d land grab had disastrous consequences for the financial sector, which had been exposed by the seizure of the 220 farms to the tune of US$21,8 million. Land Reform minister Didymus Mutasa claims the land is needed to resettle landless peasants
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$250 to US$1 but because of the shortage, the US dollar is trading at Z$200,000 on a thriving black market. Although the bank executives estimated the financial sector’s exposure of the 220 farms at about US$21 million, the actual figure could be higher.
The executives expressed disappointment that the government had continued to seize the farms in a desperate attempt to secure votes for the forthcoming March 2008 harmonised elections without even taking into account the consequences of its actions for the financial sector.
The Commercial Farmers Union could not immediately provide details on the debt owed by the designated farms to the bank but executives said there were contradictions in government over the land grab with some people saying the resettlement programme was a done deal but others continuing to grab more land.
A white farmer who spoke on condition of anonymity said any compensation payable for grabbed farms should also cover the amount owed to the bank.
“If the compensation doesn’t cover the bank loan, then it should be the obligation of the owner to make up for the shortfall,” he said
Analysts warned that 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. David Coltart, an opposition deputy and also 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.”