Guest Column

Making land reform successful

2018-05-08 06:49
(Iavan Pijoos, News24)

(Iavan Pijoos, News24)

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Frans Cronje

If the government really wanted to establish black commercial farmers, this is what it would do. My colleagues who deal with agriculture and land reform have done some sums around livestock farming.

We estimate that good quality grazing land is in the market for R10 000 per hectare. To purchase a 1 000-hectare farm for a young upcoming farmer would cost R10m. We further estimate that to stock that farm with 200 pregnant cows would cost another R4m.

A further R2.5m could then be spent providing the emerging farmer with a new Land Cruiser bakkie, a tractor, trailer, and implements. He could then be given R3.5m in cash as working capital. 

The whole investment would come to R20m and would create a debt-free commercial farmer, generating a positive cash flow of around R1m a year and with more than sufficient collateral to buy more land and expand his farming enterprise. Surely this is the ideal that the advocates and champions of land reform in South Africa should be aspiring to?  

But government policy is not to do this. The policy of the government is to confiscate land from successful producers and to lease it to emerging producers who have no collateral and no capital. The reason for this approach, the government says, is that ‘the willing buyer, willing seller model has failed’ as there is not enough money to make it work.

This, we can show, is nonsense. 

We took the example of SAA, which received a bailout of R10bn from the government last year and has just asked for another R5bn.

Based on our sums above, that amount, had it been spent on land reform, could have established 750 successful new black commercial farmers over the past two years alone. Considering that there are only 30 000 commercial farmers in the country, this is a not inconsiderable number.

A 10% cut in the government’s wage bill would finance the establishment of an estimated 3 000 new black commercial farmers every year. And yet the government is starving emerging black farmers of support.

My colleague, Terence Corrigan, writes: "This year the budget of the Department of Rural Development and Land Reform is some R10.4bn. This amounts is less than 1% of government’s total budgeted spending. The budget for land reform – the acquisition of land for redistribution – comes in at R2.7bn.

"Restitution – settling land claims – is budgeted at R3.7bn. (In each case, this includes administration costs, and not just the amounts dedicated to actual land transfers.) VIP protection and associated services (such as the SAAF 21 Squadron), by contrast, can expect to cost a total of R2.6bn.

"In other words, protecting the country’s political elite is seen as pretty much on par with providing land to emerging farmers, and not much less important than addressing cases of land dispossession. If that doesn’t tell us everything we need to know about priorities, it certainly tells us a great deal."

Between the SAA bailouts and VIP money is revealed the extent to which the government is prioritising the establishment of black farmers. 'Willing buyer, willing seller' cannot be said to have failed when there is no buyer.  

Each of the new farmers established under our model would be very well positioned to grow their businesses through their own collateral and cash flow – particularly if the Land Bank would grant them generous loan conditions, something it does not do. These emerging black farmers would arguably be in a much stronger financial position than most white farmers.

Their rise, eminence, and success and expansion would be the most powerful answer South Africa could offer to the historical denial of property rights to black people. 

Our model is simple, straight forward, cost effective and could be put into action within weeks. But it only works if property rights are respected and the agricultural sector is run as a market economy. 

Why is this model not the policy of the government? The answer most likely relates to ideology around state control of property, disdain for white farmers, and a fear of the political power that would be exercised by a new class of truly successful black rural property owners. Until that changes, South Africa will not see much in the way of successful land reform.   

- Frans Cronje is the chief executive office of the Institute of Race Relations (IRR). This article is based on a column first published in Rapport. 

Disclaimer: News24 encourages freedom of speech and the expression of diverse views. The views of columnists published on News24 are therefore their own and do not necessarily represent the views of News24.

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