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November : Where are we now with land ceilings?

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16 November, 2017

Where are we now with land ceilings?

Where are we now with land ceilings?

1. Introduction

Farming units worldwide tend to be larger with a view to making optimum use of economies of scale. Farmers are increasingly struggling to survive on smaller units. The International Labour Organization's 2015 / 2016 inquiry into conditions on farms found that South African farmers are forced by international markets and the policy environment to go bigger or fail. Deregulation and increasing integration of the international food chain have resulted in an economic squeeze where they are price-takers. Agricultural producers have few options in this situation and one of the strategies for survival is to expand their units.

In October 2015 the Southern African Food Lab released a report on the future of food security in South Africa. The report contains four possible scenarios for food security for the period 2015 to 2030.  The report, highlights the effect that climate change, the exchange rate and an uncertain policy environment can have on food production, food prices, the economy and law and order. There are some red flags in this regard which every South African should heed.

South Africa is already in a situation where policy uncertainty around the land issue impacts negatively on investment in the sector. In addition, we have large-scale urbanisation - our population is already more than 64% urbanised and these people rely on affordable food sourced from commercial farms and sold in supermarkets. Add to this South Africa's alarming and growing government debt, the weakening exchange rate and the fact that more and more people depend on social grants for survival, and you have a recipe for a potential disaster.

The recently released land audit conducted by Agri Development Solutions, Landbouweekblad and Agri SA points to an alarming decline in available agricultural land. This trend is expected to continue. This means less agricultural land is available to produce for a rapidly growing, highly urbanised population. Although South Africa has some of the best farmers in the world who have for decades ensured that we have sufficient, healthy, affordable food, they are under increasing pressure, with policy uncertainty taking its toll.

In the context sketched above, the proposed land ceilings of Minister Nkwinti are regarded as very bad news for the sector and for South Africa. This is directly in contrast with the trend of consolidation as a survival mechanism for our commercial farmers and it specifically targets bigger farmers who make a massive contribution to food security and foreign exchange earnings, creating further policy uncertainty among farmers and financial institution.

Land Ceilings

1.   Process to date

Minister Nkwinti released his Green Paper on Land Reform in 2011. Land ceilings and limitations on foreign ownership were two elements of the Green Paper that Agri SA opposed from the outset.  A three-year consultation process followed the publication of the Green Paper. Various working groups focused on different aspects of the Green Paper. Agri SA participated on a continuous basis in all these working groups. External experts were contracted by the Department of Rural Development and Land Reform to provide input on the economic consequences of possible land ceilings as well as the constitutionality of introducing such ceilings. Some of these external experts warned against possible negative effects of land ceilings. They also warned that the introduction of land ceilings could be unconstitutional.

After the three-year consultation process where Agri SA and other role players clearly outlined the risks relating to land ceilings and limitation of foreign ownership, a team from the University of Pretoria and Unisa was appointed to consider the impact of the proposed land ceilings. It seems that their recommendations were largely ignored, as were those of other experts who were consulted during the three-year consultation process. At one stage the Department of Rural Development and Land Reform indicated that they would not proceed with land ceilings, but merely wanted to appoint a commission that would generate a proper land database.  During November 2016, however, Minister Nkwinti convened a massive bosberaad consisting of thousands of people and, with a strategically planned agenda and pro-land ceiling inputs, managed to garner support for the introduction of land ceilings. In March 2017 the Regulation of Agricultural Land Holdings Bill was published for commentary. Although the guidelines of the Department of Planning, Monitoring and Evaluation required that a socio-economic impact study should accompany the legislation published for commentary, no such study was made available. The study was supposed to set out the advantages and disadvantages, as well as cost implications of and possible alternatives to the legislation. Agri SA and other role players prepared comprehensive written commentary on the Bill.  During September the Bill was tabled in the National Economic Development and Labour Council (Nedlac). Agri SA formed part of Business' negotiating team within Nedlac.  Business objected to the fact that no socio-economic impact had been conducted and insisted that the study be done and made available before proceeding with the negotiations. The study was only made available on 7 November.

2.   Socio-economic impact study

In 2007 the Cabinet decided that socio-economic impact studies should be conducted for all new policy, legislation and regulations. This came after the realisation that legislation often has negative consequences or is ineffective. Since 2015, all Cabinet memorandums requiring approval for draft policy or legislation have to be accompanied by an impact study signed off by the so-called SEIAS unit. The Department of Planning, Monitoring and Evaluation has issued a guideline for socio-economic impact studies which prescribes the process and format of such studies.

The proposed legislation is rife with potential risks and possible unintended consequences. The risks that were identified by Agri SA and other role players include the following:

  • A possible adverse effect on investment in the agricultural sector;
  • Possible adverse impact on food security;
  • Enormous cost of implementation;
  • Little, if any, real benefit for persons and groups who are supposed to benefit from the legislation;
  • Fragmentation of agricultural land;
  • Neutral or even negative impacts on poverty relief;
  • Open to corruption and circumvention and objections by the courts.

The impact study that has now been made available makes much of the fact that the agricultural sector remains untransformed, as well as the slow progress made with redistribution, the poverty in rural areas and consolidation of farming units. The report indicates that more than half of South Africans are poor and that 81% of people in rural areas are poor. Poor black people are forced to sell their labour cheaply to white capitalists, while large-scale, white commercial farmers continue to benefit from the injustices of the past.  The introduction of land ceilings is proposed as a solution to all these problems. According to the studies, this legislation will facilitate meaningful land reform and sustainable rural development and will lead to inclusive economic growth. The study also creates the impression that the legislation will create a new class of black smallholder farmers and will help medium-sized black farmers to gain access to more land. The impression is created that the Bill will also attract a new class of investor who believes in inclusive business models for the agricultural sector. The irony is that the proposed legislation will most probably have exactly the opposite effect.

The study rejects Agri SA's commentary on and criticism of the legislation. It is alleged that Agri SA merely pays lip service to transformation and is not really contributing towards, for example, the funding of land transfers in terms of the National Development Plan. Agri SA's well-considered arguments, which were formulated by a senior advocate, were dismissed as an effort to jeopardise real transformation. This is very far from the truth. Agri SA's affiliates have in the past year spent R318 on transformation initiatives.

3.   Further process and opinions

The negotiations within Nedlac between the government, business, trade unions and communities are expected to commence later in November and will continue until approximately the end of February 2018. During this process the groupings will try to reach consensus on certain aspects of the Bill, with areas where they are unable to find common ground being placed on record. A Nedlac report will then be compiled and sent to the parliamentary committees which will deal further with the Bill. Thereafter normal parliamentary processes with be followed. The Portfolio Committee on Rural Development and Land Reform will most likely hold public hearings on the proposed legislation.

Agri SA has already sought a legal opinion on the Bill which indicates that aspects thereof are probably unconstitutional. Agri SA is aware of similar legal opinions obtained by other groupings. If rational arguments and proposals for workable alternatives cannot be agreed on, Agri SA will have no choice but to have the constitutionality of this legislation tested in the courts. However, this will only happen after the legislation has been adopted by Parliament.  Agri SA's Land and Environment Fund was created to help fund this type of litigation.

Source: Agri SA