Clem Sunter

Land reform: The real deal

2013-12-18 11:35

Clem Sunter

I watched Question Time on television the other night in which a panel of experts have a live debate with the audience on issues of the day. The show is chaired by David Dimbleby and normally takes place in Britain. In this case, it happened in Johannesburg with a South African audience and a panel consisting of Peter Hain, Pik Botha, Eusebius McKaiser and leading representatives of political parties including the EFF.

It was a very South African debate with no holding back and plenty of emotion. I doubt whether London has ever witnessed anything so lively, given the level of reserve and diplomacy normally displayed on British television. Two matters dominated the debate: corruption in government and land reform. On the first issue, a consensus was formed that those involved should be held accountable, dismissed from office and face criminal prosecution.

The second issue went all over the place with inevitable references to Zimbabwe, the argument that it demanded an African as opposed to a European solution and the point that progress so far in South Africa had been pathetic. All of a sudden we were back in the dark days of apartheid with the old racial divisions manifesting themselves: the exact opposite of what Nelson Mandela spent his entire life striving for.

The realities of South African agriculture

In keeping with Mandela's point that the best solution is the one that works, I am going to list the realities facing South African agriculture which have to be faced in determining what does and doesn't work. These are not biased in favour of any particular outcome but come from facilitating strategy sessions with some of the most successful farmers in the country who are exasperated by the lack of progress so far in achieving a practical land settlement. They fully understand the risks of allowing the pressure to rise by doing nothing. They know this can precipitate extreme and chaotic responses. They make the point that just as the risks of civil war were eliminated by the negotiations and actions that took place in the early 1990s, something similar has to take place now in the sphere of agriculture. They want a solution but they want to be part of it themselves.

So what is the list of realities which need to feature in all the scenarios and options examined around agriculture?

1. The total surface area of South Africa is 122 million hectares of which 101 million hectares are farmland. Only 17 million hectares are considered arable land suited for dryland crop production without irrigation. The remaining 84 million hectares constitute nonarable farmland used primarily for grazing. The point to be made here is that the latter demands a limited number of animals per hectare in order not to be destroyed. This means that farms have to exceed a certain size to be commercially viable. Subsistence farming on much of this land is not environmentally sustainable.

2. The megatrend around  the world is that farms are being consolidated into ever larger operations to remain competitive and profitable. Agriculture is now a big business like making cars and aeroplanes. 80% of South Africa's food in many categories comes from 20% of its farmers using world class practices. The rest contribute but make little profit for themselves. So they have to rely on appreciating land values to justify their choice of occupation and lifestyle.

3. Alongside the previous megatrend, urbanisation is an unstoppable force flowing from people seeking a better life in cities and towns away from the relative isolation and poverty of living in the countryside. Any attempt to reverse this trend like the one Mao tried in China and Pol Pot tried in Cambodia failed dismally. In South Africa, sadly, the trend has been intensified by murders and other violent crimes in the farming community.

4. Despite the last megatrend and the uncertainties around land claims, the value of agricultural land has risen in South Africa. Hence, the average return on capital employed (including the land) of a medium-sized farm in say the Karoo is around 3 to 4%. This compares with an interest rate of 7 to 8% on loans obtainable from the Land Bank and the big four commercial banks to purchase such a farm. The difference between these two figures is the primary reason why 90% of the deals have been unsuccessful. An additional reason is the decline in quality and numbers of agricultural extension officers who could assist emerging farmers in setting up shop and in improving the productivity of the farms which they have bought.

5. Nevertheless, the upside is that where emerging farmers have been assisted by the super-farmers in the 20% category to buy and run farms, the success rate is much higher on account of superior technology, operating procedures and management. It is not inconceivable that in a year's time the second largest dairy farm in South Africa will be an employee-owned trust based in the Eastern Cape.

6. The negotiating power of the big food retail chains has remorselessly squeezed the margins of the farmers, processors and wholesale distributors upstream. Farmers have not banded together in sufficient numbers to defend their share of the value chain. On the other hand, you might argue that the escalation of food prices in South Africa might have been higher if farmers had actually got their act together.


We all know that land reform is one of the trickiest and most emotional issues facing South Africa. If handled badly, it could even create civil war. It could certainly lead to food shortages, prices going through the roof and an increase in food imports we can ill afford. The government cannot possibly resolve the problem on its own. It needs the active co-operation of the agricultural representative bodies as well as the commercial farmers - particularly the super-farmers - to forge and implement a workable solution. Farming is a tough enough business already with the combined risks of crime, weather, crop/animal diseases, periods of labour unrest and fluctuating product prices. Don't make it tougher.

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