Don’t bank on land reform panic, policy menu is diverse

2018-06-28 12:07

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When controversial public policy proposals are put on the table, it is easy to choose with an “either… or” mentality, ignoring the rich menu of options. This is particularly the case when emotions trump rationality. 

There are many policy options that can be explored on land reform. But the high-pitch emotional rhetoric, if allowed to dominate public debate, can turn into an “either… or” scenario, depriving South Africans of a well-thought-out outcome. 

It’s either there is expropriation without compensation, or there is no transformation – the emotional argument goes.

But it should not be an “either… or” matter. Only those who don’t know the historical realities of South Africa can dispute the need for transformation in the agricultural sector. Similarly, only those who don’t have the slightest clue about the workings of the economy would want to undermine property rights, using the legitimate need for transformation. 

It sounds complicated, doesn’t’ it? But it isn’t, actually. Transformation, including the distribution of land to black people for agricultural production, can be done without necessarily resorting to the deprivation of property rights. After all, even the beneficiaries of land reform would like to benefit from the system of property rights that serve as the backbone of the entire agricultural value chain, including finance. 

What South Africa needs is transformation that diversifies and grows the entire agricultural value chain. It should whet the appetite of commercial banks and state-owned development finance institutions such as the Land Bank to continue to oil the engines of agribusinesses. 

But we would be inhuman if we were not emotional. Not all emotional reaction to policy options are negative. There is something positive about emotional reactions in the debate about expropriation of land without compensation: it has jolted those who believe in rationality to stand up, wear their thinking caps and contribute towards solutions. 

The parliamentary public hearings on the matter are therefore more likely to yield rational outcomes. This would be good for the economy. With farm debt exposure at R170 billion, the banking sector cannot afford to panic. It too has to act rationally. 

Fortunately, South African banks understand the potential negative consequences of banking sector panic in the economy and have therefore continued to extend credit to the agricultural sector. 

John Hudson represents Nedbank, one of the commercial banks that continues to support agriculture, and that is making a submission to Parliament on land reform. He shares his perspective…

This post and content is sponsored, written and provided by Nation In Conversation.

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