Land reform seeks to address South Africa's historical imbalances

The issue of land reform is one of the thorniest topics that South Africa faces, with serious social, economic and political implications. The apartheid regime left land concentrated in the hands of the white minority, a situation that has proved difficult to redress fairly and efficiently. Land reform is closely connected to the agricultural sector, where the government’s latest proposals are an attempt to reinvigorate the process, but have caused some concern among investors.

Past & Present: 

The roots of the current situation lie in three centuries of colonial and then white-minority rule. One of the first moves to codify apartheid – before it became an official policy per se after the election of 1948 – was a law passed in 1913, banning black people from buying land outside designated areas covering just 13% of the country.

By the end of apartheid in 1994, more than 90% of land was owned by white South Africans, who made up less than 10% of the population. The new majority-elected government aimed to address this, but, in the spirit of reconciliation, without coercion. It set a target of a third of land being redistributed to black owners by 2014. In some cases, those with verifiable legal claims to land were given the option of buying it back, but most decided to take financial compensation instead. However, in most cases, the government encouraged the “willing buyer, willing seller” model, based on voluntary market-driven transactions. But lack of adequate funding – and, some say, lack of buyers – has seen less than 7% of land redistributed since 1994, according to Edward Lahiff, an expert on South African land reform. Recent changes have allowed a state agency to act as an agent on behalf of potential buyers, but there is still no compulsion to sell.

Shaky Grounds

When farmland is redistributed, the new landowners have often found it difficult to raise capital to invest, with government support programmes under-resourced. In some cases, the new owners have not been equipped with the agricultural or management skills needed to make their farms thrive. Broadly speaking, redistribution has not been seen as a success. “Even if you were to give land for free, it is difficult for new smallholders to gain access to inputs to start a viable farm,” Aart-Jan Verschoor, senior manager of the Agricultural Research Council, a research and development institution, told OBG. “We need capacity development first, to create a viable environment, and then reward success. Coordinated, integrated investment to set up farms is lacking.”

New Proposal

In 2011 the government published a green paper on land expropriation, which established a working group on the issue that proposed allowing the state to make compulsory purchases. The possibility of land being sequestered raised concerns in the agricultural sector. In February 2015 President Jacob Zuma went a step further in his state of the nation speech, proposing a substantial re-gearing of the land reform programme that would also ban foreigners from acquiring new land in the country. This has caused some disquiet among multinationals, though foreign investors currently own only a very small proportion of land. More concerning for many was the proposal to impose a ceiling on land ownership at 12,000 ha, and the suggestion that farms should give a 50% ownership stake to employees.

Critics say the land caps will undermine the progress made in recent years on consolidation through market mechanisms. Given supply-side pressures, they worry that breaking up farms would challenge the viability of some, and add that beyond the direct economic impact on farming, the proposed legislation would lead to costly litigation. There is an argument that land redistribution and restitution as the government proposes would increase investment risk, as it is possible that land will be reclaimed by the state. This, in turn, makes farmers more reluctant to invest in the capital goods required for higher productivity.