The progress with South Africa’s land reform programme has not been correctly monitored. This has resulted in an incorrect understanding of the true progress made to appropriate the racial distribution of farm land possession in South Africa.
In 2012 the Nationwide Improvement Plan set a goal to redistribute (or restore) 30% (or 23.7 million hectares) of all freehold agricultural land to black South Africans by 2030.
The overall notion is that the land reform programme has didn’t ship a recognisable shift in possession patterns. However the true scenario is extra nuanced. It’s because land reform is made up of various initiatives. These embody redistribution, restitution, monetary compensation, non-public acquisition and state acquisition.
Some have progressed greater than others. On this article I take a look at what’s occurred to the state acquisition of farm land which is then, for essentially the most half, leased to entrepreneurs eager to turn into farmers. I determine the elements that stand in the way in which of its success. The record is drawn from studies in addition to insights from farmers and based mostly on my three many years of expertise as an agricultural economist within the South African farming sector.
I’ve additionally recognized steps that the federal government ought to take to repair the issues. These are knowledgeable partly by my view that the federal government shouldn’t be within the enterprise of farming and will ideally merely be making certain a conducive atmosphere for companies to thrive. The land needs to be within the fingers and management of the entrepreneurs.
It’s of the utmost significance that the federal government act on this ineffective and politics-ridden system of land leases and make sure that beneficiaries are getting safe rights to the land. If not, the query about why there are so few profitable black business farmers (7% of all VAT registered farm companies in South Africa will proceed to be requested.
Land acquisition
In 1994 when South Africa held its first democratic elections, the 77.58 million ha of farmland within the nation with registered tile deeds was primarily owned by white farmers.
Since then, by our calculations, the whole space of land rights transferred away from white possession – both to the state or black beneficiaries – or the place monetary compensation has been made, is the same as 19,165,891 ha. Our calculations might be revealed shortly by the Bureau for Financial Analysis in its replace on the Nationwide Improvement Plan targets.
That is equal to 24.7% of all freehold agricultural land.
Though the quantity could look heartening, on condition that it’s near the 30% goal set out within the Nationwide Improvement Plan, the problem of concern is that the state is now a significant proprietor of agricultural land (greater than 2.5 million hectares).
This can be a downside for various causes.
Flawed design
The Agricultural Land Holding Account Buying and selling Entity is answerable for the acquisition of land and different property (movable and immovable), when it comes to the Proactive Land Acquisition Scheme which was applied in 2006. Via the scheme the land is then held by the state for the use by lessees of the programme.
By June 2023, the state had acquired 2.5 million hectares of productive farmland by way of the programme. A lot of the roughly 2500 beneficiaries have a 30-year lease settlement with the state. There are a number of farms the place no settlement has been signed.
The association makes reference to the leasing of land. However there’s no point out of the switch or sale of land to beneficiaries.
The acquisition technique was a noble try at land reform. It had some clear goals: purchase land of excessive agricultural potential; combine black farmers into the business agricultural sector; enhance beneficiary choice; enhance land use planning; and guarantee optimum productive land use.
However the programme has been disappointing. Just about no land has been transferred to people. Most is leased to beneficiaries and in some circumstances the farms are illegally occupied. Greater than half of the present beneficiaries on the leased land haven’t proven any substantial agricultural manufacturing. This means that precious agricultural assets aren’t utilised and are mendacity fallow.
The elements behind this failure had been set out in public in an article we just lately co-authored. The article was based mostly on findings which had been first collated in a analysis report compiled by the Agricultural Analysis Council for the Division of Rural Improvement and Land Reform and launched in 2019. Nevertheless, its findings had been by no means publicised.
Learn extra:
The South African authorities has been shopping for farmland for black farmers. It is not gone nicely
I’ve gained additional insights in conversations with farmers presently leasing land from the State. Their tales corroborate the report’s findings.
Main obstacles
Firstly, land tenure is insecure. This makes it tough – or unimaginable – to spend money on the land or safe loans for enhancements and progress. Beneficiaries should depend on authorities grants to do enterprise. The grants are sometimes not sufficient. And the method is usually gradual.
A second downside is official crimson tape. There’s clear proof of extreme layers of approval with repetitive documentation. This causes vital delays.
Thirdly, there’s a lack of entry to finance. Farmers have restricted credit score historical past, collateral or entry to formal monetary establishments due to the character of the lease association.
Fourth, the association of leasing of state land and the engagement of bureaucrats within the beneficiary choice course of and administration of choices on the farms are setting beneficiaries as much as fail.
Motion that must be taken
Authorities has purchased land on behalf of beneficiaries at market worth. However the authorities doesn’t have the capability and assets to handle the land property and generate any return within the type of rents, enhancing the capital asset base and even performing common upkeep of the bodily property that could be on the land.
There are answers.
Firstly, the federal government ought to switch the asset to an establishment with a vested curiosity and capability to offer each oversight and finance. One such establishment may very well be the Land Reform Company introduced by the president in his State of the Nation tackle of February 2021.
Secondly, beneficiaries who’ve managed to have commercially profitable enterprises on these leased farms ought to get precedence to accumulate the land and finance.
Thirdly, lease quantities which are paid ought to get deducted from the acquisition quantity. And farmers who’re updated with their lease funds needs to be given desire.
Fourth, the acquisition quantity needs to be pegged at 50% of productive worth (versus the market worth) – thus round 25% of preliminary buy worth by the state. Promoting the farms at lower than half the worth they had been purchased for would permit farmers to develop shortly and keep away from any challenges and provides them the respiratory area to meet up with their friends.
Fifth, the acquisition worth (pegged worth minus lease quantities paid) needs to be financed over 25 years at a preferential rate of interest.
Sixth, a monetary establishment (such because the Land Financial institution) ought to take title deeds as safety and register a mortgage bond on the land.
Seventh, put a moratorium on the allowed window of reselling the farm to 10 years and let authorities have the primary proper of refusal.
