PROFCA. Why? What?
Like many Zimbabwean Title Deed Holders (TDHs), I received sight of a promotional video through social media introducing a new association that goes by the acronym PROFCA (Property and Farm Compensation Association). The video told me that PROFCA was created to facilitate individual TDHs who wished to accept the Government's payment in bonds for their farm improvements. I have no doubt some, especially the desperate, will take the offer as they just do not have access to any funds, be it in savings, pension, investment income, work income, family support or charity.
I cannot criticise those who have to take up this offer. If I was in the same position, stuck in Zimbabwe in my old age, I may be tempted. What alternates would I have? I only hope those involved in this new association, which they are promoting, firmly believe that the Government will honour their bonds in US$ as promised upon maturity. As a show of good faith, all PROFCA board members should be happy to take up this Government offer.
“The promoter and service provider to desperate and vulnerable individuals should be expected to ensure the utmost integrity of what is on offer. There could be legal implications if it is deemed they were negligent or worse in the future, especially if they charge fees.” - Peter McSporran
I must admit I am very suspicious of why the Government wants to push this deal. It is certainly not because it has any sympathy towards those of us it has dispossessed, no matter our circumstances. After all, virtually all the population of Zimbabwe lives below the poverty line, so why should we, the TDHs, be treated any differently? I am further unconvinced about the Government's will or ability to pay for the bonds on surrender at maturity. Why have they not made an effort to put the required legislation and approvals through Parliament? I have no doubt there will be some initial window dressing, but certainly beyond year four, the question in their mind will be; “Why pay?” After all, it is not renowned for keeping promises.
I want to keep my blog short this week, so rather than going into any detail on my misgivings in the presentation video, I decided to list my immediate questions and self-answer or state my thoughts, even if only hypothetically. Remember, I have no legal background, so my assumptive answers and self-musings may be misplaced.
So here I go.
Q. How was the association formed, purely by the founders?
A. At face value, many of the old faces who were promoting the deal through the auspices of the Compensation Steering Committee (CSC) are involved as the founders. What is the wider membership, or is PROFCA a self-motivated group?
Q. If so, what is the motivation of the founder board members? Some are older than me, and that says something.
A. Looking at the board and Valcon’s involvement, some may think they are doing it for the better good, while others I would question their motivation. Should I say it smells of self-interest?
Q. Who came up with the idea and need for PROFCA? CFU, CSC, ARAC, Valcon or the Government.
A. I surmise all in collaboration. I cannot see PROFCA being a functional organisation in carrying out what it claims it will do for desperate TDHs without the government's at least tacit agreement or direct support.
Q. Who paid for this production? It looks very professional in visuals, although the commentation is ambiguous.
A. The Government? After all, the promoters were loath to get a legal opinion on the GCD due to lack of funds.
Q. How much influence does the Government have in the association?
A. The second half of the video has a strong Government Influence. Has the Government had a hand in the promotion of the organisation itself? So many unknowns around this video’s production and PROFCA’s own formation raise further questions.
Q. This video, by design or default in its content, promotes the ‘bond deal’ rejected by the majority of the TDHs.
A. The board, as sponsors of this promotional video, may lay themselves vulnerable to future litigation if the Government does not honour its side of the agreement. Fraud charges can come under many guises, including intentional misrepresentation, knowledge of falsehood, reliance on the fact, and damage from the result thereof. I would have a very strong legal opinion on both the promotion of and the agreement itself, not just for the protection of the TDHs but the promoters.
Q. Do they have indemnity insurance?
A. I would! Would the level of indemnity insurance required for this be affordable?
Q. Will this agreement prejudice those who do not take it up?
A. Without studying all the documents pertaining to the agreement, I am highly suspicious that it may.
Q. Why is the Government enthusiastic about promoting it?
A. For the huge financial advantage they will receive on the discounted value or because it gives them the ability to have an offer on the table accepted by the farmers, be it a minority. Once again, probably both.
Q. Why does the video say they are a non-profit association?
A. Associations are non-profitable in their constitution; therefore, it is strange to emphasise this so strongly in the video.
Q. How is the start-up phase of the association funded prior to income?
A. Good question. I do not know. I would like to hear the answer; I hope it is not Government-sponsored.
Q. They say they are facilitators offering a whole raft of services. From advice on the individual's agreement, negotiations and administration with the Government and even related matters in regard to the payments of the bonds.
A. The association will need financial and legal advice to do this. We can presume there will be fees to join this ‘voluntary association’ and its services.
Q. What will these fees be, and how will they be paid?
A. Once-off, commission, or flat fee across the amount awarded. Will this be on top of those fees due to Valcon? Who knows fees are not mentioned and while it is an association I am sure it is not a charity.
Q. The deed of ascension, which has to be signed in year four, states you have been paid in full (in the form of bonds), although you have received only 10% in cash form of the full payment. Thereafter, you have no further claim on the Government. In the event of default, you can withdraw from the agreement and keep what has been paid.
A. But wait a minute, what about what has not been paid? Further, does the ascension deed apply to the land you have not been paid for? If the Government defaults, does it mean you cannot take the Government to court for the outstanding value of your improvements or the land?
I give up. I am piling up so many questions that I will leave it there. The slick video uses ambiguous language and purports without saying in so many words that the Government will honour the deal while distancing PROFCA and all its affiliated organisations from it.
“My conclusion is while the visual presentation is very good, the choice of words for the commentary has taken much more deliberation before their presentation.”- Peter McSporran
Two final thoughts following the budget announcement. It states the debt to farmers is in local currency, not US$ and the monies due this year are listed under the GCD or BIPPA. The proposed compensation muted under PROFCA is between the Government and individuals and not under the GCD. Why then would the Ministry of Finance put the debt to farmers under this description within the budget statement?
Funding Farmers Following the 1992 Drought and Water Wars
As I said, I certainly got around Zimbabwe once I became Vice President of the Commercial Farmers Union (CFU). It reminded me of the army that sent me to the country's hinterland, which, if left to my own devices, I would have unlikely visited. As of then, in early November 1992, the drought still hadn't broken, although the prediction was there was good rain forecast for the new farming season. In the meantime, we, as office bearers in the CFU, were desperate to find funding to enable planting to take place on time. Without money, which by then the farmers had little due to two years of drought, there would be no recovery in agriculture and the economy as a whole. To compound matters, the Agricultural Finance Corporation (AFC) had failed to disperse many loans, especially capital for irrigation and working capital. At that time, the AFC offices were just across the street from the CFU offices, so we were able to pester them almost on a daily basis. As a quango, their source of funds was delayed in the higher offices of the Government. Anthony, our President even went as far as attacking their performance in the press, something we generally avoided but it seemed to work, and some funds were being released. For bridging loans, some farmers had secured loans at punitive borrowing rates from commercial banks or more dubious lenders. It was a great relief to them now to address some of these problems. These, of course, were promised old loans, which were only released long after the agreed disbursement date.
It did not address, however, the need for new cropping loans, with the banks claiming their coffers were empty, although they did hold a statutory reserve at that time in deposits with the Reserve Bank of Zimbabwe of some 15% if I recall correctly. By this, it was not just rain-fed crop farmers and ranchers that were in trouble but also irrigators; everyone needed money.
Because of their nature plantation crops were given priority for water but the policing of this was given to the local river boards. These river boards soon became catchment boards as the source of any water from the smallest tributary was now required to help sustain the farmers. The system was further complicated by priority rights; the older your water rights, the higher your priority. For example, if you built a dam upstream under a water right issued in 1989 if there was a dam or water right older downstream, say issued in 1982, you would have to release your water to the prior right holder. A cause of much ill feeling. Some catchments were well run, an example was the Mazowe River Catchment with an American, Bill Darby as the water bailiff. Bill did an excellent job, and most of us in that catchment had good records at his instigation, both of the rights and historical usage. Despite this, Bill was the most loved and hated man in the district, depending on your allocation.
The arguments over water amongst farmers got so intense that it was jokingly said,
”You can take my wife, but if you take my water, I will kill you.”
This was not far from the truth. There were always some cheats that overused their allocations, some resorting to pumping secretly at night, but generally most complied. Where there was no catchment or river boards formally in place, it was a free-for-all. Luckily this was generally not in the intense cropping areas, more in the marginal areas. Some farmers who felt badly done for many years never forgave their neighbours.
“Time does not always heal disagreements, but in agriculture, especially farming, with the reliance and need to work with your neighbours, time generally resolves even the worst dispute.” - Peter McSporran
Getting back to the funding dilemma, we came up with the idea that the Reserve Bank, with the agreement of the Ministry of Finance, to reduce the statutory reserve. This was when there was still fiscal discipline in Zimbabwe, so in doing so, we saw it as a huge victory for our members when the Government agreed to reduce the figure by half from 15% to 7.5%, allowing the commercial banks to release the difference in the form of cropping loans to farmers.
The CFU’s task suddenly became financial advisors in working with those farmers in severe trouble in producing working models to tap into this money. This is where I really learnt about agricultural finance. With time, a good agricultural business plan will work; the secret is convincing the lenders to give this time. Surprisingly few farmers went under because of the drought, but some took years to pay it all back. The Government itself helped this in a few years when imprudence in fiscal policy led to high inflation. Not so much for the farmer growing food crops selling in local currency but for those in export crops such as tobacco, horticulture and floriculture. The mad years of expanding floriculture and horticulture were on us, and suddenly, offshore loans were available. Sadly, not everyone used these loans wisely.
There was a huge sigh of relief in the CFU building when the rains came in late November that year. I was to find myself being a senior member of a team representing very successful farmers happy to see the rains again.
“Circumstance can have as much impact as skill. So it was for me during my tenure in the CFU.” - Peter McSporran
Disclaimer: Copyright Peter McSporran. The content in this blog represents my personal views and does not reflect corporate entities.
Hello Peter. Thanks again for your blog reflecting your thoughts on varying issues in Zimbabwe. Today, as with land, the Zim. Constitution states, the President owns all of the country's water!!