Why size matters for farmers

Lie of the land: Economies of scale are said to be important for large-scale commercial producers, although this is debatable. (Madelene Cronjé, M&G)

Lie of the land: Economies of scale are said to be important for large-scale commercial producers, although this is debatable. (Madelene Cronjé, M&G)

In his State of the Nation address last month, President Jacob Zuma announced government plans to impose a land ceiling of 12 000 hectares on agricultural land. Landowners immediately responded by arguing that this will threaten food security because a few large farmers produce the bulk of the country’s food.

It is true that South Africa has a very concentrated agricultural production structure, with a small core responsible for a large share of commercial production. According to Frikkie Liebenberg, an agricultural economist at the University of Pretoria, 237 commercial farm units accounted for 33% of total agricultural income in 2007 and 2 330 farm units accounted for 53% of gross agricultural income in 2005.

These statistics are drawn from the most recent available and, by all accounts, concentration has increased since then. The imposition of a land ceiling is a response precisely to the extent of concentration in landholdings and production, as Zuma himself said in response to the objections from landowners.

There is a valid argument that a uniform land ceiling across the country does not make sense, because productive land sizes vary by agroecological context. High-value fruit and wine farm units in the Western Cape may occupy relatively little land, whereas large sheep and cattle farms in the Karoo and Northern Cape may struggle to break even.

On the other hand, land is hardly even a factor of production for the huge industrial poultry operations, or the enormous cattle feedlots through which more than 75% of commercial beef production passes.

Twelve thousand hectares means very different things in these different contexts. It is also a large tract of land. Statistics from 2007 show average land sizes by province vary from 427 hectares in Gauteng to 5 799 hectares in the Northern Cape. In this context, a ceiling of 12 000 hectares is set too high rather than too low – and arguments to the contrary appear to be in the self-interest of the large land barons. Anecdotal evidence indicates that, in some districts, individuals own more than a third of all agricultural land at the expense of other inhabitants. This is of questionable economic merit.

Zuma has unnecessarily muddied the waters by referring to a national uniform ceiling in his address, and it is not clear why. The 2013 agricultural landholdings policy framework indicates a district-based process for setting the upper (and lower) bounds for the ownership and use of agricultural landholdings, with excess land to be used for redistribution.

Excess land will be expropriated and landowners compensated on the basis of an independent valuation. Zuma might have simply announced the plan to set land ceilings at a district level in consultation with stakeholders and thereby avoided the whole debate.

If government actually follows through on the district-level plans, it can respond adequately to the issue of flexibility for different agroecological contexts.

But the extent of popular involvement by organised black farmers, rural communities, civil society organisations and farmworkers in these district-level processes is crucial. It is very possible that district processes could end up being just negotiations between landowners and government to their sometimes mutual benefit.

Civil society can play an important role in identifying major landowners at district level and working with government to find ways of redistributing land in excess of district ceilings equitably and democratically.

Concentration in landholdings is based on an argument of the economic viability of production units. This is a challenging and complex issue to deal with. It is true that economies of scale are increasingly important for the viability of commercial producers in the context of global competition.

But we should note that viability is a contested social construct. Recent Zimbabwean experience is instructive in this regard. Prior to the fast-track redistribution, large tracts of land under private ownership were considered to be commercially unviable and were passively held under extensive livestock grazing, which excluded the majority of the population from gaining access to that land.

There are many problems with Zimbabwe’s land redistribution process, but there is evidence that land became more productive when it was spilt into smaller units and people used it for growing crops for home use and local markets. In these cases, at least, the change in structure of landholdings did not threaten national food security and it improved local food security.

The argument in South Africa that a small core of producers generates a large share of the output works against the argument that imposing ceilings on the large, less productive periphery of commercial producers will negatively affect food security. But it also points to the imperative to provide effective support for productive activity on redistributed land.

South Africa has not yet got this right. A starting point would be more active involvement of those receiving land, a larger number of smaller landholdings, greater flexibility in the settlement/production mix while maintaining the integrity of scarce productive resources, and ecological production for long-term sustainability.

The broader problem is that the ANC in government has contradictory aims. On the one hand, it has favoured deregulation and trade liberalisation and encouraged global competition in agrofood production since 1994. And the competition commission has routinely approved large mergers in the agrofood system, generating greater concentration in ownership and control.

Large portions of the commercial agrofood system are owned by foreign interests, whether through outright acquisition or through controlling stakes by share ownership. This path favours economies of scale, and government regulatory processes have facilitated this.

On the other hand, the ANC now wants to limit the extent of concentration in landholdings. But it can’t have its cake and eat it. Global competition and corporate domination of the agrofood system (especially retail and food manufacturing) require consistent, large volumes of standardised agricultural outputs, and economies of scale are essential.

This is an endgame for agricultural production and inevitably leads to fewer, larger entities producing for an ever-larger base of consumers. The logic is that other economic activities will emerge for those displaced by these processes, but these have not materialised in South Africa. We have witnessed large-scale job losses in commercial agriculture, with no other industries emerging to absorb the surplus labour.

An alternative is to break down the economic concentration of ownership of assets and engage many more people to produce on smaller scales for more localised markets.

It will be necessary to maintain a core of large-scale producers able to meet the agrofood needs of those not engaged in food production, especially in the urban areas. This raises the issue of democratic control and ownership of these large-scale enterprises.

A democratically controlled, large-scale core with more diversity in the production structure, including diversity of scale, points to a different agrofood model. Though land ceilings are one part of this picture, there is a necessity for a thorough rethink of the entire structure of agrofood production and its relation to the broader economy.

Stephen Greenberg is a researcher on land, agriculture and food



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