Farming not the dependable pursuit the land reforms assume
Wandile Sihlobo advocates a dynamic system incorporating public-private partnerships based on sound agronomic principles
On June 6, I published an essay in Business Day which explored the official land reform data and argued that the pace of land reform in South Africa had been fair, especially if progress was measured by the amount of land acquired from white owners and made available to black beneficiaries, including calculated assumptions about private transactions.
About 17.5 million hectares have been acquired from white ownership since 1994, equal to 21.2% of the 82.8million hectares of farmland held in freehold. Against that background, I believe that the initial Strengthening the Relative Rights of People Working the Land (50/50) policy and gazetting of the Regulation of Agricultural Land Holdings Bill are based on fundamentally flawed assumptions.
First, the policies imply that most farms consistently generate positive returns that can be distributed to farmworkers, whereas returns are generally low, at best reaching 6% in a good season. With erratic rainfall, returns have tended to be negative, which has largely been the case over the past two seasons. The sector is fragile, and a significant policy shift can easily translate into extended negative returns.
Second, the sector is sagging with debt, estimated at a record R160-billion, due to drought. A compulsory 50/50 arrangement would imply that beneficiaries would inherit significant debt, increasing the risk of insolvency unless there is a significant government commitment.
Third, with regard to the land-ceiling proposals, while we do not yet know what figures will be proposed, most farms are small and will therefore not make a contribution by releasing land under the scheme. In addition, what I have learnt about the land ceiling so far is that it has not sufficiently incorporated the nuances of agronomic conditions that would allow extensive production in arid and semi-arid conditions.
Given these realities, I advocate a dynamic system incorporating public-private partnerships based on sound agronomic principles in line with chapter 6 of the National Development Plan. There are examples where the private sector has taken the lead to develop solutions tailored to a specific area or commodity. Initiatives in Bester and Witzenberg, share-milking schemes, as well as projects led by agribusinesses and co-operatives come to mind. These should be supported in conjunction with new projects designed according to the NDP guidelines.
The NDP suggests that the identification of transferable farms and beneficiaries should take place at a district level, facilitated by district land reform committees, established in 2015. Farms with an annual turnover of more than R3-million should be reasonably well represented and could assist in reaching the original 30% target. The contribution could happen in the following way:
Farms for sale are identified by inclusive district land reform committees;
A farmer is appointed as mentor/co-investor to acquire new land with a qualified beneficiary;
A beneficiary will be selected by a farmer-investor (not the state), to ensure a good relationship;
In acquiring the farm, the state can contribute 30% of land value in a grant to the beneficiary. Another 30% can be a loan from the Land Bank in the name of the beneficiary and farmer (50/50), and the 40% remaining is a cash contribution by farmers (with a turnover of R3-million a year). The farmers should then be exempted from future land-reform claims; and
The farm could be co-managed with the farmer's existing operation to ensure its success.
• Sihlobo is an agricultural economist and head of agribusiness research at the Agricultural Business Chamber. This essay included contributions from Theo Boshoff, head of legal intelligence at Agbiz