COMMENT
South Africa’s 35 000 remaining commercial farmers (down from 60 000 in 1996) are vital to the food security of 54-million South Africans (up from 40-million in 1995). They also contribute 3.9% of the country’s gross domestic product, employ more than 650 000 mostly unskilled people and help to boost exports and hold down the current account deficit.
They generally have good relationships with their workers and don’t pay less than the statutory minimum wage. Many have also done all they can to mentor new black farmers and generally help with the process of land reform.
Commercial farmers underpin the rural economy and the prosperity of small rural towns. This means that increased investment in commercial agriculture is vital to the rural economy.
Despite this, South Africa’s commercial farmers are under attack. They already face a raft of damaging policies that threaten the success of commercial farming. Now many of these policies are being ratcheted up, putting the future of farming still further at risk. This policy brief explains why this is happening and what the farming community must do to safeguard its future.
Failure of land reform
Many farmers have long accepted the need for land reform to overcome the ongoing effects of past racial laws prohibiting the purchase of agricultural land by black people and the forced removal of more than 1.1-million Africans from “white” rural areas in the 1960s and 1970s.
Yet land reform to date has largely been a dismal failure. Since 1994, about R69-billion in real terms has been spent by the state on buying about seven million hectares of land for redistribution or restitution, against a target of some 26-million hectares. The amount already spent is very close to the net value of all agricultural land in the country (R71-billion), but 19-million hectares still remain to be transferred.
In addition, between 70% and 90% of all land reform projects have failed, with beneficiaries being unable to produce any marketable surplus. Productive land has thus been taken out of use without any resulting benefit to anyone in jobs, income or agricultural production.
Overall, land reform has been so badly implemented that, where it has been applied, it has probably done more damage to commercial farming than the South African War.
But land reform is also a sham because:
- It exaggerates the extent of land hunger (in fact, only about 8% of South Africans want land to farm);
- It prevents black South Africans from gaining individual ownership of farming land (almost all transferred land goes to the state, the chiefs or community trusts) and does not aim at creating a new class of black commercial farmers; and
- It ignores the most important land reform requirement: the need to give individual ownership to about 18-million people with insecure customary land-use rights in the former homelands.
Despite these many problems, land reform is now being stepped up through legislation recently adopted or now in the policy pipeline.
Threat in new laws
Much of the threat to commercial farming comes from a spate of new laws and policies, six of which are outlined below.
- The Restitution of Land Rights Amendment Act of 2014, effective from July 2014. The land claims process has been reopened, with a new five-year window running from July 2014 to June 2019, during which about 379 000 new claims are expected to be lodged. These claims will be in addition to the 80 000 or so lodged in the first window period (up to December 1998), about 13 000 of which still remain to be resolved. The new claims could cost R179-billion to settle, but the annual restitution budget is less than R3-billion a year. In addition, both the department of rural development and land reform and the Land Claims Commission lack the administrative capacity to handle all the new claims, which are likely to drag on for decades and make for great uncertainty over the title of commercial farmers to all or part of their land.
- The Property Valuation Act of 2014, effective August 2015. A state official, the valuer general, has been empowered to value all property (including land and any accompanying movables) that has been identified for land reform. Where farms are under claim, this statute will help the government expropriate them as working entities and for less than market value.
- The Regulation of Land Holdings Bill, mooted in the green paper on land reform in 2011 and still to be approved by the Cabinet for tabling in Parliament. This Bill will introduce ceilings on farm sizes, which are likely to be set (in the beginning, at least) at 1 000 hectares for a small farm, 2 500 hectares for a medium one, and 5 000 hectares for a large farm. In exceptional circumstances (for example, to cater for timber or game farms), a maximum of 12 000 hectares may be allowed. In many cases, these ceilings will erode the economies of scale necessary for successful commercial farming.
- The 50:50 proposal, under investigation in a few pilot studies. The land department has proposed that 50% of all commercial farms be transferred to long-serving farmworkers. Compensation for this 50% will not go to the farmer but will be paid into a trust jointly owned by both the farmer and his new owner-workers.
- The Preservation and Development of Agricultural Land Framework Bill of 2014, for which public comment has been obtained, but has yet to be approved by Cabinet for tabling in Parliament. The department of agriculture, forestry and fisheries has put forward the so-called agri-land Bill, under which all agricultural land will be vested in the department as the “custodian” for the people of South Africa. This wording could in effect result (as under the Mineral and Petroleum Resources Development Act of 2002, which has the same formula regarding the state’s custodianship of mineral resources) in the expropriation of farming land without compensation. In addition, the Bill will require all high-potential cropping land to be used solely for production for human consumption. All farmers will need state approval (through extraordinarily costly and complex new bureaucratic procedures) for any rezoning or subdivision, under rules so broad they could require state approval for a shift from one kind of agricultural use to another. Restrictions on the use of pesticides and genetically modified crops could also be introduced. Under the Bill, the “right to farm” will also be made subject to ministerial regulation. Under this provision, farmers could in time be required to obtain farming leases or licences from the state, which could be made dependent on them fulfilling various (and shifting) black economic empowerment requirements.
- The Expropriation Bill of 2015, which is currently before Parliament. This Bill will allow all national and provincial departments, municipalities and hundreds of other organs of state to expropriate land, movables and other assets either “for public purposes” (such as the building of a road) or in “the public interest” (which the Constitution defines as “including the nation’s commitment to land reform”). Under its current wording, the Bill would work as follows. The land department could decide it wants to expropriate a number of farms, which it will then lease to black farmers under the state land lease and disposal policy. The department must start by negotiating with the farm owners for the purchase of their land at, say, 70% of market value, as recommended by the valuer general. If negotiations fail, the land department may issue a notice of its intention to expropriate, under which it may investigate the value of the land. It must also invite objections to its proposed expropriations, but can reject these without giving reasons. Once these initial procedures are complete, the land department may serve notices of expropriation on all the affected farmowners. Under such a notice, ownership will pass automatically to the land department on the “date of expropriation” set out in the document, which could be the day after it is served. The only relevant time limit in the Bill is that ownership cannot pass the day before the notice is served. The land department may again offer 70% of market value as compensation. If a farm owner does not sue for more within 60 days of being invited to do so, he will be deemed to have accepted this amount. If he does litigate and a court awards him the same amount or less, he must pay the land department’s legal costs, which will be deducted from the compensation owing to him, leaving him only the balance that remains. The Bill’s present wording also seeks to prevent the courts from ruling on the validity of the expropriation: on whether, for example, it is either rational or in the public interest. It also limits access to the courts on the compensation payable through the “deeming” provision outlined above. The Bill is therefore in conflict with the Constitution’s section 34 (the right of access to court), section 25 (the property clause, with its various requirements for a valid expropriation) and section 33 (the right to just administrative action, which prohibits the land department from acting as “judge and jury in its own cause”).
AgriSA is an important role-player in the agricultural sector, but the Institute of Race Relations is concerned about some of the positions adopted by AgriSA, because these suggest that it does not fully comprehend the threat to commercial farming and may not be doing enough to protect farming interests.
For example, AgriSA has welcomed the expropriation Bill and rejected criticisms of its unconstitutionality. Thanks mainly to the institute’s sustained objections, the Bill may now be amended to give the magistrate’s courts jurisdiction to rule on both the validity of an expropriation and the amount of compensation payable.
But even if these changes are made, this will still not be enough to protect property owners, either black or white.
On general principles of constitutional interpretation, the onus lies on the state to prove that all constitutional requirements for a valid expropriation have been met. It is not the job of the expropriated owner to show that these criteria have not been fulfilled.
Moreover, the state must provide this proof before it proceeds with a disputed expropriation, as the constitutional guarantees otherwise have little practical significance. Great harm may also be done by an unconstitutional expropriation – and this harm might not be easy to reverse.
The institute has thus proposed an alternative expropriation Bill, under which:
- The state must prove the validity of a disputed expropriation before it proceeds with it;
- Compensation must begin with market value, less the four discount factors listed in the Constitution, but must also include an amount to make good all losses directly resulting from an expropriation, such as moving costs and lost future income; and
- Payment must be made in full before the state takes ownership, failing which the relevant notice of expropriation becomes invalid and falls away.
These changes would make it more difficult for the land department or any other organ of state to abuse the power to expropriate.
AgriSA has failed to make or support these important changes, perhaps because it sees the need to maintain a good relationship with the government as more compelling.
Good relations with the state are, of course, desirable. But the institute’s experience, over several decades, is that appeasement does not work and that bad policy must always be opposed.
Frans Cronjé is the chief executive of the Institute of Race Relations. This is an excerpt from a policy brief produced by the institute at the request of the Transvaal Agricultural Union.