Overcoming the divide between commercial and smallholder farmers

In January 2014 Jacob Zuma, South Africa’s president, delivered a speech to a property owners association in Mpumalanga province. “The restoration of land to rightful owners is one of the biggest responsibilities you gave the democratic government,” he said. “We have made a lot of progress, but work still continues.” Land reform – a central pillar of the government’s policy framework since apartheid ended in 1994 – has been a divisive issue for the past two decades. As Zuma stated, the policy aims “to address the legacy of colonial and apartheid land dispossessions” in a variety of ways, including by land restitution, land redistribution, land tenure reform and, more broadly, development.

While the necessity of land reform is widely agreed on, the details and long-term implications of the numerous laws, policies and implementation plans are controversial. In the agriculture sector land ownership and control is a central issue. “People get upset when you blame everything on apartheid, but it continues to reverberate,” Aart-Jan Verschoor, senior manager of the economic and biometrical services department at the Agricultural Research Council, told OBG. “The huge inequity in land ownership and access that resulted from colonialism and apartheid still needs to be addressed, and so far the land reform programme has not substantially altered the agriculture sector.”

Background

In the first half of the 20th century state entities such as the Ministry of Agriculture, the Land Bank and the Agricultural Credit Board implemented and enforced segregationist and protectionist policies, effectively creating two distinct and disparate agriculture sectors in the nation.

On the one hand, white commercial farmers took ownership – sometimes by force – of the majority of the country’s arable land, agricultural resources, available financing and market access. On the other hand, black farmers were given small parcels of land – primarily used for subsistence farming – in “homeland areas”: state-designated tracts set aside by the apartheid government and organised according to ethnicity.

In the late 1980s and 1990s the sector underwent deregulation and liberalisation in the lead up to the end of apartheid in 1994. This culminated in the opening up of South Africa to international trade and competition soon after. “In the 1960s there were 100,000 commercial farmers in South Africa,” said Verschoor. “This shrank substantially since the 1980s, when deregulation started to result in a round of consolidation in the industry. Today there are only 35,000-40,000 commercial farmers in the country, according to most estimates, with many of them being conglomerates.”

Legislation that contributed to the formalisation of this transition included the Marketing of Agricultural Products Act No 47 of 1996, which replaced a 1937 law; the Land Reform Act No 2 of 1996, which replaced a segregationist 1913 law; the Water Act of 1996; and a series of new labour and trade reform laws put in place from 1995 to 1998. In the nearly two decades since, these and other related laws have been updated, amended and reissued a number of times.

Current Status

While the legislative and regulatory framework has improved dramatically over the past two decades, the divide between white commercial farmers and black smallholders remains a defining characteristic of South Africa’s agriculture sector.

When apartheid ended in 1994, the recently elected African National Congress (ANC) announced that a key tenet of its land reform programme was the transfer of 30% of South Africa’s white-owned agricultural land to black farmers. In the two decades since this pledge was made, this has yet to take place in full. A variety of issues have served to undermine the programme, including inadequate financing, competing policy priorities – such as food security, which relies heavily on large-scale, commercial food production – and, in some cases, corruption.

Numbers Game

A lack of reliable land ownership data has complicated the issue. In 1996, two years after apartheid ended, white commercial farmers owned 70% of South Africa’s agricultural land and leased another 19%, effectively controlling nearly 90% of the country’s total arable land, according to the UK-based Africa Research Institute (ARI).

Today, while white commercial farmers are seen as dominant in terms of production, revenues and land ownership, the exact split between the commercial and smallholder segments is unclear and regularly debated in local media. In March 2014, the former deputy minister of agriculture, forestry and fisheries, Pieter Mulder, said that commercial farmers produce 95% of South Africa’s food crops, with the remaining 5% produced by smallholder and subsistence farmers.

According to a 2013 report by the Institute for Poverty, Land and Agrarian Studies at the University of the Western Cape, 67% of the country’s total land is owned by white commercial farmers, while 15% is controlled by smallholder farmers. In 2012 the ANC announced that 80% of total land was owned by the white population. In reports from various state entities, the percentage of South African land that is owned by the government ranges from 25% to 40%. Upon completing a land audit in 2013, for example, the Department of Rural Development and Land Reform (DRDLR) reported that 78% of the country’s land was privately owned, while the government held the remaining 22%.

Restitution & Redistribution

In addition to the legislative and regulatory side, South Africa’s land reform programme is made up of two primary components: restitution and redistribution. Under the land restitution initiative, the state aims to compensate citizens – either by paying them for lost land or by restoring said land – who were deprived of property as a direct result of legislation put in place by the apartheid government. Dispossessed landholders who wished to make claims under the restitution law introduced in 1994 were required to do so by the end of 1998. Since then the government has been working through these claims. According to the DRDLR, from 1994 to 2012 some 3.8m ha of land was transferred under the restitution programme, nearly 80% of it in urban areas.

Under the redistribution initiative the government provides grants, loans and other assistance to black citizens who want to buy land, with a focus on agricultural land. According to ARI data, by the end of 2012, 4.12m ha had been transferred from white to black farmers under the redistribution programme. By mid-2012, 8m ha had been transferred under the government’s land reform programme as a whole, one-third of the original goal of 30% of white-owned land.

Productivity

According to government data and local anecdotal evidence, the redistribution programme has had a negative impact on productivity. In 2010 the DRDLR reported that 90% of the agricultural land transferred under the programme so far was “no longer productive”. Indeed, according to a 2013 ARI report, “very few new landowners possess the working capital, skills and machinery to sustain a large commercial farm”.

“To turn a profit in the agriculture sector requires expertise, access to market, access to financing and in most cases economies of scale,” said Robert Matsila, the project manager of the agro-industries business unit at the Industrial Development Corporation, a parastatal entity overseen by the Economic Development Department. “The margins are generally low and shrinking for the larger commercial farmers, and in these situations it is even harder for smallholders.”

Moving Forward

A handful of recently introduced and upcoming pieces of legislation pertain directly to land reform. In February 2014 the National Assembly passed the DRDLR’s Restitution of Land Rights Amendment Bill, under which the restitution claims process has been opened. Citizens and communities that can prove their land was taken from them during apartheid will be able to file a claim under the new law up until June 2019. Also in February 2014, the DRDLR put forward a draft proposal for a new property valuation act, which would mandate the establishment of a dedicated land valuation office. This entity would oversee all valuation procedures related to land reform, with the goal of ensuring that property is priced according to section 25 of the constitution.

In December 2011 the DRDLR introduced a draft version of the Expropriation Bill, which is now under discussion in the National Assembly. Under the 1994 land reform programme, property transfer was carried out on a “willing seller, willing buyer” basis, which required both parties to enter into any deal voluntarily. This principle has been cited as a key reason for slow progress in land reform. Under the Expropriation Bill the government would likely have the power to sequester land, in exchange for compensation. This could speed up reform, but has also put off many farmers. “Many commercial farmers are afraid to invest in new equipment, land development or training now,” said Verschoor. “They are afraid their land will be taken away.”

Most recently, in June 2014 the minister of rural development and land reform, Gugile Nkwinti, unveiled a draft proposal that would see commercial farmers being required to hand over half of their land to their workers. The document sets April 2015 as the deadline for submissions on the controversial proposal.