No Cash, No Deal: Farmers

Former farm owners have rejected Zimbabwe’s compensation proposal of paying in government securities over a 10 –year period amid concerns about the age profile of the supposed beneficiaries.

The government has proposed to compensate former commercial white farmers with commercial paper into the market for a duration of 10 years in a frantic attempt to fund its US$3.5bn compensation deal.

But former farm owners want urgent cash payment.

“Ex-farmers have rejected the Treasury Bonds as they need cash payments with much shorter periods which allow them time to plan with their money due to their age profiles which are between the 80s and 90s. For that reason, they are not taking any deal which does not include in the cash at the shortest possible time,” a source privy to the information told Business Times.

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 to be paid in four equal instalments of US$437.5m per year.

The government has been shifting goalposts on several occasions much to the chagrin of the former farm owners who fear age may not be on their side and many are pushing for immediate action for Zimbabwe to meet its side of the bargain.

The international community put the compensation of former farmers as a prerequisite for arrears clearance and debt strategy, engagement, and re-engagement processes.

This has pressured the government to compensate to start accessing credit lines to ramp up production in various sectors of the economy.

Finance and Economic Development deputy minister Clemence Chiduwa told Business Times that he is happy about the fact that both parties continue to engage.

“At the moment, I am not aware of this position but what I know is that there were some engagements this week and an agreed position will be reached soon as both parties continue to engage to find common ground for compensation to take place,” Chiduwa said.

He said compensation was going to be decided based on negotiation outcomes that are being finalised.

However, the farmers feel there are loose ends that still need to be tied.

Commercial Farmers Union president Andrew Pascoe could not be reached for comment as his mobile number went unanswered.

However, recently Pascoe said there is a need for safety nets to come up with a win-win situation for both parties, no matter what proposal comes through.

“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 the government, in Zimbabwe, commercial paper has in the past few years become a major source of economic vulnerabilities.

In Zimbabwe, 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 funding.

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.

Zimbabwe 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.

Farmers immediately rejected that deal.

The TBs will be issued with features that 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. Business Times

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