• Zimbabwe has begun compensating former farm owners with $311 million approved for 740 farms under the Global Compensation Deed
• The Treasury bonds, carrying a 2% annual coupon rate, present a long-term financial obligation
• The compensation strategy aims to address historical grievances while attempting to restore international credibility and unlock new financing opportunities

Harare- Zimbabwe’s recent initiation of compensation payments to former farm owners under the Global Compensation Deed (GCD), signed in 2020, marks a significant step toward resolving historical grievances stemming from the land reform program of the early 2000s.

As of April 9, 2025, the government has approved compensation for 740 farms, with the first batch receiving a total approved compensation value of US$311 million.

This amount is split into US$3.1 million in cash representing 1% of the total and US$308 million in US dollar-denominated Treasury bonds, which carry a 2% annual coupon rate and maturities ranging from 2 to 10 years.

This means that bondholders will receive 2% of the bond’s face value each year as interest. For instance, if the face value of the bonds is $308 million, the annual interest payment would be $6.16 million (2% of $308 million). This interest is paid to investors annually, providing a consistent income stream over the life of the bonds.

The bonds have maturities ranging from 2 to 10 years, indicating that they will return the principal amount to investors at the end of these periods. For example, if $100 million of the bonds matures in 2 years, investors would receive their initial investment back at that time, along with the interest accrued during those years.

Meanwhile, another $100 million might mature in 10 years, allowing for longer-term growth and interest accumulation.

This structure allows the managing entity to maintain some immediate cash flow while also benefiting from the stability and income that U.S. Treasury bonds provide. Overall, the combination of cash and bonds creates a balanced approach to managing funds, enabling both short-term and long-term financial strategies.

This initiative is part of a broader strategy to clear the country’s total debt of US$21 billion with external arrears, estimated at over US$13 billion, and restore international credibility to unlock new concessional financing opportunities, essential for achieving development goals under the National Development Strategy 2 (NDS2) for 2025-2030.

Compensation Structure and Context

The GCD focuses on compensating former farm owners for improvements made to their properties, such as infrastructure and irrigation systems, rather than the land itself, aligning with the national constitution.

The cash component of US$3.1 million is a small fraction, with the bulk (99%) issued as bonds to manage immediate liquidity constraints.

This approach is distinct from compensation under Bilateral Investment Promotion and Protection Agreements (BIPPAs), which cover both land and improvements for a smaller group, primarily foreign farmers.

Recent reports from February 2025 indicate that for BIPPA-protected farms, the government has begun disbursing funds from a US$20 million allocation in the 2024 budget, with a total value of US$145.9 million for 56 farmers, and the remaining US$125.9 million to be paid from 2025 to 2028.

However, the focus here is on the GCD, which targets a larger cohort and involves significant bond issuances.

Zimbabwe’s economy is characterised by chronic US dollar shortages, exacerbated by a trade deficit, restricted foreign exchange access, and reliance on the US dollar alongside the gold-backed Zimbabwe Gold (ZiG)  introduced in April 2024.

The country’s liquid cash reserves are estimated at around US$240 million as of April 2025.

The immediate cash outflow of US$3.1 million for the first batch poses minimal strain on these reserves, suggesting short-term liquidity is manageable.

However, the issuance of US$308 million in bonds introduces long-term obligations. With a 2% coupon rate, annual interest payments amount to approximately US$6.16 million, and principal repayments will be due over a period extending up to 10 years, depending on the maturity structure.

Given Zimbabwe’s GDP is roughly US$27 billion and external debt US$21 billion, the cumulative effect of these bonds, especially if extended to all 740 approved farms, could strain future US dollar availability.

The total compensation for all farmers under the GCD is estimated at US$3.5 billion, based on the 2020 agreement, implying potential bond issuances could reach billions, further complicating liquidity management.

Zimbabwe’s ability to service these debts will depend on sustaining export earnings from sectors like tobacco, gold, and horticulture, as well as remittances and potential foreign investment, which remain constrained by international sanctions and debt arrears.

The issuance of US$308 million in Treasury bonds for the first batch alone raises questions about whether Zimbabwe’s financial markets can absorb such a volume.

To enhance appeal, the bonds are designed with features such as liquid asset status (allowing trading or use as collateral), prescribed asset status (making them eligible for institutional investors like pension funds), tax exemption (free from income, capital gains, or inheritance taxes), and transferability.

These attributes are intended to encourage uptake by domestic institutional investors, who are often mandated to hold prescribed assets under regulatory frameworks. For instance, pension funds and banks may be compelled to absorb a significant portion, potentially mitigating initial placement challenges.

However, secondary market liquidity remains a concern, as over-the-counter trading exists but lacks aggregation mechanisms to ensure market depth.

Given that US$308 million represents about 1% of Zimbabwe’s GDP, this issuance is substantial for a market with limited participation from retail investors or foreign entities, suggesting that while initial absorption may be feasible through institutional holders, active trading and liquidity in the secondary market could be constrained, affecting bondholders’ ability to offload holdings and potentially undermining confidence in the compensation program.

Therefore, Zimbabwe’s compensation program under the GCD is a historic effort to address land reform legacies, illustrating a strategy to balance immediate liquidity with long-term obligations.

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