Market mechanism for farmland under fire

THE Department of Land Affairs is secretly debating the principle of willing-buyer / willing-seller, arguing that it is hampering land reform in South Africa. Proposals contained in an official document include making the state the only buyer of farms, and giving it the right to pay below-market prices.

The document, now in its third draft and the subject of workshops behind closed doors, also evaluates the merits of a progressive land tax and mentions the possibility of “one farm, one farmer”.

It contains a stirring injunction to “learn from the ‘storming of the Bastille’ in France in 1879, the peasant revolution in Ethiopia in 1974 and the Zimbabwean experience for the period between the year 2000 and 2005”.

Should the proposals to give the state greater powers to transfer agricultural land from white to black ownership take effect, it could dent foreign investor sentiment towards South Africa and ultimately wreak havoc with agricultural productivity and food security.

Making the proposals a reality would require a change in legislation, and possibly a change in the Constitution.

But Pat Thaker, regional director for Africa at the London based Economist Intelligence Unit, says the South African government would not want to create a negative perception now that the economy is starting to perform well.

“Based on current evidence, South Africa will be very cautious. It would not want to go the route Zimbabwe has. Any sensible government would follow the right path.”

The existence of this document was revealed last week in an exposé by Farmers’ Weekly journalist Chris Louw.

Although the thrust of the document appears to match the sentiments expressed by deputy president Phumzile Mlambo-Nqcuka at the closing of the Land Summit in July, this isolated debate amongst a select few jars with the agreements reached at the summit.

A working committee with representation from all agricultural stakeholders had been set up in the wake of the summit, to draw up land reform policy within the context of inclusive debate. Glen Thomas, director general of Land Affairs, is one of the convenors of this working committee.

He is said to have been the host at the September workshop of the Land Affairs document.

Agri SA president Lourie Bosman says he is aware of the workshop having taken place, although his organisation and others represented on the working committee was not invited to it.

“There is some unhappiness amongst agricultural role players about this process, because the Department of Land Affairs appears to be driving the process without all the role players,” Bosman says.

Land Affairs officials’ decision to go it alone on this key aspect of land reform reflects the degree of political pressure that is building up around land ownership in South Africa.

The land restitution process has been frustratingly slow, with only tiny percentage of commercial farmland having been transferred over the past eleven years. Statistics from 2005 show that 80% of agricultural land is still white-owned, 2,5% is in black hands and 18,6% is unfarmed.

This contrasts with the government target of having 30% of agricultural land in black ownership by 2014.

The Land Affairs document expresses the sentiment that the willing-buyer/ willing-seller principle is at the heart of this slow progress, along with financial constraints, farmers who are pushing up farm prices, and insufficient political will on the part of the government to expropriate farms.

It says that the willing-buyer/ willing seller principle offers no guarantees that the “landless will acquire land”, while the willing sellers (also referred to as the “landed gentry”) maintain “monopoly control of the means of production that is the land”.

Moreover, this legal principle gives white farmers the “latitude to determine the price of land that suits them, regardless of the buyers’ ability to enter into transactions”.

The authors of the Land Affairs document propose that the Expropriation Act be rewritten to include a “negotiated compulsory purchase”, as has been implemented in Zimbabwe and Namibia.

This would give the government the right to buy commercial agricultural land at prices below market value.

Property economist Francois Viruly warns that deviating from the Expropriation Act as it now stands would be against international norms and would place the rand at some risk.

Thaker says an important aspect of the debate on land reform is whether black farmers are making good use of the farms that are being allocated to them.

She quotes a report released by the parliamentary portfolio committee on land and agriculture in November 2005, based on a study by the University of Pretoria involving 177 land reform projects in the North West Province, which shows that many farming projects have failed.

Of the farming projects surveyed, 27% were not producing, 44% were producing or were in decline and 42% were producing above subsistence, but were not necessarily generating a profit.

Thaker comments that “this is hardly surprising, considering that as many as 86% of the farms had been taken over by people with no commercial farming experience”.

Such projects have been criticised heavily for the lack of technical, skills and financial support offered, which inevitably dooms them to failure.

Get commercial property news by email

Free alerts when we publish — pick a focus or get everything, unsubscribe in one click. Subscribe »