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In other cases, when government extends services to privately owned peri-urban land which
then becomes valuable residential sites, the owners of the undeveloped tracts are required to donate
to the local council suitable sites for schools, clinics, markets, and other services. Their compensation
for these sites consists of the state-financed roads, water and electric lines that made their landholdings
more valuable. As in the irrigation case, they still gain substantially, but at least the council is not
forced to later buy sites at market prices for needed community facilities.
There are several alternative ways in which the LDF could be used to increase the supply of
serviced farmlands:
► improve the idle or underutilized land in the state tenure area, recaptured from those who hold
leases now but are not using the land productively (once improved, it would be leased anew,
preferably at open, public auction);
► rehabilitate run-down and unproductive state farms that are to be privatized (actually, we
would prefer a cheaper, faster process—auctioning these state farms "as is," letting the bidders
develop the land with their own funds);
► make loans to emergent farmers who do not have access to loans from commercial banks
because they are unable to provide sufficient guarantees of repayment (such a plan should
begin with serious analysis of alternative schemes that make it likely that the emergent-farmer
borrowers will in fact repay the loans, 16 and that enable those farmers to thereafter apply to
commercial banks precisely because they have demonstrated creditworthiness);
► improve newly created leaseholds that government wants to create in customary tenure lands,
thereby converting customary into State Lands; or
► finance improvements to land in traditional villages in customary areas.
2. Who pays for the land and improvements?
There are several approaches the fund could use to finance land and improvements:
► outright gifts or grants to disadvantaged persons;
► installment loans which the beneficiaries would have to repay over a period of months or years
(the period might vary according to the type of improvement, and incentives such as free life
insurance might be provided for those who repaid punctually and in full); or
► increase the annual ground rent payment required of the leaseholder by enough to recover the
amount invested by the fund, with interest (this is similar to the case of a private landholder
who finances construction of a house or flat and then rents it to a tenant). 17
3. Who provides the improvements?
In each approach, the state could do the actual construction, contract with private firms to do
the work, or make loans to the lessees, with which they would hire the work done (and supervise it).
Some types of investment (such as access roads into a new land block) would best be contracted for
and supervised by the state. Most on-farm improvements (such as fences, tree crops, wells, and
See, for instance, Strasma 1992.
A form of this, using two accounts (one for normal ground rent, and the other for recovery, at interest, of the
premium caused by the LDF improvements), has been used in settlement schemes and in the opening of new labor blocs.