Editorial Comment: Bankable title deeds will unlock value on farms

THE issue of bankable title deeds for farms acquired during the land reform programme, or rather deeds giving title to the use of the land, will allow farmers to borrow to fund improvements to their farms, buy machinery and have the working capital to plant and reap a larger crop.

Banks will obviously be fairly choosy over who they lend money to, wanting more than just the security of title. What they will really be looking for are farmers who can work the land efficiently and profitably and so repay their loans out of their production profits.

But to be bankable, the title deeds also need to be transferable to someone with money, or someone who can be considered a good risk for a mortgage, in the event that the first borrower is a failure.

The reason banks demand security for loans is that they can then sell that asset to get their money back if the unfortunate failure occurs.

The chairperson of the Land Tenure Implementation Committee, Mr Kudakwashe Tagwirei, has however, made it clear that banks will neither acquire ownership of land whose title forms the security for a loan, nor have absolute discretion about selling that title. The land remains in State ownership, even if the use of the land has been signed over, and so the State will make the final decisions.

Practical bankability can be retained, however, since there are significantly more applicants for land for farming than there is land available for farms and that land allocation committees are charged with creating and maintaining waiting lists.

This means that if a bank has to pull the plug on a farmer who cannot repay their loan, there will be someone already vetted and with enough initial capital, or being a good risk for a decent mortgage, who can take over the farm and the debt.

Basically the next person on the list, or at least the next person who can raise the money from their own resources or through a mortgage, who can liquidate or take over the debt owed to the bank is the one who moves onto the farm. The bank is not fundamentally worried about who is on the farm, or who owns the farm, so long as they can clear or service the debts.

So the State can continue deciding who that new person will be and can continue enforcing its policy over fair land distribution while at the same time allowing market forces to work and ultimately ensure that the most able farmers are the ones who remain on the land or are moved onto the land.

There would obviously be a need to be very strict rules about ownership of more than one farm to prevent some very able farmer from reassembling a large estate. But these days that should be simple to enforce through a database. It might even be a good idea to criminalise attempts to acquire a second farm to discourage people from even thinking about trying it.

Land reform had several goals. The first was to have a far more equitable allocation and beneficial ownership of land, tens of thousands of small and medium-sized farms rather than a few thousand very large estates.

There was the historical fact that half the agricultural land, and a far higher proportion of the better half, had been seized in the 1890s by armed conquest. The British South Africa Company actually used land to pay off the forces it raised for the conquest, 1 200ha in Mashonaland per ordinary trooper and 2 400ha in Matabeleland. It then sold off very cheaply large areas to rich Englishmen who wanted country estates. Colonial settler governments maintained the policy and moved people off their ancestral lands.

But along with the need for equity and the correction of historical wrongs, there was also the need for efficiency and higher production. In many cases that has happened. Zimbabwe is growing record crops these days, and even in a drought year the new farmers on their small and medium farms grow more tobacco and wheat, for example, that the former owners of the large estates came close to growing.

But production can easily rise further if the better farmers have access to more finance, hence the need for bankable title deeds to make the system work, and if the unproductive farmers are gently eased off the land to make way for better and productive farmers.

While the initial allocations under land reform did seek business plans, it soon became obvious that there was a significant minority who were looking for a “piece of land” as some sort of status symbol or possible security, rather than wanting to move into productive farming. The production gains from land reform have come from the larger group who have seized opportunities from contract farming and Government programmes, but their hard work should not mask those who have not made any effort and those who quite simply are not cut out to be a farmer.

The bankable and transferable title deeds now about to issued solve the twin needs to push production ever higher. The good and hard-working farmers will be able through prudent financing to push their output higher much faster. Those not interested in farming can be encouraged to sell out to the next person on the list who gives every indication of being a good farmer and so moving a farm from almost zero production to something that is growing crops and raising livestock.

So long as the Government controls the allocation lists, and so can ensure that without recreating the huge estates there will be competent farmers able to take over from the failures and those who wish to leave farming. In the end, banks will have what they want, the security of the title deeds but at the same time a growing group of highly productive farmers who they can work with for mutual advantage and profit.

The Government has been stressing that farming must be a business, not some sort of social security scheme or a dumping ground as the colonialists made it out to be for the majority, while making sure that a tiny minority made really good money from farming.