The conflict over land was related to growing tension between the government and veterans of the liberation war. In 1980, there were about 60,000 men and women who had been guerrilla members of the two liberation armies, Zanla (affiliated with Zanu) and Zipra (affiliated with Zapu). About 20,000 were integrated into the national army; the remainder were demobilized and awarded a small pension, but given little other assistance to help them in starting a new life.
In April 1989, the Zimbabwe Liberation War Veterans' Association (WVA) was formed, bringing together excombatants from both Zanla and Zipra to lobby for increased government assistance. By 1991, the government opened negotiations with the veterans group and several laws were passed in their favor, including a War Victims Compensation Act (1993). The administration of the compensation, however, was corrupt and inefficient. A number of senior Zanu officials were later found to be claiming large pay-outs, while those in real need remained neglected.
The confrontation over these issues provoked a crisis in relations between the government and the WVA. In August 1997, a commission of inquiry was appointed to look into abuses in the payment system (the Chidyausiku Commission), provoking a split in the WVA between those who supported and those who opposed the investigation. In September of that year, at the Zanu-PF summit, Mugabe bowed to pressure and announced a package for veterans that included a once-off payment of Z$50,000 to each veteran, and a Z$2,000 per month pension for life.
It was not clear how the state would pay for this commitment. The pledge, however, gave some war veterans an interest in the continued rule of Zanu-PF; by mid-1999, the WVA faction led by Chenjerai Hitler Hunzvi, who was to be a key figure in leading the land invasions of 2000, was clearly close to the government. Exacerbating these problems was a growing economic crisis in the country. The new government had borrowed heavily from the World Bank during the 1980s, and servicing the debt rose to 37 percent of export earnings by 1987.
Small-holding peasants defaulted on more than 75,000 out of 94,000 loans given to them, worsening the government's fiscal crisis. Loan conditions were placed on the government, which led to food subsidies falling in 1986 to two-thirds of their 1981 level and a cut in education and health spending. The adoption of an Economic Structural Adjustment Program (ESAP) in 1991 led to increases in interest rates and inflation, and drought in 1992 and 1995 compounded the problems. Land reform was not integrated into ESAP, while large scale commercial farmers were the principal beneficiaries of reforms promoting agricultural exports.
The stock market fell and manufacture contracted by 40 percent between 1992 and 1996. Many workers were laid off. By 1997, Zimbabwe was in the throes of a serious economic and political crisis. Spiraling food and fuel prices inspired urban strikes and political protests, radicalizing the trade union movement under the Zimbabwe Congress of Trade Unions. A militant strike wave in 1998 saw public sector workers at the forefront of this growing resistance, including two successful national general strikes.
Despite the domestic financial problems, in June 1998, the government sent the first of what would eventually be 11,000 soldiers from the Zimbabwean army to the Democratic Republic of Congo, to fight in support of the government of President Laurent Kabila. In fact, in the wake of a growing confrontation between the British and other donors and the Zimbabwean government over the financing of land transfers, and the November 1997 government notice of compulsory acquisition of 1,471 farms (about 3.
9 million hectares), an international donors' conference on land reform and resettlement was held in September 1998. This forum aimed to build a consensus among various stakeholders in land reform. A set of principles was adopted to govern "phase two" of land resettlement in Zimbabwe, including respect for a legal process, transparency, poverty reduction, affordability, and consistency with Zimbabwe's wider economic interests. A technical committee worked on finalizing the details of the new system. Nevertheless, relations between the donors and the government broke down.
The Zimbabwe government accused the donors of not actually putting up the funds that they had pledged and of protecting the neo-colonial interests of white-owned agribusiness; the donors accused the government of continued lack of transparency and failure to adhere to the principles agreed at the conference. New conditions related to governance were attached to funding for land reform. Despite these difficulties, some progress was made: by the end of 1999, thirty-five farms totaling 70,000 hectares had been purchased, with others in line to be acquired. A draft land tax bill had been produced, and steps taken to limit farm sizes.