GOVERNMENT will fund its US$3,5 billion debt to white farmers who lost land during the controversial land reform programme mainly through Treasury bonds.
In July 2020, the government announced that it will pay white farmers US$3,5 billion as compensation for the losses incurred as a result of the chaotic “fast track land reform programme” which started in 2000.
The agreement, called the Global Compensation Deed, was entered into between the government and the Commercial Farmers Union of Zimbabwe, an exclusive union for white commercial farmers, ending a long-running battle for compensation by the farmers.
“Under the US$3,5 billion Global Compensation Deed (GCD), in September 2022, Government made an offer for the settlement of the GCD which was accepted by former farm owners through a referendum,” Finance minister Mthuli Ncube said, in the 2023 National Budget presented last week.
He said the plan would involve paying 10% of the bill in cash and the rest through the issuance of Treasury bonds.
“Interim cash payment of 10% (US$350 million) of the Global Compensation value (US$3,5 billion), over four years. Government will pay interim cash payments of US$35 million per year for 3 years, starting in 2023 to 2025, with the balance of US$295 million being paid in 2026 from the sale proceeds of the FFO 12,5% Kuvimba shareholding and/or sale of any other government asset,” Ncube said.
“The cash payments will be made in any jurisdiction in United States dollars to an account of former farm owners’ choice, payable biannually in February and July.”
Ncube said the issuance of US$ Treasury bonds for the 90% balance of US$3,15 billion, would be done with 0% coupon in the first 4 years and 1% coupon starting from the 5th year.
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“The Treasury bonds will be issued in 2023 and have maturities ranging from 6 to 20 years. The coupon payments will be bi-annual in March and August in United States dollars,” he said.
“The TBs will be issued with the following features: Prescribed asset status; Liquid asset status; Tradable; Payments emanating from the bonds will not be subject to taxation, including income, capital gains and/or inheritance in Zimbabwe; Redeemable as and when additional resources become available to government.”
One of the key challenges of the land reform programme was that the farms could no longer be used as collateral for individuals and companies to borrow money.
Thus, paying these white farmers may restore the value of the farms in allowing loans to be taken out.
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