ZIMBABWE’S development is undeniably tied to the success of its agricultural sector. Farm productivity is essential for building a prosperous nation, serving as a catalyst for growth across all sectors.

However, the “land question” remains one of the country’s greatest obstacles to progress. The challenge of financing agriculture has been exacerbated by the complex issue of land tenure.

In economics, the Cobb-Douglas function illustrates how capital and labour, balanced with technology, drive production.

While I will not delve into the theory, the essential point is that funding plays a crucial role in capital investment. Unfortunately, Zimbabwe’s farms have struggled to attract sufficient financing over the years, leading to a stagnant agricultural sector.

Access to financing involves a balance between savers, who provide funds, and borrowers, who seek capital at a cost — interest.

The question of what happens when a borrower defaults is pivotal. No prudent banker would lend to a farmer without adequate security, highlighting the intersection of land tenure and financing.

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Ordinarily, the ability to foreclose mitigates the risk of non-payment, protecting creditors when borrowers default.

In Zimbabwe, the fact that most agricultural land is owned by the government complicates matters. Proposals to grant title deeds to resettled farmers are politically and practically untenable, as they would require constitutional amendments and risk deepening polarisation. Instead, the focus should be on making farm leases freely tradeable under the current framework.

Freely tradeable leases could provide a solution by allowing creditors to foreclose on the leaseholder’s right to occupy and use the land — a personal right — rather than on the land itself. If properly implemented, this approach could open a new pathway for agricultural financing in Zimbabwe.

But as always, the devil hides in the details.

For freely tradeable leases to work, two critical conditions must be met: clear market rules and confidence in the government's commitment to upholding those rules. Without addressing these, "bankability" will remain a catchphrase, rather than a reality.

The emphasis on “freely” is key. An unproductive farmer should be incentivised to vacate the land, allowing for its productive use.

This can be achieved through voluntary exchanges rather than coercion, which aligns with democratic principles.

Allowing farmers to sell their lease rights to the highest bidder creates a win-win-win situation: the buyer gains access to land for profit, the seller receives compensation for relinquishing their rights, and the government benefits from increased agricultural productivity and a broader tax base.

All this is based on the premise that the farmer can freely trade his rights to occupy farmland. Who the farmer sells their rights to must be irrelevant. The farmer must be able to alienate their rights to the highest bidder.

Proposals that the lease rights must be alienated only to black Zimbabweans runs contrary to a successful freely tradeable lease market. The farmer is worse off when forced to trade only with black Zimbabweans, this limits capital available.

There is no difference between black Zimbabweans renting out farms to people of other races, and tradeable leases that open lease rights to a multiplicity of suitors.

Logically, it is absurd to claim that selling leases only to black people protect national interests, while leasing farms to other races is not considered a national security threat.

This makes the case for freely tradeable leases stronger, and the right path to follow for Zimbabwe.

Claims that trading rights to occupy and use farmland is returning land to whites are equally unfortunate. How is this so when the government retains ownership?

Equally claims that trading leases impoverishes blacks are unfounded since they ignore policy levers like taxation, which can be used to redistribute income from productive farms.

Is it better for the nation to have unproductive farms occupied by blacks or to have productive farms occupied by competent farmers of any race?

Empirical evidence supports the potential of freely tradeable leases to attract financing to agriculture. In cases of loan default, banks could foreclose on the leaseholder’s right to occupy the land, offering lenders a form of recourse.

However, markets do not operate in a vacuum; the political environment must be conducive to a functional lease market. The lingering effects of past land reforms have created scepticism that must be addressed.

As one author aptly stated, the power of government should be measured not by the force it exerts, but by its restraint. Government officials wield considerable authority, but true success lies in their ability to exercise it judiciously.

How can banks and investors be assured that, once a lease market is established, the government will respect leaseholder rights, even against politically influential defaulters?

The question is whether a politically powerful farmer who has borrowed on the strength of their lease rights can have his right foreclosed in instances of default.

Broadly speaking, this is a question of whether the government might interfere in the lease transfer process to alter rights without any due process.

Without the discipline to restrain itself from unnecessarily interfering in the process of trading leases, even the best written of land policies on freely tradeable leases will not direct funding and production to Zimbabwean agriculture.

It all boils down to keeping a promise even if it disadvantages the one who would have done so. Is the Zimbabwean government willing to have a regime of trading lease obligations that is akin to the existing Zimbabwean housing market?

For the lease regime to succeed, the government must refrain from arbitrary interference in the lease transfer process.

Even the most well-crafted land policy will fail if the state is perceived as unreliable. Trustworthiness is earned through actions, not rhetoric.

Zimbabwe’s government must demonstrate a commitment to upholding leaseholder rights consistently, just as it does in the housing market.

Freely tradeable leases offer a promising path forward for Zimbabwe’s agriculture. The policy's success will depend on well-defined market rules and government restraint.

Title deeds are not the only way to attract funding into agriculture; sound lease policies that respect property rights can achieve the same objective. The government now has an opportunity to rebuild trust and stimulate growth in the agricultural sector. Will it rise to the occasion?

  • Chibanda is a finance officer at the Zimbabwe Institute of Tax Accountants. He is interested in taxation, public infrastructure funding and public finance in general. He writes in his personal capacity and views expressed in this article do not reflect those of the organisation he works for. These weekly New Perspectives articles, published in the Zimbabwe Independent, are coordinated by Lovemore Kadenge, an independent consultant, managing consultant of Zawale Consultants (Pvt) Ltd, past president of the Zimbabwe Economics Society and past president of the Chartered Governance & Accountancy Institute in Zimbabwe (CGI Zimbabwe). — kadenge.zes@gmail.com or mobile: +263 772 382 852.