex and funding to rural infrastructure getting almost drying up.

In nutshell just after the massive land redistribution which happened in a very short span of time, the whole agricultural sector collapsed and resulting in drastic change in financial situation of Government due to sanctions, lack of credit lines due to unserviced foreign debts and loss of revenue brought about by the sudden decline of an extremely flourishing agricultural sector of Zimbabwe.

Zimbabwe’s turnaround from a bread basket of Southern Africa to net importer of food grains is a tragic story.

In my opinion fast track land reforms were too fast. Reforms should have been done slowly and should have kept pace with ability of Government to support them.

Secondly, there is need to shift focus from using land reform for political gain and/or to control of politics of the farm inhabitants to commercialisation of the acquired land through issuance of title deeds and/or transferable leases so that the farmers can access private finance through monetization of the title or lease.

One can get into the unending political blame game, that is whether this disaster happened due to fast track land reforms or due to apathy of the international community.

But I think one should now look for a way forward and identify gains from land reforms.
There are several books written by reputable authors describing the gains from land reforms, that is increase in numbers for food and cash crop production.

There are also very strong critiques written by equally eminent writers denouncing such claims. This dispute is raging and will go on.
However, what I found during my very regular visits to rural Zimbabwe is that the sense of dignity which is now being enjoyed by farmers due to ownership of land has boosted their confidence and inspired them to achieve.

There is no doubt that an inspired person can do wonders provided the circumstances are right and the required support system is in place.

I also saw a noticeable change in human capability.

A farmer, who earlier worked as farm labourer and merely followed the dictates of white masters, now knows how much fertiliser is to be applied and when it is to be applied to his crop.

He now knows and understands the economics of his business and is able to do back of the envelope calculation.

My personal experiences during distribution of inputs by my father’s company to cotton farmers proved this point.

Many a time a farmer would come with detailed calculation of costs of his inputs and expected kilogrammes of seed cotton production per hectare and the average price of seed cotton in last three years to bring home the point that his net return would be so much.

Farmers calculated the net return on the investment of capital and labour and compared it with how much they would make in cash annually if they worked in my father’s factory instead of farming.

They had gained freedom of choice as well and their valuable labour could go where it earned maximum returns.

Such comparisons prompted them to look for ways and means to increase returns from farming. Such changes in human capability and resultant discussions led to very interesting business models being offered to farmers.

For example, my father’s company offered to some farmers a package deal of growing cotton with input support as well as employment during farming off-season in a cooking oil factory.

I personally saw a farmer bringing New York futures printout for July while he was selling his seed cotton in May with a proper calculation as to how much profit my father’s company will make and used that calculation to negotiate prices with buyers.

The field managers at our factory informed me that when my father first invested in Zimbabwe in 2003, the seed cotton was being bought by few white-dominated companies from mainly communal indigenous farmers at 15 US cents per kg.

The same seed cotton is now being bought by cotton companies at 50 US cents per kg with 2013 international lint prices being not very different from what they were in 2003.

Such positive change to revenue of farmer has been brought about by freedom of choice available to farmers and increase in competition brought about as a side effect of land reforms.

The other important change I noticed as a direct effect of land reforms has been the use of democratic practice in rural areas while taking economic decisions and the significant empowerment of women.

Farmers regularly participate in meetings to take collective decisions and exchange news and information about issues related to farming.

Rural district councils have become a forum for farmers to mutually discuss and decide levies on farmers and private companies.

Such fora are used by farmers to discuss and decide the conditions of doing business with private companies and collective bargaining on cost of inputs and produce prices.

They also act in a very democratic manner and discuss the terms of contract farming with private companies.
Once a majority takes a decision the decision is implemented.

The addition of women in the category of farmers and small-scale entrepreneurs has given a completely new perspective to the farming business and this change is a direct result of land reforms.

Women beneficiaries of land are much less in number than men but are more vocal in deciding the issues during council meetings.
The attempt towards gender equality has received the biggest boost from land reforms.

It is well-known that the contribution of women, who constitute more than 50 percent of population, in the economic activity, can uplift the fortunes of a country.

The awakening has happened in Zimbabwe and its benefits need to be harnessed.
The final issue is how such changes in human capability, democratic practice, women empowerment, sense of dignity, freedom of choice and action could be used for economic growth.

The experiences of rapid and sustained economic growth in Western nations, growth in BRICS, and especially in China, clearly prove that it is extremely necessary to have the above changes for rapid and more importantly, sustained economic growth.

The ground for rapid and sustained economic growth is ready in Zimbabwe and if there could be a fusion with other much needed factors, Zimbabwe can again become bread basket of Southern Africa much sooner than many people would anticipate.

Zimbabwe has so much land and resources that more than half of its population can catapult itself to middle class status very quickly.
There are a very large number of steps required to be taken by Government, its people, NGOs and the international community in order to achieve massive transformation of agricultural production in Zimbabwe and this is a very wide area of research.

However, I feel that just two important steps, that is transfer of title of land for farmers and blanket free permission to private companies to engage farmers in contract farming without Government interference, can yield immediate results.

I shall spend the next few months in Zimbabwe to explore further steps required for economic growth and will also attempt to devise and suggest practical and sustainable models of land redistribution.

Pranjal Bajaj is an Indian who was spent much time in Zimbabwe between 2003 and the present. He can be reached at pranjalbajaj95@gmail.com. His blog is pranjalbajaj95.blogspot.in