BUSINESS DAY TV: ‘Land reform is vital but must not lead to uncertainty’
Theo Boshoff is the head of legal intelligence at Agbiz.
BUSINESS DAY TV: Land redistribution is being stepped up a notch with a new bill proposing limitations on land ownership in the country. The Regulation of Agricultural Land Holdings Bill was published last Friday, and stakeholders have until mid-April to submit their comments.
If the bill is promulgated, foreigners will be banned from buying farm land but will be able to enter into long-term leases. Joining us with the implications of the bill is Theo Boshoff, he heads up the legal intelligence business at Agbiz.
Theo ... so it seems pretty reasonable that foreigners are given long-term leases because is it desirable to have foreign ownership of productive land?
THEO BOSHOFF: It’s certainly not unprecedented. If you look at economies and especially emerging market economies across the world, they do place limitations on foreign land ownership. Something that is just very important to note as well is that a perception is being created, especially with regards to foreign direct investment because the South African economy as well as the agricultural sector is very reliant on that. Something perhaps that is also interesting to note is that this bill creates something called the Land Commission where land owners will be obliged to within one year give compulsory disclosures with regards to, amongst others, nationality, so that we can have an idea or a sense in SA of what proportion, what percentage, of agricultural land is owned by foreigners. So perhaps a comment from our side is that the Land Commission should perhaps just be allowed or permitted to do its work, and to find out what percentage it is so that we can move on to making those policy decisions from an informed basis.
BDTV: Is it hard then to anticipate just how much of a shift we’re expecting to see as a result of selling by foreigners because we don’t have concrete numbers we’re working with right now?
TB: Yes, absolutely that’s a very important thing, to work from an informed policy base because we don’t currently have the numbers. What the bill does, though, is that it won’t necessarily mandate foreigners who currently own agricultural land in SA to sell, it simply places limitations going forward that foreigners will only be able to enter into long-term leases as opposed to purchasing it and when foreigners who currently own agricultural land before the bill comes into operation, who want to sell it, the limitations are placed as well in terms of that they would have to sell it to historically disadvantaged individuals to further land reform, and if none can be found, then the state also has the right of first refusal to purchase it.
BDTV: And they’re also placing a limitation on how much you can own so both from locals as well as foreigners and that’s 12,000ha I think, so would foreigners who currently own more than 12,000ha be obliged to sell down to that level?
TB: As far as I understand it’s anyone, whether its foreigners or locals who are above the proposed caps, will have to sell, but what’s very important to note ...
BDTV: How big is 12,000ha, by the way?
TB: Twelve-thousand hectares is quite large but it depends completely on which area of SA you’re in because, of course, the natural resource base differs dramatically between say the Karoo versus high-potential agricultural land. But importantly the 12,000ha was initially mentioned by the minister when the policy was being debated. But the current bill doesn’t actually refer to figures, it simply gives the minister discretion on a district-to-district basis to set the agricultural cap. So it might be a potential red herring to look at whether or not it’s over or above 12,000ha because at this stage we’re not exactly sure what the cap will be but it will most likely differ between districts.
BDTV: Looking at some of the other points on the bill, foreigners selling land would have to offer the minister the right of first refusal to acquire ownerships such as agricultural land holdings and that seems like it has the potential to venture into very dangerous terrain, what’s your perspective on that, especially if you’re coupling it with the fact that if the minister and the seller of the land are unable to reach an agreement on the purchase price then expropriation becomes the next course of action?
TB: It’s very key for the correct connotation of expropriation because if you look at foreign jurisdictions, Namibia, for example, they have a compulsory right to first refusal over all agricultural land to try and affect the land reform ventures and with a country where the fiscus is comparatively a lot smaller than SA, they’ve actually succeeded further than SA in terms of the percentage of land that’s been transferred in terms of the land reform programme with the right of first refusal.
So, in itself, the right of first refusal is an option that can be considered and I know from organised agricultural and Agbiz businesses like this is one of the proposals we also put to government. But it’s very important, the devil is always in the details. And there must be specific timeframes attached to it that, if the minister doesn’t exercise the discretion within a certain timeframe, you should be able to sell it freely on the open market. And that’s where you combine it with expropriation mechanisms where it does in effect become a forced sale.
BDTV: Are we talking about all sorts of agricultural land, so would this include wine farms, for instance, and would it also extend to things like game farms?
TB: If you look at the initial definitions in the current version of the bill, it certainly would. It’s anything that is not formally zoned by a municipality for any other purposes, so it’s anything that is not a formally proclaimed township would essentially be agricultural land. So you would look right across all the commodities with the exception, of course, of proclaimed conservation areas.
BDTV: The aim, of course, is to get more land into black hands, what kind of impact has land reform had on economic growth, is there a direct correlation to be extrapolated?
TB: Land reform, per definition, has to be seen in the social context. For SA, it’s ingrained in the Constitution that land reform and transformation in the agricultural sector especially has to happen and it’s very important for the stability of the sector. But chapter 6 of the National Development Plan (NDP) says we need to accelerate land reform but without distorting business confidence in the agricultural sector as well as the land market. And there it’s very important that land reform per se, and the way in which you do it, will not distort business confidence.
And, from our point of view, there certainly are mechanisms that are more closely aligned to the National Development Plan, which will cause less uncertainty and less of a disruption in the land market. An example would be something from our side that we formulated, a public-private partnership funding model, where you combine grant funding with commercial loans on a 50-50 basis to purchase land on the open market to transfer to beneficiaries.
BDTV: I presume that you’re making a submission on the bill, are you hopeful that you can help to influence the final result?
TB: Absolutely, yes, and it’s also very important to note that for the past five years, we’ve been working very closely with the Department of Rural Development and Land Reform in policy discussions and all the consultation processes up to now. Now that the bill has been formerly published is no exception. We’ll also prepare a submission and what we will most likely propose is hopefully something that’s more closely aligned to chapter 6 of the National Development Plan.