Private sector and land law provisions: Not all is sad, gloomy

25Feb 2018
The Guardian Reporter
Guardian On Sunday
Private sector and land law provisions: Not all is sad, gloomy

PRIVATE sector experts have lately cautioned the government on the likely implications of slated changes in the Land Act of 1999, especially in relation to how governance of the use of land as collateral in bank borrowing is being reconstituted.

The Tanzania Private Sector Foundation (TPSF) has written to the minister for Lands, Housing and Human Settlements, William Lukuvi on the new provisions, being included in the Written Laws (Miscalleneous Amendments) Bill, number 5 of 2017 seeking that the bill and resort to wide ranging consultations on the matter. TPSF representatives were scheduled to meet MPs at committee level.

One provision in the bill relates to obtaining bank loan using undeveloped or underdeveloped land, in which the changes require that the loan be only used to develop that specific piece of land, while failure to do so invites withdrawal of right of occupancy.

Another provision directs that loans obtained by pledging land as collateral cannot be spent in investments outside the country,  and no foreign bank can be given land in a loan procured locally as realized collateral in relation to loans advanced to customers.

The bill, in a similar vein, backdates its application to affect past mortgages contracted in a manner contrary to these provisions.

What is analytically interesting is how far these amendments are negative for the country's economy, as the TPSF experts say the organisation categorically opposes those amendments and that herald doom for the country's economy.

That would by implication suggest that the drafters have little or no awareness how those provisions shall work out in practice, which is by and large untenable, as amendments to provisions in the law are calculated to bring about behaviour change.

Instead of examining how the new provisions may affect 'the economy,' it is more helpful to find out what sort of investors they will favor, or disenfranchise.

In that sense it can be said that TPSF experts pointed out what is likely to happen to current stakeholders who used the format of land law as it stands, and evidently there will be many repercussions once the land collateral is removed in all the stated categories.

Still all these effects aren't accidental to intentions of the legislator, in the sense that these effects are expected and seen as positive. The question is in what way this is true, and how this was missed by TPSF, or rather, how this aspect relates to the private sector generally, which comes down to asking how far the local private sector is ready to apply or benefit from the changes.

What the TPSF says in the letter to the minister is to place the whole of the private sector among the losers from the proposed amendments, a position that is unlikely to be valid.

It amounts to saying that no private individual can obtain an advantage in transactions on the has is of the new provisions, in which case the changes would be aimed at assisting public sector transactions alone, since evidently foreign companies are the first to lose from the new provisions.

That is where the secret lies, as to what sort of individuals or for that matter, private sector operations, are targeted by amendments, or how far this is economically positive.

The reason perhaps for TPSF to have reached the conclusion that the proposed changes are negative for economic growth generally is the lack of a sound premise of competitive economy in institutions of civil society in the country.

There is for instance no awareness in routine economic discussion of the difference between 'realty and personalty' in economic activity, where realty refers to real estate and fixed assets, and personalty refers to fluid assets like money, share holdings, deposits, bonds or other negotiable instruments of a quantitative sort. 

This law targets holders of 'realty' wishing to use it for other needs, like 'personalty.' If one looks at the background of the proposed legislation, it is evident that it is a continuation of the moves to cancel occupancy titles of holders of large chunks of land that has remained undeveloped for many years, at times running into hundreds of acres.

On the other hand, there are provisions meant to bring land law into conformity with provisions of the 'unconscionable' provisions of natural resources contracting that is the use of Tanzanian land to obtain loans outside or as collateral for foreign investment locally or abroad would be running foul of the law. It changes the sort of purposes for which land in Tanzania can be used, rightly.

It means for instance that when one obtains a loan against a piece of land it ought to develop that land first, which is meant to curb taking loans using landed collateral without developing the land.

It means that land that is not being developed is considered to have been forfeited and thus liable to be taken over, and that such reallocation of occupancy right will not be stopped by the fact of being mortgaged for a loan, as such a loan was unlikely to have been used on that land.

It is an explicit provision against those who hold land but have little intention of developing them, and instead obtain money for other activities using land as a shield.

This change in legislation, like other measures relating to land, mainly affect members of what Prof. Issa Shivji in a book published in 1975 described as the bureaucratic bourgeoisie, individuals with sizeable amounts of wealth arising from civil service positions.

They are individuals who take up large chunks of land in rural areas for purposes of financial transactions (realty to gain a base in personalty) and aren't in any real sense investors on the land.

In actual fact this was one among reasons for land seizures in post-2000 Zimbabwe, that many people (Europeans) held many farms, but in actual fact tilled just one, or two.

The changes underline that individuals who took land for collateral either develop them or lose right of occupancy, and that land purchasers ought to develop the land they purchase, firstly.

The idea that land is a purchase that one takes to keep fallow for a long time is thus coming to an end, which also means ending artificial holding of land and inability for real investors to find land to develop, as those holding land, and they have other means of livelihood, sell at astronomical prices even if they haven't developed the land.

The government is thus compelling real investment by all occupancy title holders, and cut down on speculation, in which case sizeable amounts of capital will be directed at developing land, creating industries, farms, jobs.

Top Stories