Former commercial white farmers are pushing for interest on the US$3.5bn compensation after the government breached its contractual obligations, Business Times heard this week.
Two years ago, Zimbabwe tabled a US$3.5bn offer to the former farmers as compensation for assets expropriated during the fast track land reform exercise.
Of that amount, US$1.75bn was supposed to be paid in July this year while the balance would be paid in installments of US$437.5m per year for the next four years.
The government has failed to meet its side of the bargain and now wants to pay US$70m annually for 20 years.
A former farmer, who spoke at a recent virtual meeting with Finance and Economic Development Minister, Mthuli Ncube said: “If you are serious about honouring the Global Compensation Agreement, there should be some penalties or interest rates of some sort to ensure that you pay and if you don’t the interest rates will accumulate.”
But Ncube sprang to the government’s defence saying that won’t be necessary as the authorities are committed to pay.
“There is no need to do that as we are friends who are committed to ensure that the issue is resolved,” Ncube said.
“We will honour our promise of paying you [farmers] US$3.5bn but under the circumstances and in a more realistic way we will pay U$35m in six months starting January 2023 and another US$35m in July 2023 to make it US$70m through platinum royalties,” he said.
“With that arrangement we can guarantee you that we will pay the farmers without difficulties.”
Ncube said the bonds are securitised by international financiers who guarantee payments in case the government fails to pay within the prescribed time.
The government provided a copy of the proposed bond to all former farmers.
“We will give you a period of four months to vet our proposal then give us feedback,” Ncube said.
Contacted for a comment, the Commercial Farmers Union president Andrew Pascoe said: “We are still discussing the issue and we are yet to reach a conclusion.
“In 2020, we were the ones under pressure but now it’s the government which is under pressure to deliver the promises made in the compensation deal,” he said.
Former farmers have lost trust in the current government which failed to honour the deal in the past two years.
“We have lost a great deal of treasure as the US$ has lost significant value in the past two years hence if we are to be compensated now the value will never be the same as in the last two years.
“With the way global inflation is moving we may be forced to go back to the initial negotiating figure of US$5.4bn,” another farmer said.
The government’s delay in compensating former commercial white farmers had been cited as a breach of property rights.
At least 4 000 white farmers were forcibly evicted from farms during the land redistribution programme in the early 2000s.
Analysts say the offer was critically important as it marked an important step to end Zimbabwe’s costly two-decade isolation by powerful western nations that imposed economic sanctions on the country after the land reform programme.
The analysts said honouring the deal could see them lifting the sanctions on the southern African country, which was once the bread basket of the region.
Several economists told Business Times that Zimbabwe, which is in arrears with international financial institutions, would find it difficult to meet its commitment.
The government set up a joint resource mobilisation committee to work with the Ministry of Finance and Economic Development to raise funds for payment of the global compensation figure.
The land compensation deal was signed by Ncube, CFU representative Pascoe, South African Commercial Farmers Alliance (SAFCA) representative Cedric Robert Wilde and Anthony Nield Purkis representing Valuation Consortium (Private) Limited (Valcon).
The CFU represents the interests of commercial farmers operating in Zimbabwe while SACFA the interests of commercial farmers in Matabeleland and Valcon the interests of all commercial farmers registered with them, some of whom are not members of either the CFU or the SACFA.
The government wanted to issue a long term debt instrument in international capital markets, to mature after 30 years, the compensation document said.