Wednesday, July 15, 2009

Cheap land reform will take us nowhere

Some of these farms have been bought for R100 million each (game farms in the Mashishimale claim in Phalaborwa) to R250 million each (banana and citrus farms in the Ten Bosch claim in the Onderberg). Why and how the department planned to transfer super-expensive, high-technology farms to beneficiaries with no experience, skills or capacity to maintain, let alone expand and improve them, remains a mystery.
Related: Black farmers failing

The government is the only stakeholder that, in the short term, benefits from cheap land reform, while all others struggle to survive, writes Dr Theo de Jager, chairperson of Agri SA’s transformation committee.

Recent media reports on the revisiting of the willing seller principle, the possible review of the Expropriation Act, and budget constraints within the Department of Land Affairs have once again caused agricultural investors to employ a wait-and-see strategy, with an immediate negative effect on food and fibre production.

It’s not yet clear how the new minister of land affairs plans to deal with the tension between high land reform goals and low budgets, but with the same old corp of Land Affairs officials to advise him, the risk of embarking on a cheap land reform programme is very real.

Cheap land reform can’t lead to sustainable rural development or the transformation of the agricultural sector.The Afrikaans saying, “goedkoop is duurkoop” applies here. We need no more proof of this than the terrible track record of failed agricultural projects on land reform farms over the past 15 years, which contributed to turning South Africa into a nett importer of food in 2008. On many farms, it will cost more to repair infrastructure and agricultural assets after the transfer from commercial farmer to beneficiaries of land reform, than government paid for those farms less than three years ago.

The answer is not to pay less for the land. We need a complete reconstruction of the land reform process. Paying below market value for farms means that landowners and mostly farmers service the bill for apartheid injustices as well as for poor administration, gross negligence and corruption, nepotism, incompetence and mismanagement of funds in the Department of Land Affairs. We have serious problems with the ability of department officials and this is not being disputed – even the director-general and chief land claims commissioner acknowledge that.

Nearly 30% of posts in the department are vacant, and the rest have been filled with young, inexperienced and often extremely arrogant and ideology-driven former activists. This is hardly the kind of human resources required to manage the fine balance between pursuing land reform targets and maintaining a healthy agricultural industry and food security. With a director-general and three out of seven land claims commissioners dishonorably dismissed over the past few years, and serious accusations levelled against many other senior officials, the integrity of the department has been called into question.

Too much money allocated for land reform is being wasted on legal battles fought with taxpayers’ money, which the department can never win. Officials should be put on risk (like landowners are) for losing a case or having to repeat a valuation or game count over and over again after the previous ones have expired because of their negligence. In October 2008, the auditor-general stated in his report on the financial management of the department that R1,15 billion could not be accounted for. The public has still not received a satisfactory explanation for this. As the new budget for land claims in the current year since April is only R1,6 billion and has already been exhausted, the missing funds could have made a huge difference.

Broken relationships
When landowners are intimidated into accepting below market-related prices for their land, on average 46 months after they’ve offered their land in a gazetted land claim, intercommunity relations also suffer. Commercial farmers aren’t prepared to engage as mentors or joint-venture partners in cheap land reform projects because they fear their own resources and integrity will be at risk.Agribusinesses, organised agriculture and other support structures in the industry have little sympathy for beneficiaries of cheap land reform and they are, more often than not, left out in the cold. This is partly because of the destruction of agricultural collateral and the decline of sensitive rural economies that results from cheap land reform.

Few farmers operate on their own capital, and the rest rely on production loans from commercial banks, with the value of their land as security for that financing. Cheap land reform has already seen banks tone down the collateral relationship between the value of the land and the percentage a farmer can borrow. Beneficiaries can’t enter into the vacuum left by previous owners, as they often have even less collateral.

In agriculture-driven towns such as Utrecht, Hazyview, Tzaneen and Levubu, the collapse of the local economy is gaining momentum. The government is the only stakeholder that (in the short term) benefits from cheap land reform, while all others struggle to survive under more conflict and tension, the local economy and an uncertain environment in which no investors will take a chance. Beneficiaries find it hard to access private financing, and remain a burden on the state.

They, too, become frustrated and impoverished and start stripping and selling infrastructure on their newly acquired farms.

Some of these farms have been bought for R100 million each (game farms in the Mashishimale claim in Phalaborwa) to R250 million each (banana and citrus farms in the Ten Bosch claim in the Onderberg). Why and how the department planned to transfer super-expensive, high-technology farms to beneficiaries with no experience, skills or capacity to maintain, let alone expand and improve them, remains a mystery. The alternative is simple. If we want to transfer 30% of productive agricultural land in land reform, we should budget to buy 30% of the farms. We should do it smarter than before, though. We should introduce new landowners to smaller, manageable portions of land, and expose them to risk to force them to utilise the land productively and profitably.

As they prove to be successful, they can graduate to larger, more complex production units with higher risk and requiring better management. We need a different attitude and approach from the officials who have to execute land reform. Forcing down prices of land, and thereby forcing agricultural investors and experienced commercial farmers out of the country or the industry, is a foolish short-cut to cover for the incompetence of an embattled management team in a dysfunctional department.

Hat tip: FishEagle

2 Opinion(s):

Anonymous said...

Yes, in 9 years time it would be interesting to see how expensive the food becomes in South Africa.

WHITEADDER said...

Cheap land , expensiv land - it really does not matter to the outcome if this land is given to the boons. It will be destroyed.