Threat of farm seizures causes financial chaos

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The Independent Online

The decision by Zimbabwe's government to seize 804 farms without compensation has thrown the country's financial services sector into turmoil, as it emerges that banks are owed about 6bn Zimbabwean dollars (about £60m) by the affected farmers.

The decision by Zimbabwe's government to seize 804 farms without compensation has thrown the country's financial services sector into turmoil, as it emerges that banks are owed about 6bn Zimbabwean dollars (about £60m) by the affected farmers.

Banking industry executives said the huge debt may have to be written off with serious consequences for Zimbabwe's already beleaguered financial sector.

Most international banks have been shunning their Zimbabwean counterparts because of the severe foreign currency shortage in the country. Banks are forced to use the official rate of Z$38 to US$1 but because of the shortage, foreign currency exchanges have hiked their rates from Z$44 in late April to Z$60 last week.

Although the bank executives estimated the financial sector's exposure to the 804 farms at about Z$6bn, the actual figure could be higher.

The executives expressed disappointment that the government had rushed to seize the farms in a desperate attempt to secure votes for the 24 and 25 June general elections without even taking into account the consequences of its actions for the financial sector.

Jerry Grant, the deputy director of the Commercial Farmers' Union, said that the 804 farms on the government list represented a quarter of the commercial farming sector.

Mr Grant said the owners of the designated farms had to settle their debts using whatever money they were given as compensation by the government, which has said it will pay only for improvements to farms and not for the value of the land being appropriated.

"Any compensation payable should cover the amount owed to the bank and, if it doesn't, it is the obligation of the owner to make up the shortfall.

"That's a problem because if farmers are not paid for the value of the land, then what they get may not cover the degree of indebtedness to the bank," he said.

In addition, compensation will be spread over years and paid as and when the cash-strapped government has money.

Thousands of government supporters and veterans of the liberation war have invaded more than 1,000 of the country's 4,500 white-owned commercial farms demanding the land they say British settlers stole a century ago.

President Robert Mugabe has justified the invasions, saying that the process of land redistribution has been too slow. The government published a list last Friday of 804 mostly white-owned farms that are to be redistributed without compensation.

Analysts said banks were likely to end up holding worthless title deeds because the security on which they gave loans to farmers would now belong to the government.

"Whoever is owed money and had used the farm as security is in trouble. The bank that advanced the money against the farm is exposed," said Welshman Ncube, a University of Zimbabwe constitutional law expert.

"The government has the power to cancel title deeds and they become worthless once the land is acquired. If the farmer can't pay his debt and there is nothing that the bank can recover from him, it has to write off the debt."

David Coltart, a Bulawayo-based lawyer, said: "The individual farmer is liable to the bank. But, of course, the bank's main security is the farm and if the farm is no longer there, the bank has no security and most farmers have no other assets other than their farms.

He warned that while in theory the banks can turn to the farmers to recover their money, "in practice they will have to write off billions of dollars and this could cause the banking sector to collapse."

Other sectors that are likely to feel the knock-on effect include the agriprocessing industries, and small agricultural towns.

Supporters of Zimbabwe's ruling Zanu-PF party are repeating human rights abuses that were a feature of the white Rhodesian government they ousted in 1980, Amnesty International said yesterday.

"One of the most critical issues in the history of human rights in Zimbabwe is the fact that serious violations of human rights have neither been investigated nor the perpetrators identified and punished," said Maina Kiai, Amnesty's director for Africa. "Amnesty International is concerned that this longstanding climate of impunity is facilitating the repetition of similar human rights abuses in the run-up to the June elections."

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