By Wandile Sihlobo and Prof Johann Kirsten[i]

Agriculture, land reform & rural development minister Thoko Didiza’s announcement that 700,000ha of agricultural land will be released for distribution is a positive step for agricultural expansion and inclusive growth.

However, the fact that so much land is owned by the state, mainly due to the government’s Proactive Land Acquisition Strategy, confirms the global experience that governments tend to be good at acquiring land for the purpose of redistributive land reform, but lack efficiency and effectiveness in redistributing it to beneficiaries.

It is for this reason that many scholars (ourselves included) have argued for a decentralised approach to redistributive land reform. In an ideal situation, the idea would be to keep bureaucrats and politicians out of the land redistribution process so that individuals can negotiate the terms of transactions themselves.

However, in SA efforts to deal with redistributive justice and the reduction of racial inequality in land ownership requires government intervention. This could include land acquisition grants, subsidised finance, an effective farm support system and a number of other requirements for efficiently operating a farm.

It is unfortunately also true that access to these grants and support mechanisms provided by the state requires beneficiary selection, application processes and red tape, which are open to abuse and long delays. Again, for a rapid land reform process, these approval processes need to be quick, effective and based on merit.

The government has promised efficiency and no corruption in the process of distributing the 700,000ha of state land to beneficiaries. The selection process will be through three broad structures — district, provincial and national — and could take up to two months after the approval of applications, which opened last week.

So far, it is unclear what criteria the selection committees will follow, as no final version of the beneficiary selection and land allocation policy has been published since the draft was gazetted earlier in the year. The published eligibility and exclusion criteria give limited information, aside from the fact that applicants must be previously disadvantaged — Africans, Indian, coloured or Chinese — SA citizens; that priority within the target groups will be given to women, the youth and disabled; and that all employed public servants are not allowed to apply.

Prioritising women and the youth stems from the work of the presidential advisory panel on land reform and agriculture; these categories of applicants have also been given priority in the 135,117ha of land that the government has released since February.

The selection process will need robust and transparent criteria to bring confidence that it has not been corrupted. This is an important area that was also emphasised by the presidential advisory panel, and there are already concerns about the process:

  • It is not clear whether the land is currently unoccupied. It could be that there are already successful black farmers on that land and that they have already shown their ability to farm sustainably. Why can’t they be allocated full ownership? Why should they be dispossessed once more or forced into insecure 30-year lease agreements?
  • It is also unclear whether the land in question is productive agricultural land and whether all on-farm infrastructure is well maintained or the assets (orchards, fences, irrigation pipes, electric cables) and farm buildings have been stripped by criminals. Each farm might be in a different condition from the next because some might have been bought by the state years ago and the infrastructure might not all be in usable condition. A clear assessment of this, and upgrades where necessary, will be required before the new beneficiaries take over the farms.
  • The decision to provide only a 30-year lease contract is not real land reform. It merely ensures further dependence on the state and will not bring real empowerment. It would have made more sense to include an option to buy after five years of full-time farming, during which beneficiaries could prove their ability to farm sustainably. The rental payments for the five years could then be deducted from the final purchase amount. In the meantime, the state needs to ensure beneficiaries have access to affordable production finance because commercial finance will not be available due to the fact that a lease agreement is no good as collateral. The only other avenue is where a commercial financier will get involved to secure access to the output of the farmer through some form of the contractual relationship.
  • The government states that beneficiaries will be subjected to a compulsory training programme before gaining full access to the farm. This is an important step that should include financial and business management courses as well as specialised training in the commodities beneficiaries wish to focus on. There is also a need for active extension officers or mentors to assist the new farmers. Another important avenue would be for the potential beneficiaries to work closely with various agribusinesses and commodity organisations, specifically the ones with development programmes that focus on grooming farmers. This would be in the spirit of promoting private-public partnership engagements. Various commodity organisations are already involved in farmer development programmes, with which the government can partner.

The major challenge we foresee is financing. The release of this land is taking place in a year when even established farmers are struggling with access to finance on the back of liquidity constraints at the Land Bank, which has implications for the broader agribusiness community. The commercial banks have grown more risk-averse due to uncertainty caused by the pandemic. This is a tough financing environment even for farmers with long-term tradable leases and title deeds.

Once the process of contracting with beneficiaries has started the restrictions placed on the lease will enable us to fully assess the degree to which the beneficiary, the government and private sector financiers can share the risk of private or blended finance. Once beneficiaries have passed the rigorous selection process outlined above, the option to buy the farm should be granted at an early stage of the five-year lease. This would provide the state with an ideal opportunity to assess the beneficiary’s potential to become a fully-fledged landowner. This process would ensure that the new entrant farmer has the flexibility to use the land as collateral and access capital to further develop the farm.

Written for and first published on Business Day on 22 October 2020

[i] Wandile Sihlobo is chief economist at the Agricultural Business Chamber of South Africa (Agbiz). Johann Kirsten is professor of agricultural economics at Stellenbosch University.

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