South African land reform may slow as economy cools

A plan to reform South Africa’s current land ownership structure is being reconsidered by the government, in a bid to find a bigger consensus that will encourage greater participation by black commercial farmers.

Under the draft of the Relative Land Rights legislation proposed in June 2014 by rural development and land reform minister Gugile Nkwinti, commercial farmers would have been obliged to hand over 50% of their land to their workers, with the state to compensate the owner of the land. The proposal had sought to re-establish black commercial farmers who were rooted out by 1913 Native Land Act and other apartheid regimes.

Further discussions

However, in mid-October, the minister said the draft legislation was not workable and a new approach was needed to move the land reform process forward, playing down concerns that the kind of forced land requisitions that happened in Zimbabwe could take place.

“In South Africa it’s not going to work,” Nkwinti told reporters. “[Farmers] say it is unconstitutional, and they are right. That is the beauty of our country…[it] is a constitutional democracy.”

The minister’s comments were echoed by the agriculture, forestry and fisheries minister, Senzeni Zokwana, who also suggested further discussions and debate on land restitution were necessary.

The proposals came under fire from a number of directions, with the leading farming organisation, AgriSA, asserting the 50/50 plan would see output fall and threaten food security. The group likewise accused the plan of being economically unviable, as it would break the value chain and lower investor confidence at time when the government is looking to attract additional funds.

The government has been promoting the agriculture sector as a destination for foreign investment, with both upstream and downstream operations heralded as investment opportunities for overseas buyers – here, too, investors may hold off until uncertainty over the land redistribution scheme is resolved.

Economies of scale scaled back

Over the past 50 years there has been a growing trend of consolidation – in South Africa as in many other countries around the world – with less than half as many commercial farmers currently operating as there were in the 1960s. Some estimates put the present number of commercial farmers between 35,000 and 40,000, a far cry from the 100,000 of five decades ago.

This consolidation has allowed greater economies of scale to be achieved across much of the agriculture sector – gains that could be rolled back if larger properties were broken up and the land subdivided again.

Any lingering uncertainty over the direction of land reform could also have an impact on spending for equipment. Farmers, who have until April to respond to the proposal, may be hesitant to make big-ticket investments if there is a possibility that land redistribution may force operational downsizing in the short to medium term.

While it is possible that a large-scale influx of new farmers could spur a wave of investments in equipment and technology, such expenditures are capital intensive and would need to rely on expanded lending programmes by either the state or banks.

Austerity measures may hit reforms

In tabling the mid-term budget on October 22, the minister of finance, Nhlanhla Nene, underscored the need for better and more efficient support mechanisms to assist farmers who benefit from land redistribution.

“In agriculture, better links between emerging farmers and produce markets need to accompany an improved alignment between land reform and agricultural support programmes,” Nene said. However, funding for such links may be challenging.

As part of the mini-budget papers, the Treasury lowered its GDP growth forecast for the year to 1.4%, down from 2.7% in February. Although growth is predicted to slowly rise to 3% by 2017, it will nonetheless fall short of government targets for job creation, which call for 5% annual growth to reduce unemployment and boost economic empowerment.

Nene stated that a culture of “doing more with less” was required, backing this up with a series of spending cuts – which, if they extend to land acquisition and agricultural support schemes, could result in a general slowing of the land redistribution programme, at least in the short to medium term.

Covid-19 Economic Impact Assessments

Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.

Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.

Register Here×

Read Next:

In Africa

Will Covid-19 accelerate the renewable energy transition in emerging...

With new data showing that global carbon emissions are rebounding more quickly than expected after coronavirus lockdowns are eased, questions are being asked about the prospects for renewable...

In Agriculture

What is the outlook for Peru's food exports following Covid-19?

Partly as a result of coordinated government efforts since the outbreak of the novel coronavirus, food supply chains in Peru have remained relatively resilient to logistical challenges and...

Latest

Will Covid-19 accelerate the renewable energy transition in emerging...

With new data showing that global carbon emissions are rebounding more quickly than expected after coronavirus lockdowns are eased, questions are being asked about the prospects for renewable...