Land reform and the inequality of land ownership have remained persistent politically charged subjects within South Africa, which should not be surprising, given the weak progress that has been made in light of severe shortfalls in the land reform programme. The alternative of a more aggressive redistributive effort led by government with a lesser focus on ensuring productivity seems equally dangerous.
Instead, a successful way forward for land reform likely rests on the proactive engagement of the commercial sector in pioneering different models for integrating emerging farmers into the globalised economy. The resilient and long-term commitment to charting a future for land reform is not only a social necessity but also a commercial imperative that requires the proactive and constructive participation of the private sector, government and civil society alike.
Since its democratic transition in 1994, South Africa has embarked on a multi-pronged land reform programme that sought to address the severe inequality in land ownership at the time. Against an initial target of redistributing 30% of agricultural land owned by so-called white descendants of former settler communities in favour of previously disadvantaged communities (a target proposed by the World Bank, which was intended to have been achieved within five years), only approximately two-thirds of that target has been achieved 25 years hence (Lahiff, Boras and Kay 2008; AgriSA 2017; BFAP 2018).
While the rate of redistribution remains problematic, it is also the lack of success achieved within redistributed farms that presents a critical concern. Despite highly limited monitoring and evaluation data, evidence suggests that the overriding majority of redistributed farms are less productive than before, with a significant proportion no longer producing any surpluses. The South African land reform programme is therefore considered by most as having performed dismally.
Several factors have contributed to this poor performance. The neoliberal stance towards economic development chosen by the South African government in its transition into democracy, characterised by the dismantling of almost all substantive subsidies and industry protection in agriculture (among other industries), has meant that emerging farmers have faced stringent challenges posed by globalised market forces.
This lies in contrast to global historical precedent suggesting that the emergence of a new class of farmer has invariably been observed within a protectionist environment with extensive state support (Moyo 2008). Emerging farmers have therefore largely been left in the cold, exacerbated by market failures in the support of these farmers. This is not surprising given the challenges observed globally in creating effective market access in rural areas due to the inherently high transaction costs, as well as covariant risk in the case of financial services.
Beyond the challenges posed by the neoliberal economic context, the South African land reform programme has been significantly flawed in its implementation and application. In this regard it has been crippled by chronic underfunding and weak political will, impacting negatively on both the strength of the institutions responsible for its implementation and the rate at which land could be acquired for redistribution (HLP 2017; Lahiff and Li 2012)
By resisting the subdivision of expansive commercial farms and not implementing progressive land taxes to dissuade the hoarding of unproductive land the South African government has effectively maintained and protected the status quo and suppressed the emergence of smallholder farmers (Lahiff and Li 2012). It has, in the majority of instances, forced land reform beneficiaries into non-functional, internally conflicted groupings obliged in practice to adopt communal farming practices that sought to mimic generic commercial-farming models instead of seeking fit-for-purpose solutions.
This lies in stark contrast to global empirical evidence illustrating the productivity gains that can be achieved through fostering the formation of smaller, family-owned farms, as well as global policy promoting this. Despite increased mechanisation and the use of technology increasing the optimal size of farms, the agency costs associated with large-scale farming often overshadow any such economies of scale (Bernstein 2004; Binswanger and Elgin 1988; Deininger and Binswanger 1999). While mitigated by distortionary policies favouring large-scale commercial farmers, this has also been evidenced in South Africa.(Van Zyl, Binswanger and Thirtle 1995; Van Zyl 1996).
To compound this critical flaw, what was intended under international policy as an extensive pre-transfer planning process intimately involving the intended beneficiaries and their aspirations, in practice the South African programme has instead been characterised by the formulaic application of generic models by consultants or administrative staff on behalf of (and often to the complete ignorance of) intended beneficiaries (Binswanger-Mkhize 2014; Deininger 1999; Hall and Williams 2009; HLP 2017).
At the same time, the willing-buyer-willing-seller approach adopted favours the better-informed existing landed elite and has often allowed them to forestall intended redistribution, or benefit unduly from sale transactions (Hall 2003; Hall 2007; Lahiff 2007; Borras 2003; Lahiff, Borras and Kay 2008).
The failure to provide more comprehensive support and solutions outside of the provision of land has also been a key source of failure. Many of the developments in policy and implementation related to land reform in South Africa have been undertaken in an attempt to address some of these weaknesses, but appear to have had a limited impact in improving the success rate of existing land reform projects.
The importance of successful agrarian reform should not be underestimated, nor the potential dangers of increased or continuing failures therein. Empirical evidence illustrates very clearly the especially pro-poor nature of agricultural development, and in turn the importance that a more equitable growth trajectory holds for sustainable economic growth and development.
The link between agricultural development and accelerated broader economic growth has also been evidenced (Stiglitz 2007; Deininger 1999; Cervantes-Godoy and Dewbre 2010). At the same time, as has been studied in countries like India (in states that did not implement relevant regulations effectively) (Ghatak and Roy 2007), in Zimbabwe as well as South Africa (in terms of land tenure for farm workers) (Hall 2007), the negative implications of poorly implemented land-reform initiatives can be severe.
While it is easy to point to flaws in the South African land reform programme and process, identifying practicable solutions represents a greater challenge. In the absence of a marked shift in economic policy away from globalised trade liberalisation by the South African government, relevant solutions will need to address the challenges to be faced by emerging farmers comprehensively. Successful interventions will likely need to satisfy three key requirements:
Firstly, they will need to address the several market failures that befall emerging farmers in South Africa in a consolidated fashion. In this regard, access to infrastructure, access to agronomic inputs, access to technology and technical expertise, access to capital and other financial services, as well as access to markets will be essential. Relevant interventions will need to effectively address all of these factors where existing markets or structures can not be relied on.
Secondly, the shortfall in skills and experience among the desired corps of emerging farmers will need to be enhanced. The progressive and deliberate removal of what literature refers to as a peasantry in South Africa (outside of its former homelands) in the first half of the 20th century, combined with the severe limitations on extended agricultural enterprise in the densely populated former homelands, has constrained the development and presence of agronomic expertise. In reality, this expertise is often inter-generational and inherited through practice more than created through formal education. A distinct and extended focus on an effective skills transfer over a sufficient period of time will therefore be critical to success.
Thirdly, interventions should be context-specific and competitively positioned in order to ensure sustainability and profitability. In the absence of extensive government subsidisation, and in the face of economic forces that often disadvantage the producer, this will be essential to ensure that relevant interventions translate into the meaningful economic empowerment of participants. For this to be possible, focus areas for development need to be driven by specific market opportunities, combined with suitable climatic conditions and natural resources, and structured suitably.
South African academic literature seems to favour a more statist, government-led intervention to force the creation of smallholder farms, at times with little regard for actual productivity. This seems unlikely to succeed given the government’s decidedly poor track record in implementation, should the above-mentioned factors to a comprehensive solution be considered relevant. Instead, the proactive and more deliberate, expanded intervention by the private sector seems a more likely avenue to engineer a successful future for land reform. This should ideally be supported by suitable government policies and initiatives that will better enable this.
Existing literature presents a highly limited understanding of the existing involvement of the private sector in land reform. While government has in fact actively encouraged the involvement of the private sector in land reform projects, in practice this has mostly translated into involving private-sector actors in retrospect to try and turn around failing projects. In many ways the involvement of private-sector actors has also constituted a grudge purchase for the participants as a necessary requirement to qualify for recapitalisation funding.
This has also factored into the motives and quality of the private-sector actors involving themselves in such projects. Despite this, numerous examples of successful industry-led, comprehensive interventions do exist and should be studied more closely to better understand the opportunity for further expansion. In doing so, a clear framework for assessing the broader impact of such interventions on the relevant communities and stakeholders should be developed and applied to ensure that the activities benefit all involved fairly.
While it is reasonable to question the equitable accrual of especially financial benefits derived from private-sector-led projects, given the unequal negotiation powers likely to prevail at commencement, there are an increasing number of mechanisms available that could assist in balancing relevant interests. Aside from a growing realisation of the need to restore and maintain a more sustainable long-term future for the industry among commercial actors, civil-society interventions that bolster the level of information of communities and ensure the application of suitable mechanisms also assist in ensuring a more level playing field. The community-development work and application of competitive bidding processes in the selection of private-sector partners as facilitated by the Vumelana Advisory Fund on behalf of communities is an example of this.
Global trends and developments also represent a potential source of solutions in this regard. Technological innovations are being pioneered, often inside developing countries, that are instrumental in broadening the recognition of movable collateral such as livestock, the access to technology and information, and improved access to markets. In addition, the global landscape is seeing the increased emergence of actors that occupy the space between profit-hungry commercial actors and purely charitable institutions. This would include so-called social entrepreneurs that drive financially sustainable initiatives deliberately oriented towards benefiting communities, as well as the increasing prominence of so-called “patient capital” that seeks a more balanced outcome between financial returns and social impact.
Ultimately, developing a new generation of farmer and successful models for facilitating land reform is not only a necessity in achieving a more equitable society, but also represents a commercial imperative to develop the successors to a fast dwindling and ageing population of white, commercial farmers. By harnessing the competitive nous of what remains one of the country’s most globally competitive industries, a successful future for land reform can certainly be charted. However, this will require compromises, hard negotiations and long-term commitment from all quarters – the private sector, civil society and government alike.
Martin Potgieter is the Chief Investment Officer for a large agricultural enterprise, and is a PhD candidate at the University of Stellenbosch Business School, with an intended research focus on land reform. He can be found on LinkedIn at linkedin.com/in/martin-potgieter-2a60564b.
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