Fast track land reform crippled the economy

This is the third in a series of articles extracted from a report done by the Research and Advocacy Unit (RAU) titled Conflict or Collapse? Zimbabwe in 2016. ‘

Source: Fast track land reform crippled the economy – The Zimbabwe Independent June 25, 2016

3.3.5 The economy

It is banal to point out that the economy is in deep trouble. The transformations brought about by the “Fast Track Land Reform Programme” (FTLRP), led directly to the collapse of commercial farming and the manufacturing sector and the consequent displacement of millions of workers and a man-made humanitarian crisis. The long period of ineffective economic management — the short period of the Global Political Agreement (GPA) excluded — have informalised the economy to such an extent that some estimate 90% of employment is petty trade, vending, and artisanal mining.

Mining is now the major foreign currency earner, but all economic actors are hamstrung by the lack of a clear and consistent policy direction from government. Furthermore, the possibilities of revenue from diamonds have been wholly dissipated by opaque policies, elite capture of the resource, and now massive dissimulation about the loss of revenue. Endemic corruption and policy contradictions have resulted in both capital flight and disinterest by many external players in direct investment. As regards the latter, remittances are probably a far greater contributor to the economy than Foreign Direct Investment (FDI), but the former has little direct effect upon the economy since very little enters the formal economy through tax or savings. Added to the equation are the collapsing infrastructure and the costs of rotten roads, erratic power, poor sewage and sanitation as cities become hubs for those fleeing rural collapse, especially with current and future impact of climate change and the severe drought.

3.3.6 Land and food

Issues around land reform are subject to the same policy inconsistencies that affect other areas of the economy. However, the most serious implication of the FTLRP is in connection with food security. According to the Zimbabwe Vulnerability Assessment Committee (ZimVac), 1,49 million people of the rural population would be food insecure during the peak hunger period between January and March 2016. This figure has proved to be conservative, with the effects of the El Nino influenced drought having a much larger effect on cropping.

The original figure has been drastically revised, and ZimVac now estimates that three million Zimbabweans will be food insecure in 2016-2017.

While it is obvious that drought cannot be avoided, planning for drought can be and here the abandonment of any planning and the absence of policy have exacerbated the situation enormously, leaving millions of Zimbabweans, both rural and urban, at risk of extreme hunger and even starvation. The downstream effects are difficult to gauge, but some recurrent themes are suggested.

Firstly, rural citizens will require food assistance on a very large scale, and this will make them vulnerable to patronage and coercion around food hand-outs. This has been a recurring theme in past elections, and already there are allegations about violations involving food (ZPP, 2016). This is well documented and there is an extensive literature on the links between land, food, patronage, and coercion (Hammar, Raftopoulos & Jensen, 2003; International Crisis Group (ICG).

Secondly, the informalising of the economy has resulted in deepening poverty and, with Zimbabweans now existing on greatly reduced income, daily hunger has now become a feature of urban existence itself.

Data from the Afrobarometer surveys of 2012 and 2014, based on citizen opinion and asking the questions how often have you gone without food in the past year and how often have you gone without cash income in the past year, provides an interesting insight into Zimbabweans. The contrast was between those that reported these events, always or many times, with those that reported less frequency, never just once or twice, or several times. This suggests two findings of empirical content.

Firstly, the correlation between lack of income and food is highly significant for both years, which suggests that there will be synergies between drought, poverty and hunger. This should be expected.

Secondly, these changes point to two other issues of concern for any understanding of possible conflict. One has been highlighted already; the vulnerability of rural people to food violations and patronage. The other issue relates to the possibility of urban unrest, exacerbated by hunger. Zimbabwe has only seen one major upheaval related to economic adversity, the Food Riots of 1998 (HRF, 1999) that was sparked by both economic adversity and increased food prices. It is not improbable that similar events could emerge in the near future, and the strong turnout for the MDC-T march in April 2016 suggests growing frustration and anger with people coalescing around the question of what happened to the diamond profits. There is also evidence of increasing protests over failure to provide public goods and services. The growing frustration with the poor quality of social services has been evident in all Afrobarometer surveys since 1999 (see Table 6 in Section 2.3.2). This single issue eclipses all other areas of potential civic concern and indeed may prove to be a trigger for future unrest.

It is universally agreed that commercial agriculture has collapsed since the land invasions of 2000. Most point to the on-going collapse of agriculture as rooted in the failure to develop an effective land policy and the distribution of multiple holdings to a small political elite, who for the most part have not used them productively. Many of these “new farmers” have allowed viable farms to become derelict, whilst more invasions still take place. Recently, in response to the complaints of the war veterans, President Robert Mugabe threatened even to take over some 300 or more farms remaining in the hands of white Zimbabweans. Most recently, there is the threat to remove 18 000 families that illegally occupied former white commercial farms, and also the displacement of Matabeleland farmer, David Connolly. The confusions in land policy thus continue, which may not be encouraging for foreign investors.

Supporters of FTLRP point to a substantial body of successful new farmers who have been lifted out of poverty by the policies (Scoones et al. 2010), but this is disputed by other researchers (Zamchiya. 2014). It is certainly doubtful that these farmers will produce any food surplus during the worst drought in 35 years.

Overall, the tenure of those allocated land under FTLRP is highly insecure with even the elite losing farms once they fall out of political favour. There have been strong attempts to implement a lease arrangement for these beneficiaries, but efforts are tenuous as most banks remain unconvinced of the financial backing for such an arrangement and mistrustful given the continual re-allocations of properties. Land tenure is now a feature in the succession struggle, with suspended or expelled members of Zanu PF having their farms appropriated, and on-going invasions of commercial farms owned by white farmers.

3.3.7 Rule of law and investment

The disregard of the rule of law did not merely apply to the problems in dealing with opposition political parties, civil society and commercial farmers, but has become a major problem for the economy, beginning with the violations of property rights that began with the seizure of farms in 2000. However, the blunt disregard of property rights was merely the next step in a series of seemingly irrational economic decisions prior to 2000. Beginning in 1997 with the unbudgeted payments to the war veterans, and subsequent collapse of the Zimbabwe dollar, this was followed by the involvement of Zimbabwe in the DRC conflict, and these two decisions led to the suspension of Zimbabwe from bi-lateral support by the World Bank and the IMF.

The land invasions signalled contempt for the most fundamental basis for any investment, made even worse by the breaching of Bilateral Investment Promotion and Protection Agreements (BIPPAs). Added to these were the disregard of international treaties and agreements such as the Harare Declaration of the Commonwealth, the Cotonou Agreement, and the decisions of SADC Tribunal. If this was not bad enough for foreign investors, the government resorted to hyperinflationary printing of money, and finally the implementing of a discriminatory indigenisation policy.

This last has been the cause of complete confusion, mostly because of the conflicting policy statements emanating from the government. Much of the confusion arises from a (deliberate) misconstruing of the Indigenisation Act. As Derek Matyszak has pointed out, in a number of detailed analyses of the legislation, it has been incorrectly interpreted, in most of the literature, media and public discourse, to mean that all non-indigenous companies (including those owned by white Zimbabweans together with the foreign companies) had to cede 51% of their shares to “indigenous” Zimbabweans (Matyszak, 2011(b)). The effect is that Foreign Direct Investment (FDI) in Zimbabwe, presently at much reduced levels and vital for Zimbabwe’s economic recovery, will be withheld until Zimbabwe‘s indigenisation laws are clarified.

This may now have been resolved with the latest statement by the President, but this will need to stand the test of time, as the President has a well-documented habit of reneging on his previous views.

While adherence to the rule of law is crucial to creating business confidence, and is addressed in the Lima Agreement (GOZ, 2015), albeit in most terse terms, equally critical to business confidence and investors is coherent policy. However, it has been the case since at least 2014 that all experts are agreed that the Zimbabwe government needs to address at least five major policy issues before economic stability can be achieved and foreign direct investment will find an attractive home”:

Policy consistency and an end to conflicting policy positions emerging from within the government. Here, for example, can be evidenced the conflicting statements from Patrick Chinamasa and Patrick Zhuwao (Matyszak, 2016(b));

Clear commitment to the protection of property rights;

Clarity on the indigenisation policy. This may now be clear, but time only well tell;

A comprehensive land audit, leading to the development of an effective agricultural and land policy. This is seen as critical to future employment, with agriculture seen as one of the drivers in the economy;

The rehabilitation of the parastatal sector. This sector contains a number of critical components for economic recovery. Here various parastatals, such as the National Railways of Zimbabwe, are critical to economic recovery, and most are in a parlous state, with both massive inefficiency and corruption identified. (Sapes & NED, 2014).

While the Lima Agreement outlines 10 areas for reform, and does mention both public enterprise reform and the rule of law, adherence to the rule of law is dealt with in seven short sentences and dealing with corruption, expressed as a reform area, is not discussed at all.

Incidentally, all of these recommendations find some echo in the views of ordinary citizens, and their concerns about the delivery of public goods and services (see section 2.3.5 above).

These concerns of the citizens seem unlikely to receive much attention in the very short term, and it is more likely that increasing poverty and hardship will be their lot until the political crisis is resolved.

l To be continued next week.