Move towards land expropriation could have unintended results, warn farm bodies

Cape Town - The erosion of property rights in South Africa will create uncertainty and inevitably divert potential investment away from the country's agricultural sector, the Agricultural Business Chamber said on Wednesday.

The chamber was reacting to a resolution taken in Parliament on Tuesday about the expropriation of land without compensation.

The National Assembly adopted a motion proposed by the Economic Freedom Fighters and with amendments by the African National Congress for a committee to review section 25 of the Constitution.

This section concerns the right of property ownership.

"The open and competitive South African agro-food system, and by implication the excellent national food security we as a country experience, is fundamentally based on secure property rights to leverage financing for investment and production," said Agbiz CEO Dr John Purchase.

He said that if expropriation of land without compensation is implemented, the country would run the risk of becoming a net importer of food. South Africa is currently a net food exporter.

"Food prices will essentially be based on import parity and not export parity as is currently the case. This will result in food prices escalating considerably and the affordability of food, a key component of food security, will be compromised," he said.

Agricultural industry association Agri SA said in reaction to the motion that while it understands the need for land reform and the frustration around its apparent slow progress, it must be done in an "orderly and sustainable" way. 

Annelize Crosby, head of land affairs at Agri SA, told Fin24 on Wednesday that the motion and the debate in Parliament was "highly politicised" and "did not properly consider the consequences of tampering with property rights".

The motion was adopted with a vote of 241 in support, and 83 against. The only parties who did not support the motion were the DA, Freedom Front Plus, Cope and the ACDP.

EFF leader Julius Malema has proposed that expropriated land be taken over by the state. The ANC in Parliament, meanwhile, described the passing of the resolution as heralding a "new era of intensified land distribution to address the long-standing national grievance of African people around land dispossession."

'Constitution no impediment' 

"We honestly don't think section 25 [of the Constitution] is the impediment to land reform. We do not think the ANC and the EFF have properly thought through all the negative unintended consequences that will flow from any attempt to tamper with the property clause."

Crosby emphasised that financial institutions are substantially invested in the agricultural sector and that expropriation without compensation will also impact negatively on the banking sector. In her view, such a step will probably lead to a situation where financial institutions would no longer make production loans available to farmers.

Without these loans, farmers cannot purchase seed, fertiliser, feed or implements and will be unable to produce, she said.  This may put SA at risk of food shortages, price increases, and even food related riots and social instability.

Agri SA also pointed out that the High-Level Panel on Key Legislation appointed by Parliament had found that the property clause and the requirement that compensation be paid upon expropriation were not impediments to land reform.

Instead, an insufficient budget, lack of political will, poor implementation and corruption were identified as impediments.

Low budget, corruption the true hindrances

Crosby said it would be a better approach if if government would be willing to set up a kind of a credit guarantee fund, which would stand in if people default on their loans to the bank. That would lessen the risk to the bank, making them more willing to lend more money to new black farmers wanting to enter the industry.

She said Agri SA also proposes subsidising new black farmers.

"A lot of black people have acquired agricultural land on their own over the last number of years. That shows the market is working. There is more than enough land on the market, so subsidising loans could help in this regard. We are also willing to help make land productive," said Crosby.

Both Agri SA and Agbiz indicated that they will participate in the consultation process regarding the issue going forward.

According to a statement by Parliament, the Constitutional Review Committee has been given until August 30 2018 to review sections of the Constitution to "make it possible for the state to expropriate land in the public interest without compensation".

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