Agricultural land reform in South Africa: An opportunity for economic recovery and transformation

Redistribution of farmland is a key catalyst for growth. But what reforms and interventions are necessary to accomplish this? The imperative for land reform from a social justice point of view and for a more equitable distribution of productive farmland presents an important growth opportunity if executed appropriately. Enhanced private-sector participation in land redistribution, supported by enabling policies, incentives and monitoring mechanisms of the state, is a critical way to boost agricultural growth. In conjunction with a series of interventions in five specific areas of the agricultural sector, it is likely that the real agricultural gross value added could increase substantially by 2030.?

A number of organisations agree that private sector participation will drive the success of land reform. The Vumelana Advisory Fund, for example, through its Community Private Partnership (CPP) model, has demonstrated that the private sector has the greatest potential to mobilise investment for land reform. In this way both beneficiaries and private sector partners have a meaningful stake to drive the productive use of land that can yield a good return on investment. Over the past 10 years, the not-for-profit organisation has mobilised over R1 bn of private sector investments into the land reform programme and facilitated 26 partnerships between private sector investors and land reform beneficiaries. These partnerships have benefitted over 20 communities, nearly 16?000 households and created/saved over 2,500 jobs.

?It is clear that the provision of land alone (through land reform) is unlikely to achieve the growth anticipated. To improve agricultural growth the land reform process should be carried out by a central agency, and once the land is distributed, financial and technical support as well as off-take agreements or contracts should be provided to beneficiaries. There are, however, a few critical preconditions necessary to achieve agricultural transformation and growth in South Africa. These include:

• A stable and conducive policy and investment environment
• Comprehensive, sufficient, and well-maintained infrastructure including electricity, water, roads, rail and ports
• Well-functioning local municipalities with reliable service delivery
• Effective farmer support services and administrative support
• Well-functioning state resources such as veterinary services, agricultural research, biosecurity measures, trade negotiations and support.

Land Reform Strategy

?Land reform is important in South Africa for two main reasons. Firstly, land has productive value and those from whom access has been unfairly removed are unable to enjoy the economic and income generation potential that such land can offer. Land reform has been a tool both to rectify the imbalance of economic opportunities and to restore ownership. It has been shown to reduce poverty, support sustained growth and increase efficiency. Secondly, in South Africa land and access to land have political resonance, representing dignity, heritage, belonging, and restorative justice.

?To date, government initiatives on agriculture and land reform have been slow in achieving the required success. However, there is no additional evidence that the commercial agricultural industry and private individuals have made substantive progress on many of the targets set out in Chapter Six of the National Development Plan:

• ???????In the case of land reform, if we consider the private transactions by black farmers, and government-led restitution and redistribution, the extent of land transferred away from white ownership is equivalent to 69% (16.07 million ha) of the 30% land reform target that is highlighted in ANC documents. This represents a higher figure than official statistics, according to estimates from the BER.
• ??Area expansion of several high-value labour-intensive crops far exceeds the NDP targets.
• ??Agricultural sector's gross value added expanded by 44% between 2010 and 2020.

These largely positive achievements have not fully translated into more participation by black farmers, and their contribution to commercial output remains constrained. There are several reasons for this:

• Misalignment and lack of policy and programme implementation by national and provincial governments. This has been compounded by inefficiently designed programmes to support black farmers becoming part of the commercial sector.
• Slow adoption of the latest technology to increase productivity. This has been largely caused by the long backlogs and delays in getting new agricultural inputs approved by the Department of Agriculture, Land Reform and Rural Development (DALRRD).
• The fractious nature of organised agriculture. Many farmer associations in South Africa are still formed along racial lines resulting in unnecessary duplication. This entrenches the divide.?
• Collaboration between the government and the private sector (commodity organisations, agribusinesses, farmer organisations, etc.) is not optimal. This results in slow implementation of farmer development plans.
• Inefficiency of many of the provincial departments of agriculture. This results in poor and non-delivery of critical programmes to support farmers. This situation is aggravated by a lack of coordination with Water Affairs, Environmental Affairs, provincial roads, and local municipalities.
• Slow delivery of critical large infrastructure projects, especially related to water infrastructure and improvement in rural roads and rail networks.
• Failure of municipalities to deliver basic services such as water, electricity and road maintenance. These failures have been among some of the major constraints to higher growth of agribusiness as they have increased transaction costs of moving agricultural products.
• Vandalism and lack of maintenance of critical support infrastructure for agricultural commercialisation: railway lines, ports, electricity supply.
• Criminality in rural communities – including stock theft, theft of machinery, equipment, electricity cables, water pumps, and inputs.

We need a holistic land reform strategy that takes cognisance of these nine basic aspects. This will ensure that the redistribution of productive farmland takes place in a responsible manner. Beneficiaries need to be immediately linked to the commercial farming network and included in a financial and market structure that will secure their future as commercial farmers.

Creation of the Coordinating Agency for Land Reform and Agricultural Development

The National Development Plan (Chapter Six), as well as the recent report by the Presidential Advisory Panel on Land Reform and Agriculture, presents a clear guide on how redistribution of agricultural land can be accelerated. It locates the responsibility of redistributive land reform with local (district or municipal level) land committees, which can design context-specific solutions centred on the dominant farming enterprises while considering community and social dynamics in particular areas. It will therefore take the task of land acquisition and redistribution out of the government sphere.

There needs to be a national coordinating agency – a one-stop-shop – to leverage land and funds for land redistribution through local land and agriculture development projects. This concept of a "Land Reform Agency" was announced by the President in his SONA in February 2021. Ideally, its tasks should relate to facilitating land donations and creating recognition mechanisms for farmers who donate land; establishing and managing the Land Reform Fund; monitoring progress on land transactions; and prescribing the rules for the Land and Agricultural committees.

The Agency can be established by the Minister of Agriculture, Land Reform and Rural Development. It will not require any additional fiscal outlays but will activate contributions from the private sector and will therefore only record land transactions and accept land for redistribution. This could be regarded as a land observatory whereby the true extent of land redistribution can be assessed through better statistics on land transferred and its productive status.

Most importantly, the Agency will monitor progress in land reform and advise on partnerships between farmers and beneficiaries.

In this way, confidence in the land reform process will be fostered. This should encourage the voluntary release of land (by mines, churches, municipalities, SOEs, government departments, or absentee landlords) directly to beneficiary households, communities, or the Agency. The Agency will keep a proper record of these land parcels and provide a certificate of recognition to the donor. This certificate will entitle the holder to certain benefits such as points on the B-BBEE score card, which could mean that the entity qualifies for procurement preferences or a range of preferential financial arrangements.?

Development of the Land Reform and Agricultural Development Fund

Coupled with the establishment of the Agency, we propose that a Land Reform and Agricultural Development Fund be set up. The Fund should be specifically for land beneficiaries and land donors, providing financial assistance to beneficiaries and encouraging large farmers to partner in the redistribution process. The sources of capital for the fund should include:

• Donations by companies and private individuals (for which they will receive B-BBEE recognition)
• International donors and development finance institutions such as the Development Bank of South Africa (DBSA)
• Joint venture financing models, particularly implemented by agribusinesses, large commercial farmers, property developers and the commercial banks, among others
• Transfers from the relevant departmental budgets earmarked for land reform, farmer support programmes, and food security.?

Donors, National Treasury, and members of the Agency shall be trustees of the fund. Through this process many more people could afford to develop allocated land for farming purposes and access bridging and seasonal finance at affordable rates of around 2.5%, given that the cost of capital would only be around 1.1% or lower.

In this process, opportunities will be created for other investors, such as in the financial services, mining and manufacturing sectors, to contribute to restoring social justice, equitable land ownership, decent housing, and better economic opportunities on a voluntary basis.?

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A land redistribution strategy that harnesses underutilised and unproductive land

In addition to the initial endowment of state-owned land, government has also over the past decade acquired a total of 2.46 million hectares of productive farmland through the Pro-Active Land Acquisition (PLAS) programme for redistribution to beneficiaries. Due to bureaucratic red tape, patronage and other problems, few, if any, of these farms have been redistributed to land reform beneficiaries. These farms are rented out to specific farmers only on short-term contracts, and as a result many are unproductive or producing sub-optimally. The inability to access finance due to insecurity of tenure is a primary reason for this.

One option is to transfer the state land holding to the Land Bank as a mechanism to capitalise it. The bank could select bona-fide farmers and transfer title deeds to carefully selected beneficiaries. It could then provide start-up capital to these farmers with the land as collateral. This is a no-brainer and will help fill the gap in the market to empower farmers. So now one has the fund plus the land to help the Land Bank achieve its developmental mandate.

Anecdotal evidence suggests that if the recommendations are implemented, there should be dramatic expansion of production (especially by black farmers) in three sub-sectors of agriculture: grains, beef and poultry.

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For this to happen, there need to be three critical steps:

1.????Land ownership (title deeds) should be transferred to qualifying beneficiaries who are selected according to the approved beneficiary selection policy. Strict selection based on merit and a skills and means test should be applied.

2.????Production finance (via the Land Reform Fund and the Land Bank at beneficial rates) is secured by the title deed. Funding from the Department’s Comprehensive Agricultural Support Programme (CASP) should be targeted to improvements in immovable assets and farm infrastructure.

3.????Links must be established with commercial value chains, agribusinesses and government procurement schemes.?