Whilst land reform remains a contentious political and economic issue, role players and thought leaders in the agricultural, business and banking sector are in agreement that the pace of land reform needs to be fast enough to keep it out of the hands of reckless politicians.
“Transformation is imperative. It is the only way to ensure the on-going security and stability of our country and nation,” said political analyst, Max du Preez during a recent broadcast of the Nation in Conversation dialogue series. The series is currently being broadcast on Business Day TV and Soweto TV, with a similar series of programmes which are scheduled for broadcast on Kyknet from 02 October 2015.
There is no doubt that solutions have to be found to address the issues around private land ownership which will ultimately help to propel the country into the future.
According to Mpumelelo Mkhabela, Editor of the Sowetan, “There is great potential in the agricultural sector – not only does it feed millions of people, but it also employs hundreds of thousands of people, and produces products for export. This sector is an asset that needs to be looked after for everyone’s benefit. We, therefore, need to deal with the matters of land reform and transformation in a progressive and pragmatic manner.”
Predictable and clear legislation, proper policy targets and commitment from all stakeholders are required to fast-track transformation. Apart from ensuring the commercial viability of agricultural production, mechanisms are required to accommodate the development of farming practices on communal land and small holdings. It is essential to upscale traditional farmers too. In this regard, the financial sector plays a key role in developing opportunities for smaller farmers to access financial support in a prudent manner.
“General society should also support this (agricultural) sector and demand its stability and productive outcomes,” stressed Mkhabela.
“Farmers have already become much more progressive and pragmatic. They know their future is at stake and that they can only safeguard it by taking part in transformation,” explains du Preez.
But, it is not only farmers’ futures that are at stake. History has taught us that changes that are forced through overnight have the potential of leading to real calamities. “If social engineering is driven too far, the cost of that is not worth the principle of land redistribution,” says Jackie Grobler, Senior Lecturer in History, University of Pretoria.
Our economy would suffer vastly from massive unemployment and food starvation should we simply nationalise land indiscriminately. “There are ample examples to this effect here in Africa and elsewhere in world,” says Grobler. “However, there is no doubt that reform can be done successfully and responsibly, and we have no choice but to do so, the time to implement it is now.”
The value of the South African agricultural sector is estimated at R360-billion. It is therefore critical to ensure its viability whilst redressing land ownership. “We can ill afford the demise of agriculture,” agrees Pierre Venter, General Manager, Banking Association of South Africa.
With regards to the agriculture, the banking sector’s exposure is in excess of R100-billion. “Our exposure is premised on us being able to rely on the property as security for the loans. We have a fiduciary responsibility to lend money safely. It is critical to us that private ownership continues to exist. If it doesn’t, systemic risk will be created, and banks may go bankrupt,” make explains Venter.
With this in mind, the banking sector created a model for land reform which it considers to be a workable alternative to the Department of Agriculture’s proposed 50/50 model. “We have to get land reform right, and guard against it resulting in the division of land which could make farms uneconomical and unviable, could be considered unconstitutional and could lead to violence and disruption,” says Venter.
The banking sector proposes a model where the private sector embarks on voluntary land reform with the cooperation of the Government, financiers and workers. It is aligned to the National Development Plan and premised on “additionality” – where the commercial farmer acquires additional land in close proximity to an existing farm. The additional farm will be co-owned in a 50/50 ownership model with Black beneficiaries (who may well be farm labourers). The 50% ownership share of Black beneficiaries will be financed by a capital grant from Government, whilst the farmer will take out a mortgage loan for his 50% share of the acquisition. “This model spreads the risk between farmers, beneficiaries, financiers and Government, and with the concept of “additionality” commercial farmers can leverage off existing infrastructure and create economy of scale,” explains Venter.
“Given that we are in an import/export parity market, with no protection for farmers, getting production costs down and critical mass up is of absolute paradigm importance.”
The banking sector is confident that, with the commitment of private lenders, their proposed land reform model will result in 20% of commercially viable farms being transferred to Black beneficiaries in an orderly and viable manner.
“The banking sector would like to start implementing their model as pilot projects as soon as possible,” says Venter.
“We need to get going. South Africa has a ten year window to get land reform implemented properly, or we run the risk of radical elements becoming part of the process,” warned Venter.