NewZimbabwe.com has invited Mr. Vengai Madzima, the Senior Partner at Madzima Chidyausiku Museta Legal Practitioners (MCM Legal), to discuss legal issues affecting Zimbabweans living in the diaspora. The discussions are general and those seeking specific legal advice should contact their lawyer.
Reporter: Welcome back Mr. Madzima, last week we spoke about the legal issues affecting investing in mining, which is one of the anchor income earners for Zimbabwe. This week we want to discuss investments in the agricultural sector. What are the opportunities available for the diaspora market?
VM: Thank you for having me.
I will start with what is common knowledge to Zimbabweans, especially those living in the Diaspora; that our greatest asset for investment in agriculture is our climate, which is ideal for various cropping and animal husbandry opportunities. Despite the various opinions on our land reform and how it was conducted, it empowered a lot of indigenous Zimbabweans creating a massive opportunity for non-beneficiaries of the land reform to partner up with beneficiaries for purposes of making the farms productive and profitable. This opportunity was not available before. Our huge diaspora creates a further opportunity for capitalizing on the farming industry through its access to cheaper finance, technology and new markets.
Reporter: Do you think our farm produce can compete on the world stage?
VM: Our farms used to supply some of the major chains in Europe with our organic produce. What is common is that a lot more people prefer organic food, for example, some restaurants label their steaks ‘grass-fed,’ which you pay a little extra for. It appears in the developed world that the organic option has become the preserve of the well-to-do. I’m inclined to believe that our farm produce will remain competitive and our country’s stance on GMOs allows for that competitive edge.
Reporter: How safe is it to partner and invest in the farms in Zimbabwe?
VM: Every investment comes with an element of risk, otherwise everyone would be rich. There are the usual risks that follow all investments in any business. A key area of concern for some people is the issue of title, currently, beneficiaries of the land reform process have offer letters, permits or 99-year leases. Lenders view an offer letter and lease as precarious titles because of its none transferability as a security instrument. In this light, lenders normally secure farming loans by securing movable assets as collateral, for example, tractors, combine harvesters et cetera or by registering mortgage bonds over the other properties belonging to the farmer. The difficulty in accessing finance has left a lot of beneficiaries unable to access financing outside government programs creating opportunities for third-party investors, in this instance, the Diaspora community, to partner or have joint ventures with the local farmers for mutual gain.
Reporter: What issues should be considered when looking for a farm to do a joint venture partnership?
VM: I will attempt to answer this from my background of having managed the debt collection portfolio for a major bank in Zimbabwe. The portfolio dealt mainly with loans issued to farmers and my mandate was to recover bad debts. The common reasons cited by a lot of the defaulting farmers during the legal process of recovery was the unavailability of sufficient water sources and irrigation resulting in poor crop yields and therefore poor return on the investment. The second is a delay in the delivery of inputs which affects the quality and quantity of the harvest. From my experience the issue of water supply and timely delivery of inputs are key to increased crop yields and profit, however, an investor also has to consider other fundamental issues like the size of arable land available, infrastructure, short to long-term plans of the farmer, external factors that may affect the project example mining rights held by third parties on the same farm et cetera.
Reporter: Having identified a place the Diaspora wants to invest in, how would they secure their interest?
VM: They will have to enter into a written joint venture agreement that captures their intentions and interests. Some of the provisions that have to be incorporated in the agreement will include the duration of the joint venture arrangement, financial terms and arrangements including profit sharing, development works to be carried out, technology transfer if any, dissolution terms specifying what will stay at the farm and what will be removed, responsibilities of both parties and other salient terms affecting the particular joint venture. The joint venture agreement will require approval from the Minister responsible for Lands, Agriculture, Fisheries, Water and Rural Resettlement. An unapproved joint venture arrangement offers no security for the investor so securing ministerial approval should be a precondition to commencing the joint venture.
Reporter: Thank you Mr. Madzima for this insightful discussion. We look forward to next week’s discussion.
VM: Thank you.
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Vengai Madzima is a Senior Partner at Madzima Chidyausiku Museta Legal Practitioners (MCM Legal) in Zimbabwe and can be contacted at vengai@mcmlegal.co.zw
NewZimbabwe.com will have another discussion on legal issues affecting our readers in the diaspora next week, share your comments and experiences with us.