Picture: GALLO IMAGES
Picture: GALLO IMAGES

The CEO of the Land Bank, Tshokolo Nchocho, recently spoke to Business Day deputy editor Carol Paton about land reform and expropriation without compensation.

CP: Has the government’s decision to stop giving title deeds to land reform recipients and to switch to lease hold had an effect on the lending to black farmers?

TN: To be able to farm, you need land. But we also recognise that for certain commodities, the planting and gestation period can take very long. So for example, if you want to plant macadamia nuts, the trees take two years to grow and another three years to yield. So beyond the issue of the fact that the farmer does not have ownership, leasehold (which is usually three or five years) is not practical for the development cycle of that commodity.

A farmer needs 30-40 years to put the capital needed into a farming operation. Even for maize, this argument holds true as farmers need to invest in capital equipment and preparing the soil.

CP: How long should a lease be?

TN: In parts of the world where the state owns the land and leases it out – e.g. Germany – 99-year leases tend to be the norm. A lease like that is bankable insofar as a lender is able to exercise rights over a defaulting leaseholder and have them removed from the land, even if it can’t take ownership of the land. It can then redeem the outstanding loan from the next leaseholder.

CP: The government says it is now giving 30-year leases. Will this help?

TN: It is only in the past 18 months that we have come across some 30-year leases. For the rest, leases are three or five years. But even with a 30-year lease, I still have a question mark. You need to give a farmer a substantial line of sight into the future in order to invest.

CP: Did the government consult with the financial sector before making this policy change?

TN: I’m not aware that there was any consultation.

CP: The [Department of Rural Development and Land Reform] seems to be in possession of a lot of farms that have been bought and not distributed. Are you aware of this?

TN: Yes, the department does have a substantial amount of land that it has acquired but that is not in productive use. We are calling for the rapid release of that land. This could be transferred either with full title or long-dated lease.

CP: Has the bank done an analysis of its loan book according to race?

TN: The Land Bank is a 106-year-old organisation with a loan book dating back decades. If you take a point in time right now, then of our book of R43bn-R45bn only R5.5bn or R5.6bn has a black colour attached to it. It is our aim to lift this exposure to 30% or so, but for us to do that we need instruments of support. It is not enough to just provide people with land, but there is also a need for investment or grant funding to help capitalise farms and all sorts of technical support.

There are also two big problems that we have found: first where black people are seeking to buy land, existing owners overprice. Our valuers have found that the price is inflated by 30%-40%. The second big problem is that when we do an affordability assessment, black farmers often cannot afford the amount that they need to borrow to make the farm viable.

That is why we are arguing for some kind of blended finance that includes both loans and grants or a particular dispensation when part of a loan is written off after they demonstrate that they can use the land productively.

CP: Are black farmers given enough technical support?

TN: Commercial farmers are sustained by technical support and access to a knowledge base through their co-operatives. Black farmers don’t have that. The ones that have succeeded have cracked that code. Commercial farmers also get their market access through membership based co-ops.

The point I have been making to the African Farmers Association of SA is that anyone can speak about the politics of land but they need to start talking about institutional arrangements and the support that is needed.

That is why this conversation about land expropriation has brought us to a place we are finally having a real conversation. It is matters like these that will be our submission to the Constitutional Review Committee.

CP: Do you think this discussion about land expropriation without compensation could go awry and damage land values?

TN: Personally, speaking to our executive team, I have said we have to take [President Cyril Ramaphosa] at his word and believe in him when he says the process will unfold in a way that will not harm the sector. We have nothing else to go on.

If the system of mortgage finance is destroyed then the government will have to carry our entire R45bn loan book. I don’t think they have the appetite for that. I do believe reason will prevail and this debate will be held in a way that is well considered.