Policy cannot disrupt food production

Expropriation of land without compensation could result in disinvestment in agriculture and increase the price of food, which would hurt the poor the most. But there is a solution. (Madelene Cronjé/M&G)

Expropriation of land without compensation could result in disinvestment in agriculture and increase the price of food, which would hurt the poor the most. But there is a solution. (Madelene Cronjé/M&G)

COMMENT

South Africa is ranked as the most food secure country on the continent, and is 44th out of 133 countries worldwide, according to the Economist Intelligence Unit’s 2017 Global Food Security Index.

The index evaluates the most critical aspects of food security, namely affordability and availability, as well as quality and safety.

South Africa’s relatively high rating has been made possible by robust agricultural output over the years, making it one of a few net exporters of agricultural products.

This is a remarkable achievement because South Africa is relatively resource poor compared with many other African countries.
But what differentiates it from the other countries is the high level of investment in the sector, which is largely because of transparent markets, strong institutions and robust property rights, which can be enforced by the courts.

This brings us to our key point — expropriation without compensation. If this was to happen, it would threaten investors’ confidence in South Africa’s property rights framework and have negative implications for agricultural investment.

The agricultural sector needs investors who will develop resources to grow production. If a policy of expropriation without compensation is adopted, investors will fear that they will probably not be able to recover the value of their investments.

In turn, this will affect agricultural production and, subsequently, the availability and affordability of food in the country. This is undesirable because South Africa is already food insecure at household level. Statistics South Africa estimates that currently 13.8-million South Africans live under the food poverty line.

A clear implication of lower agricultural production was witnessed in the 2015-2016 drought, when food price inflation — the pace at which prices increase — averaged 10.5% in 2016. This was the result of South Africa becoming a net importer of staple grains such as maize, soybeans and peanuts.

This meant the country was buying these products at an import parity price, which is determined by the world market, the cost to transport the product to the market and the exchange rate. This is definitely not ideal, particularly for staple foods.

In addition, the results of this were largely felt by the indigent, who spend a far greater share of their monthly income on food.Although food inflation peaked at 12.7% at the height of the drought, it would be far more severe if there is a policy of expropriation without compensation.

Above all, we must ensure that land reform happens but in a sustainable way so that agricultural production and food supply remain vibrant in the coming years to prevent basic nutrition from becoming unaffordable.

Currently, StatsSA estimates that 13.8-million South Africans, or one in every four, live under the food poverty line, which means they cannot afford their basic food demands and are food insecure. If the price of food increases because of uncertainty regarding expropriation without compensation and the associated disinvestment in the sector, the situation will become worse. Therefore, it is vital that we find solutions to accelerate land reform without causing large-scale uncertainty in the agrifood system.

On the one hand, we need to find more land for redistribution and, on the other hand, we need to secure property rights to maintain investor confidence in our agrifood sector. But these needs do not have to be conflicting.

Instead of lowering the cost of acquiring land, more funds could be made available for land reform by raising private sector capital through public-private partnership models. This would be the best way to accelerate land reform without raising the price of basic food items.

Wandile Sihlobo is head of agribusiness research at Agbiz. Theo Boshoff is the manager of legal intelligence for Agbiz

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