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Zimbabwe May Tap Private Creditors to Pay Evicted White Farmers

Zimbabwe is considering borrowing money directly from private investors to fund the first half of a $3.5 billion compensation agreement with White farmers whose land was seized two decades ago, a person familiar with the situation said.
Bloomberg
By Bloomberg
16 Aug
Farming In Zimbabwe HARARE, ZIMBABWE - AUGUST 01: Wheat grows in fields at Ivordale Farm on August 1, 2018 outside Harare, Zimbabwe. Commercial farmer Andrew Pascoe runs the 330-hectare farm east of Harare. His father started the business in the 1950’s. The farm grows wheat mostly, maize and Soya Beans, with a dairy herd of 170 cows, a further 280 for beef, plus a piggery with 1200 animals. Before the land reform ‘initiative’, Mr Pascoe owned 1725 Hectares but was left with only 224, only 60 of which that was arable. He currently runs the 60 hectares of his own land, with the rest falling under a ‘joint venture’ program. In 2000 the then President of Zimbabwe, Robert Mugabe, ran a land reform program that aimed to redistribute the farm land mostly owned by white Zimbabweans, to black subsistence farmers. The policy was seen as a disaster, with around 4000 white farmers forcibly removed from their farms, often violently. The policy crippled the agricultural sector and subsequently contributed to the collapse of the economy as those that took over the land lacked the knowledge to run the businesses. (Photo by Dan Kitwood/Getty Images)

The government, which last month appointed London-based Newstate Partners LLP to help it raise the money, needs to secure $1.75 billion by July next year to meet its obligations. Compensating the farmers is key to Zimbabwe’s repairing its relations with the U.S. and other western countries that imposed sanctions on the country after the often-violent land seizures began in 2000. Zimbabwe’s economy subsequently collapsed as exports dwindled, and has stagnated ever since.While the government is likely to press ahead with publicly stated plans to sell an international bond to finance the compensation accord, that option probably won’t be viable, said the person who asked not to be identified as the information hasn’t been disclosed publicly. A bond would be too expensive and need a guarantee from a multilateral lender that’s unlikely to be forthcoming as Zimbabwe hasn’t paid its arrears on more than $8 billion in debt, meaning it can’t borrow fresh capital from them.

If money is raised from private investors, a special-purpose vehicle could be set up offshore and a portion of the country’s tax or royalty earnings from mineral exports could be diverted into it to repay them over a number of years with interest, the person said. The SPV could also be used as a guarantee to bolster the confidence of potential lenders, they said.

Zimbabwe’s main exports include platinum-group metals, gold and tobacco.

Finance Minister Mthuli Ncube and his Permanent Secretary George Guvamatanga didn’t respond to calls and text messages seeking comment.

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--With assistance from Godfrey Marawanyika and Ray Ndlovu.

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