The Land Reform in Zimbabwe - Essay Example

?How Global prices of tobacco have fallen during the land reform in Zimbabwe from the year 2000 “Zimbabwe has experienced a precipitous collapse in its economy over the past five years. The purchasing power of the average Zimbabwean in 2005 has fallen back to the same level as in 1953” (Clemens and Moss, p.1). This is because of the major setbacks suffered by Zimbabwean economy because of the dipping prices of tobacco in global market. Tobacco is the major revenue source of Zimbabwe and any changes in the prices of tobacco in global market may affect Zimbabwean economic growth. Tobacco production from Zimbabwe has considerably reduced after the land the implementation of land reform policies in 2000 by the Robert Mugabe government. Zimbabwe government blames natural calamities such as unexpected droughts, floods, and problems global economic orders as the reasons for the heavy downfall of tobacco production in Zimbabwe. In realities, such claims are absolutely nonsenses. The major reason for the current problems in tobacco production is the land reform policies implemented at the beginning of 2000 and the subsequent price drops of tobacco in global market. It should be noted that Zimbabwe is the number one tobacco producer in African region and the third largest in the world behind America and Brazil. “Malawi and Zimbabwe accounted for just under 70% of tobacco produced in Sub–Saharan Africa (SSA) during1965-2004 and 75% during the 1990s. The share of SSA tobacco leaf exports accounted for by Zimbabwe and Malawi is even higher – 87% during 1965-2004” (Poulton et al, p.6). Moreover, Zimbabwe is the world's biggest tobacco exporter, and tobacco is the country's biggest foreign-currency earner, bringing in some $430 million in 1994” (Zimbabwe Tobacco Exports). Apart from land reformation policies implemented in Zimbabwe, other factors which influenced the global price dip of tobacco are; excess production of tobacco from other countries, low demand for tobacco products, anti-tobacco campaigns across the world etc. This paper analyses how global prices of tobacco have fallen during the land reform in Zimbabwe from the year 2000 and its effects on Zimbabwean economy. “Zimbabwe has a total land area of over 39 million hectares, of which 33.3 million hectares are used for agricultural purposes. The remaining 6 million hectares have been reserved for national parks and wildlife, and for urban settlements”(Zimbabwe). Tobacco and maize are the major agricultural crops in Zimbabwe. Majority of the tobacco produced in Zimbabwe is exporting to overseas countries. In fact the major source of foreign money for Zimbabwe is tobacco export. Under such circumstances, any price dips of tobacco in global markets may adversely affect the growth prospects of this country. The share of major crops in the agricultural export of Zimbabwe is illustrated in the following figure. Share of agricultural exports. (Zimbabwe). From the above figure, it is evident that tobacco production has increased consistently from the period from 1985 to 2000, even though some of the other crops suffered setbacks during this period. Moreover the value of exports also increased considerably during this period. However, from 2000 onwards, agricultural sector in general and the tobacco sector in particular started to exhaust in Zimbabwe. Zimbabwe governments implemented many changes in the agricultural sector which brought more harm than the good. For example, the programme of “fast-track land resettlement and redistribution” started in 2000, has brought many problems in Zimbabwe. The above programme is still continuing in Zimbabwe even amidst criticisms from both internal and external sources. In fact these land reformation policies created more panic among the farmers their interests in farming has completely lost at present. Land ownership is a controversial subject in Zimbabwe over the last few decades. Governments implemented periodical changes in land ownership which brought many political and economic changes in the country. At the time of independence, majority of the lands were under the control of some landlords and poor people struggled to have some lands under their name. In order to correct these problems, governments implemented several policies time to time, but none of them fully succeeded so far. “The immediate objective of the current land reform is not increased productivity but transfer of landownership” (Zimbabwe). Transfer of land ownership for a short term has created more panic among the farmers especially the tobacco farmers. Since tobacco is a crop which may give more yields in the long run, short term land ownerships were not good for the best interests of the farmers. So farmers were reluctant in working hard in agricultural farms. The following figure illustrates the average prices of tobacco leaf from 1965 to 2004. (Poulton et al, p.4) Tobacco market is highly oligopolistic just like crude oil market. It should be noted that Organization of petroleum exporting countries or OPEC is controlling the prices of oil in global market. When demand increases, they increase the price and production and when demand decreases they decrease the price as well as production. Same way, only few countries such as Brazil, USA, Zimbabwe, Turkey, Malawi, Italy and Greece are controlling the global tobacco market. It should be noted that only few organizations are there in the cigarette manufacturing industry. Richardson (2005) has pointed out that in 2000 through 2003, the Zimbabwean government initiated a land reform policy that involved forcibly taking over white-owned commercial farms, ostensibly to redistribute this property to landless blacks” (Richardson, p.541). The above policy was implemented in order to help black community to get some ownership over fertile lands in Zimbabwean lands. Even though the Supreme Court of Zimbabwe declared a verdict against this policy, Mugabe government continued with it. Thus the property laws in Zimbabwe started to become meaningless because of this policy. It should be noted that Zimbabwean farmers had a habit of taking agricultural loans from banks with the help of the documents related to their property ownership. Banks insisted the verification of documents to prove the ownership of land before providing loans to the farmers. The loss of ownership on lands prevented farmers from getting loans from the banks. Thus they forced to cut down their agricultural activities which resulted in less production of tobacco. Since 2001 the former large-scale farms have been converted into A1 model farms (small subsistence farmers) and A2 model farms (commercial medium and large farmers). Many of these A1 and A2 farmers lack access to capital and other inputs, contributing to severe under-utilization of land resource and low production (Special Report FAO/WFP Crop and Food Supply Assessment Mission To Zimbabwe). As mentioned earlier, banks started to deny loans to farmers in the absence of documents related to ownership of agricultural lands. This tactics not only affected the farmers, but also the banks. Lending is the major business activity performed by banks and the strict rules with respect to ownership documents reduced banking activities substantially. Thus, banking crisis also started to develop in Zimbabwe as a result of the land reform policies started in 2000. During 2000, the value of the commercial farmland dropped dramatically by US$5.3 billion. Moreover, the land became “dead capital,” because it was unable to be leveraged and used as equity. The farmers who tilled the land quickly resorted to inefficient subsistence farming techniques. The loss of $5.3 billion in wealth caused a reverse multiplier effect, quickly destroying the networks of economic activity that had been created before the abrogation of private property rights (Richardson p.551). The above facts clearly suggest that the recent land reform policies actually destroyed the Zimbabwean agriculture in general and tobacco in particular. Even though Zimbabwe had enough opportunities to implement land reforms in the past, they never shown any seriousness to this issue in order to win elections. “Land, will always be an election issue in Zimbabwe, no matter who runs, because much of the land was in the hands of those with close links to apartheid South Africa, it would have been extremely dangerous to take land except on a willing seller basis” (Thompson). Derman (n.d.) has pointed out that “land reform provides the means to achieve complex goals to make life better for some people without harming, certainly not in the longer term, the productive base of a national economy” (Derman, p.1). While implemented, Zimbabwean government described land reforms as a revolutionary social policy to reduce the gap between the rich and poor. However, because of the poor insights and implementation strategies, it brought more harm than good. Even though the government thought of revitalization in agricultural sector through these policies, the end results clearly suggest that the policies failed to live up to the expectations of the government. “Tobacco production collapsed to a low of 48.8m kg in 2008, down from almost five times that in 2000”(England & Hawkins) A cross-sectional analysis of 68 developed and developing countries showed that those countries that experienced arbitrary seizures of property had negative economic growth. A country might increase its growth rate by more than 1 percentage point by putting a stop to such seizures. Of the data analyzed for 15 countries in a study that undertook arbitrary seizure of property, 9 had negative growth rates. They included Chad (?6.1 percent), Liberia (?4.0 percent), and Zaire (?5.1 percent). Those findings appear to underestimate the total impact of property seizures, at least in the case of Zimbabwe (Richardson, p.544). Farmers usually like to conduct farming in their own lands. They don’t like the concept of leased farms. Leased farms always put some kind of burden upon the shoulders of the farmers as they forced to pay the lease amount irrespective of the profits and losses of farming. On the other hand, farmers always like to have their own lands for cultivation as their hard work benefits need not be shared to others in such cases. In short, property rights are directly linked with the economic growth of a country. In Zimbabwe, farmers failed to get ownership of agricultural lands which forced them to stay away from agriculture. In short, unsatisfied farmers caused huge economic crisis in Zimbabwe. In the beginning of 2000, Zimbabwe imposed five percent turnover tax on tobacco sellers and the six percent levy on buyers and growers as part of their revised trade policies of tobacco (Zimbabwe). These taxes imposed, forced farmers to reduce their activities which resulted in decrease in production of tobacco in Zimbabwe. It should be noted that Zimbabwe has imposed these additional taxes while other tobacco supplying countries stayed away from such activities. In fact Zimbabwe forced to act in that manner because of the huge economic crisis in the country. However, the above strategy back-fired them and brought more harm than good. The second reason for the price dip of tobacco in global market is the increasing anti-tobacco campaign in the north, which is a major market for Zimbabwe’s tobacco (Zimbabwe). “Smoking incidence is expected to continue to decline in developed mature markets, as the percentage of smokers within total populations reduces” (World Tobacco Market). It should be noted that tobacco products are extremely harmful to human health and it cannot be sold without affixing statutory warning upon the labels of tobacco product packets. For example, Lung cancer is believed to be caused by smoking and the increasing awareness about lung cancer forced people all over the world to stop their smoking habits. “China has long been identified as the most important international cigarette market, Almost two-thirds of Chinese men (63%), and 3.8% of Chinese women, are smokers, giving a total of 350 million smokers in China” (Novotny). As per the recent statistics, smoking habits in China has reduced a lot because of the increasing awareness among the people about the health problems associated with tobacco products. The case is not much different in India also. Indian authorities have recently prohibited smoking in public places. Stiff penalties were imposed in India for smoking publicly. It’s been around 1 year now that Indian Government imposed ban on smoking in public places including government and private offices. As per the government, no one is allowed to smoke in public places including public transportation and public offices etc. As per the rules, smoking is banned in shopping malls, cinema halls, public/private work place, hotels, banquet halls, discotheques, canteen, coffee house, pubs, bars, airport lounge, railway stations. Public places cover all government, private and public sector offices as well. People go out of the offices for smoke. Earlier employees could smoke in the office premises but ever since the smoking ban everyone is prohibited to smoke inside the office premises (Smoking Ban Act, India – Must Read). It should be noted that India and China are the two most heavily populated countries in the world. Therefore anti-tobacco campaigns or low demand for tobacco products in these two countries may affect global tobacco prices drastically. Apart from the land reform policies in Zimbabwe, tobacco prices in global market decreased because of other reasons also. Other countries started to produce more tobacco in order to exploit the higher prices of tobacco in global market. In other words, over production coupled with less demand served as the major reason for tobacco price dips in global market. As mentioned earlier, Brazil and America; the two key players in global tobacco industry, started to increase their tobacco production. “In 2007, the United States had a total of 16,234 farms that grew tobacco” (Boriss & Kreith). Poulton et al (2007) have pointed out that “a steady growth in tobacco production happened in Malawi since its independence. Production peaked in 1997 in Malawi and in 1998 in Zimbabwe” (Poulton et al, p.6). It should be noted that Malawi is the second largest tobacco producer in African region. They brought more tobacco into the global market amidst the declining demand of tobacco products. In short, supply of tobacco was more than the demand which caused the severe price dips of tobacco in global market. India is another major country which is producing tobacco. India also increased the production of tobacco drastically over the past few years. Indian Tobacco Board Chairman, G Kamalavardhan Rao has recently said that “cultivation of tobacco in India is in excess by 40 per cent of the area than the authorised area of 80,000 hectare, the production is up by 30 per cent than the authorised production of 100 million kgs targeted by the board” ('International market plays a key role in tobacco prices') To conclude, the land reform policies implemented by Zimbabwean president Robert Mugabe at the beginning of 2000, succeeded in destroying the financial backbone of the country. Tobacco production in Zimbabwe has reduced considerably as a result of the land reform policies. Moreover, other countries started to produce more tobacco in order to exploit the favourable market conditions. However, anti-tobacco campaigns all over the world have reduced the demand of tobacco products. India and China; the two most heavily populated countries in the world have increased their anti-tobacco campaign which reduced the demand for tobacco products in these two countries. In short, the discrepancies in demand and supply, higher tariffs and anti-smoking campaigns going on all over the world, have created less demand for tobacco products in global market and subsequently the tobacco prices started to come down in global market. Works Cited Boriss Hayley and Kreith Marcia. “Tobacco Profile”. 2011. Web. 02 December 2011. Clemens Michael and Moss Todd. “Costs and Causes of Zimbabwe’s Crisis”. 2005. Web. 02 December 2011. Derman, Bill. “After Zimbabwe’s Fast Track Land Reform: Preliminary Observations on the Near Future of Zimbabwe’s Efforts to Resist Globalization”. Web. 02 December 2011. England Andrew & Hawkins Tony. “Zimbabwe Tobacco Farms Yield Success”. 2011. Web. 02 December 2011. “International Market Plays A Key Role In Tobacco Prices”. 2011. Web. 02 December 2011. Novotny Thomas E. The “Ultimate Prize” for Big Tobacco: Opening the Chinese Cigarette Market by Cigarette Smuggling”. Web. 02 December 2011. Poulton Colin, Kydd Jonathan & Kabame Dalitso . “Background Paper for the Competitive Commercial Agriculture in sub–Saharan Africa (CCAA) study”. 2007. Web. 02 December 2011. Richardson Craig J. The Loss of Property Rights and the Collapse of Zimbabwe. Cato Journal, Vol. 25, No. 3 (Fall 2005). Copyright © Cato Institute “Special Report FAO/WFP Crop and Food Supply Assessment Mission To Zimbabwe”. 2008. Web. 02 December 2011. “Smoking Ban Act, India – Must Read”. Web. 02 December 2011. Thompson Carol. “Globalizing Land And Food In Zimbabwe: Implications For Southern Africa”. Web. 02 December 2011. African Studies Quarterly. “World Tobacco Market”. Web. 02 December 2011. “Zimbabwe”. Web. 02 December 2011. “Zimbabwe Tobacco Exports”. Web. 02 December 2011. Read More