Earlier this week SAIRR's new Unit for Risk Analysis described the proposed nationalisation of agricultural land in South Africa as a potentially cataclysmic event for South Africa’s economy.
See Press Statement: Unit for Risk Analysis warns on land reform proposal - 15th March 2010
The Government has subsequently denied any intention to nationalise private property. We have reason to doubt their assurances and warn again that the nationalisation of agricultural land is now a published government proposal, that it follows a trend that saw the nationalisation of both mineral and water rights, and that it follows previous efforts to introduce far reaching expropriation legislation. The likelihood of the Government adopting this policy proposal is therefore something that South Africa’s domestic and foreign investors should be very aware of.The Government and the Department of Rural Development and Land Reform have responded to our warnings by saying that there is no plan to nationalise South Africa’s farms. The Government has further stated that it respects private property rights and that this will not change. We have little confidence in these assurances and believe them to be an effort to mislead the public and the media.
In part, this is because the Government’s assurances are so obviously contrary to their own written and published plan. While various government officials in the last 48 hours have said that the plan does not talk about “nationalisation”, it does talk about private owners ceding control of their land to the State which will then lease that land back to the farmers. The Government’s proposal also identifies the need to alter Section 25 of the Constitution which deals with and guarantees private property rights.
A second reason to doubt the Government’s assurances is that this latest policy proposal appears to follow an established trend of the State seizing control of what it regards as important ‘national assets.’
In 2002 through the Minerals and Petroleum Development Act, the Government took custodianship of all mineral rights in the country thereby ending private ownership. Mining companies had to re-apply for those rights in order to continue mining. This legislative step did significant harm to the mining industry in the country and to investor sentiment, particularly in the mining sector.
Similarly, the Government took control of all water resources in the country through the National Water Act of 1998. The previous distinction between public and privately owned water was eliminated, making all water a ‘public asset.’ Water allowances were imposed and the Government handed itself the authority of managing the country’s water resources.
What we are now seeing in terms of the Government’s proposed land seizure scheme is therefore a logical progression of government policy that has sought to bring under state control what it regards as important ‘national assets’.
The third reason to doubt the Government’s sincerity is that this latest proposal appears to be a continuation of a pattern of thinking that gave rise to the Expropriation Bill of 2008. The Institute published extensively on the bill, which would have given the State the authority to seize any fixed or movable property ‘in the national interest’ without paying compensation. Ahead of the 2009 elections the Government declared that the controversial Bill would be shelved.
The Government has recently admitted that 9 out of every ten land reform projects that it has managed have failed. Under these circumstances it is unlikely that this same Government will be able to successfully manage South Africa’s entire commercial farming industry. This is particularly so if they erode the capital value in agricultural land, which is important collateral that farmers have against which to raise loans to run their businesses.
We are therefore of the view that if either of the two proposals goes ahead then South Africa will experience a steep reduction in agricultural investment. This will translate into a commensurate fall in agricultural employment which will in turn drive up levels of rural poverty and provide an impetus for greater rural to urban migration.
Further we expect that South Africa’s ability to meet its food needs will be undermined. This will see knock-on effects on downstream food processing industries with corresponding falls in employment and investment. Upstream supply industries will see their markets shrink as demand for their products falls. South Africa will be forced to import a greater portion of its food needs, placing pressure on both the current account deficit and on food price inflation.
The above repercussions will see more poor rural people flocking to urban areas. The Government’s ability to meet service delivery demands will be compromised even further than it already is. In an environment of escalating protest action against Government on the peripheries of large urban settlements, this will pose a further challenge to the hegemony of the ANC.
It is uncertain to what extent the Government and the ANC identifies these risks. Certainly sentiment within the Government and the ANC ignored similar warnings on skills, mining, health, education, security, electricity, and labour market policy for which South Africa paid a heavy price. It is quite possible that the Government may therefore proceed with this scheme only to try and reverse the policy as its negative effects become more apparent.
It is also possible that the Government may identify these repercussions but proceed regardless in order to achieve what they may see as the more important end of breaking the back of white commercial agriculture and handing farms to black farmers. On this score the ANC leadership’s recent support for incitements to shoot and kill white Afrikaans farmers is pertinent. Certainly the Government’s attitude to white skills in the civil service suggests that they are willing to sacrifice performance for racial ideology.
We must also warn against regarding the second of the two proposals as a lesser of two evils. Destroying the economies of scale that make South Africa’s commercial agriculture sector viable will result in precisely the same consequences as we have spelt out above. Keep in mind that when Zanu-PF in Zimbabwe commenced its land reform programme it also commenced with a proposal of ‘one farmer, one farm’.
We therefore warn our readers to take this latest policy proposal seriously, to identify the likely consequences of the proposal, and to prepare for the eventuality of the State going ahead with seizing all or part of South Africa’s agricultural land holdings. We caution strongly against taking Government assurances to the contrary to heart particularly when viewed against the track record of that same Government in nationalising mineral and water rights and in proposing legislation to seize any fixed or movable property without paying compensation.
Frans Cronje and Catherine Schulze
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