Joint Ventures in the Agriculture Sector

Lindsay .N. Dzumbunu

09 Sep, 2022

Unpacking Joint Venture Agreements in the Agriculture sector of Zimbabwe

INTRODUCTION

The land reform processes in Zimbabwe can be traced back to the Lancaster House Agreement. The underpinning reason for embarking on the land reform programme was a need to balance and distribute land equitably which had historically been skewed in favour of the white minority. Land was subsequently compulsorily acquired by the Government under the Land Acquisitions Act [Chapter 20:10].


Compulsory land acquisition resulted in indigenous black farmers being allocated A1 and A2 model farms through Offer Letters. Zimbabwe was at one point regarded as the “bread basket” of Africa but currently this is not the case. There was inevitably bound to be a decline in agricultural exports as there was no skills transfer and the majority of the beneficiaries of the land reform programme conducted largely informal farming operations.


Another factor that contributed to the decline in agricultural production is the lack of security to guarantee access to bank loans. Previously the white farmers owned vast tracts of land and these were used as collateral to raise much needed capital to mechanise their farms. Presently, farmers are unable to access capital from financial institutions due to the nature of their title which is largely in the form of Offer Letters. These can be withdrawn at the instance of the State hence making them unfavourable as a form of collateral. The country also experienced the devasting effects of climate change which resulted in sporadic rainfall and intermittent drought as well as a hyper inflationary era which contributed and is still contributing to low productivity on farms.


The Government in line with the “Zimbabwe is Open for Business Mantra” took a policy shift and endorsed Joint Venture Partnerships on farms. The aim of these Joint Venture Partnership’s is to ensure optimal production on farms, encourage skills transfer, land utilisation, security of tenure and bolster waning investor confidence. A Joint Venture Agreement can be defined as a contractual consortium of two or more parties. They usually seek to join each party’s resources to achieve a specific objective. The parties benefit by receiving proportionately split profits and distributed ventures.


At the present moment Joint Venture Agreements are being undertaken in terms of Section 18 of the Land Commission Act [Chapter 20:29]. This Act amongst other functions provides for the acquisition of State land and the disposal of State land and the control of the subdivision and lease of land for farming or other purposes. Joint Venture Agreements are also governed by the Law of Contract with regards to their enforceability.


PROVISION OF THE LAND COMMISSION ACT

Section 18 of the Act regulates the relationship between the contracting parties and it makes it an offence to enter into a Joint Venture Agreement without the express approval of the Minister for Lands, Agriculture, Fisheries, Water and Rural Development. It states that no owner or occupier of land to which the Act applies shall permit the occupation on a share-cropping basis by another person of any portion of such land unless a written agreement has been entered into between such owner or occupier and such other person in respect of the occupation of such land on a share-cropping basis and such agreement has been approved by the Minister.


Section 19 provides for a penalty in the event that the provisions of Section 18 have not been complied with. It states that any owner or occupier of land who contravenes section 18(1) shall be guilty of an offence and liable to a fine not exceeding level ten or to imprisonment for a period not exceeding two years or to both such fine and such imprisonment.


WHY GOVERNMENT APPROVAL AND REGISTRATION OF JOINT VENTURE AGREEMENTS IS NECESSARY

It is apparent that the mischief that the Legislature sought to cure by the provisions of Section 18 pertains to unregulated and unapproved Joint Ventures which are entered into clandestinely. The Ministry should be able to account for and regulate land uses and this monitoring is effective where it is appraised of the developments on the various farms from the onset. Such regulation is also important as it impacts on financial projections for the country, food security and general policy planning.


Registration of Joint Ventures also ensures that unscrupulous elements do not take advantage of desperate and unsuspecting farmers. The mere fact that it is mandatory for the Joint Venture to be scrutinised and approved acts as a form of checks and balances. The Ministry of Lands, Agriculture, Fisheries, Water and Rural Development has gone so far as formulating a standard template for the different fields of farming with standard tenure and profit-sharing ratios. This in a way provides for standardisation of such joint ventures, although there can be deviation from the norm upon justification; the aim is to achieve some semblance of order in the regulation of the sector. This approval is also important in the event that there is a dispute between the Joint Venture partners that would require the intervention of the Ministry as they will be well appraised with the matter.


Furthermore, registration of Joint Ventures is important in that the line Ministry is aware and abreast with who holds what land. Most importantly the aim is to ensure security of tenure and enforce the principle of the sacrosanct nature of contracts. There are Government programmes such as the promulgation of Rural Land (Farm Sizes) SI 41 of 2020 that deals with the approved maximum hectarage of farm sizes. The implementation of this SI ideally is governed by the all-important principle that contacts are sacrosanct and cannot be altered or varied at will. Parties enter into a Joint Venture for certain hectarage and the profit as well as risk are calculated based on the available hectarage at that time. Any Investor will be weary to invest in a venture where there is no respect for the sacrosanct nature of contracts.


Given that farming by its nature is capital and infrastructure intensive, for one to “invest” in a Joint Venture some form of guarantee/security is required prior to making such investments. Also, the profits are not instantaneous; they are made over a protracted period of time after several farming seasons. Registration of Joint Ventures protects the rights of both contracting parties as the contractual relationship is recognised at law. The most important attribute of registration pertains to security of tenure due to the fluid nature of Offer Letters for the A1 and A2 farms. Given that these are issued and maintained at the benevolence of the State and can be withdrawn at any time, this does not auger well for investment and investor confidence.


CHALLENGES AND BENEFITS OF THE JOINT VENTURE AGREEMENTS

This apparent “policy shift’’ has been met with resistance in some circles as it is misconstrued as reversing the land reform programme and bringing back an undesirable status quo via the back door and an acknowledgement that the land reform programme has failed. In some instances, it may be construed to be the case however the issue of Joint Ventures has to be understood in its proper context. Joint Ventures have not been created for the agricultural sector they are in use widely in the African region, world over and in various other sectors. They are a reflection of the importance of commercially viable collaborations and synergies to achieve any given goal and to mitigate the effects of climate change.


Joint Ventures are a strategic tool to lure, maintain and assuage weary Investors who have farming skills and capital to enable the country to unlock much needed value in the agricultural sector.


With the coming on board of Joint Ventures there has been an increase in land utilisation where previously land had been underutilised due to various factors. There has been a marked increase in the number of parties seeking to register their Joint Ventures, signalling increased uptake and land utilisation where previously land has lain derelict. Tobacco exports which had dropped significantly during the onset of the land reform programme are steadily climbing and once again the country is on its way to regain its status as one of the world’s big five tobacco exporting nations.


Ultimately Joint Venture Agreements encourage productivity on the land as the contracting parties recoup financial rewards from the arrangement. Once again Investor confidence is restored as the underpinning Law of Contract is applicable in the event of a dispute arising between the parties. The Joint Venture Agreement clearly spells out the rights and obligations of each contracting party and there are no opaque terms governing the relationship. Increased land utilisation and productivity guarantees food security and economic development through exports to foreign markets to generate much needed foreign currency.


CONCLUSION

Joint Venture Agreements are a strategic and vital tool to facilitate the attainment of the Vision 2030 Agenda and they offer a platform for interaction between landowners and Investors. While some might label Joint Venture Agreements as a necessary evil that has resulted increased productivity and land utilisation, the Joint Venture framework in place is in fact watertight as it aims to protect Investors and at the same time maintain and consolidate the ethos and the principles underlying the land reform programme. Joint Ventures make it possible for one to farm where one does not own land thus making it an all-inclusive sector that does not discriminate on the basis of ownership.