Friday, January 24, 2014

More on the land reform issue

It’s no secret that I have always been in favour of Agrarian land reform in principle, but that I have my reservations with the system by which Government has sought to attain the redistribution. It is also no secret that I am completely opposed to the EFF’s policy of "overnight" expropriation without compensation, but I’ve only recently realised that I have never really giving full voice to why I am opposed to what is effectively the willy-nilly nationalisation of farmland. For me, there are simply too many unanswered questions surrounding this particular idea to support it.

Questions of occupancy

There is currently no system in place where we can quickly and definitively determine who owns what amount of farmland, so the immediate problem would be that you create massive uncertainty as to who has the right to occupy and work the land on behalf of the National Government should nationalisation ever occur. If we are not able to rapidly make changes to the occupancy of farmland, then indeed we have made no fundamental change and coupled with the fact that there is simply no definitive indication as to who has historical claim to what part and amount of farmland, we instantly create the very real possibility and prime conditions for the violent land grabs we’ve seen north of the Limpopo river.

The second question is the method of occupancy and remuneration of the people that work the land. In Russia for instance, the state paid people a salary for producing what they were ordered to produce, but irrespective of the amounts produced. The problem with this particular system, of course, is that there is simply no motivation for people to produce as much as possible because it does not determine their remuneration and theft of the produce, in order to avoid paying higher prices later on, was absolutely rife. This particular system also creates an absence of any sort of hierarchy, since everyone is paid the same salary and thus have no authority to tell other people what to do; people simply do not function as effectively without one because there will always be the perception of “I have to do everything around here” that will cause production to suffer.

The alternative, more modern system would be for farmers to rent the property from the state over the long term (50+ years) and take their profits as income in the normal fashion, but, as left wing detractors will argue, this is fundamentally no different from private ownership except for the fact that the State can place limits on how much land an individual is able or allowed to rent, while holding very little improvements for the lot of farmworkers. Capitalist detractors of such a system will no doubt point out that it opens up the door for large scale abuses by unscrupulous Government officials, would kill off all private investment in the agricultural sector and destroy access to credit in the agrarian sector of the economy.

The loss of skills question

A major argument against the redistribution of land is that the recipients of the land do not necessarily have the necessary skills to ensure the successful operation of a farm while the previous owners will simply leave and take their skills with them. Supporters of the system normally see this as an insult, but that particular concern is very real and one’s personal feeling about it does not make it less valid, because with a large scale transfer of land, there will be some level of skill loss, so it is only prudent to at least attempt to minimise its impact. It is a sad historical fact of South African land restitution that as much as 80% of all projects fail or become unproductive within 24 months of the land transfer taking place and if this should happen on a national scale, it is something that our economy will simply not recover from during the lifetime of anyone that happens to read this. In many other instances, the community is forced to rent the property to outside operators (often the previous owner) at a mere pittance of what they could have made if they operated things themselves and this is simply not the intended purpose of land reform in my opinion.

While many people would undoubtedly see this as yet another baseless claim that blacks cannot be successful farmers, the intention of this statement of fact is to serve as an indictment to both the absolute absence of support systems and the haphazard manner in which land reform has been applied in the past. The overall goal is not only the transfer of land, but also the skills necessary to fully exploit it and both of these aspects require serious investigation before we can attempt land reform in a responsible and non-destructive manner.

The question of Resources and Infrastructure

It is common knowledge that the amount of commercial farms and farmers has seen a steady decline over the past two or three decades due to both natural and economic considerations, even if there is nothing strange about this phenomenon. It is a common symptom of an economy that makes the move from the primary sector and into the secondary or tertiary sectors of the economy, since they offer bigger professional security and higher income. The problem created as far as the redistribution of land is concerned is that the resources and capital goods required for farming existing in the sector has also been reduced. Yes, it’s only logical that a larger farm would need more tractors for instance, but only up to a certain point, since more of them would mean that they are not being used with maximum efficiency. Another aspect not to be ignored is the fact that necessary structures like housing, barns and storage space for example, would have become fewer in line with the reduction in the amount of farms and the same applies to infrastructure where “unnecessary” infrastructure like roads, water delivery systems and electrical connections have been removed or allowed to deteriorate into oblivion.

The question thus becomes how the existing resources will be distributed and how shortages are to be met, because even if the farms are expropriated without compensation, Government would still be stuck with a capitalisation bill that could easily run into the billions, if not hundreds of billions, of Rand. Also, in the event of a total command structure, who will be responsible for the administration and cost of maintaining the mentioned equipment and structures? Since they are essentially owned by Government, it is only logical that Government should shoulder the responsibility, leading to a massive administrational problem.

The African experience

The experiences north of our borders since long before Mandela took his Long Walk to Freedom all show the same result; that it is highly risky and near economic suicide to attempt such reforms without due consideration and having iron clad systems in place. The country most on the up and up after forty years of this system being in place is Zambia and I would like to discuss their system as a possible model for South African use for a moment.

After colonisation ended in 1964, the new Republic sought a land reform project to replace that enforced on the country by the British. The specific land reforms were announced in the Mulungushi Economic Reforms of 1968 and these included the following:

  1. all land should be vested in the President of the Republic of Zambia,
  2. all land under freehold should be converted to leasehold tenure for  hundred years,
  3. land under customary tenure not to be converted into leasehold, and
  4. land reforms should be directed at improvement of the use of agricultural land

The problems encountered with this policy however was that the land was often not used productively, that the uncertainty created by the leasehold structure made it nearly impossible for farmers to access credit and that the land under customary tenure was poorly administered.  A more recent development of this land reform project is that Zambia no longer possesses people with the necessary skills to boost agricultural production in the country and the Government realised that it was time for a new round of land reform. Since then most of the non-tribal land in Zambia has been under a 99 year leasehold system that automatically renews upon expiration to overcome the problems with uncertainty of tenure and a provision was brought that allowed users of customary/tribal lands to obtain a leasehold on a piece of customary land after due investigation and consultations with tribal leadership in an attempt to make more efficient use of tribal agricultural lands.

In the most recent development, however, the Zambian Government began to actively court Zimbabwean, South African and Namibian commercial farmers in an attempt to overcome their agri-skills shortage and in their first year (2011/12) 100 Zimbabwean farmers brought hi-tech farming techniques to the country and managed to produce 70% of the country’s maize output, thus turning Zambia from a net importer to a net exporter of food, ironically supplying the bulk of Zimbabwe’s maize imports. The final changes are that the Zambian Government is endeavouring to overcome the lack of private investment in agriculture by providing tax/rent rebates on certain private investments in agriculture and that a Certificate of Occupancy by the Zambian Government is now accepted as legal collateral for banks in order to extend credit to farmers thanks to the automatic renewal of the lease.

What I think

First of all, I don’t favour a total command system since I think that it would simply be too big of a bureaucratic burden on a State that thus far seems to fall woefully short in matters of administration. I also think that we can learn a lot from the Zambian example as system that could be successfully applied to our situation, but I still do not think that an overnight change to such a system would be prudent, even if it were possible.

Every instance of land reform in Africa and the modern world points out the fact that it should be done with the utmost care and circumspection; adding to our problem is that we not only have different agricultural regions in the country (dry vs. wet land farming, crops vs. livestock, et cetera), each of which has different requirements, but that we are also facing a definite change in climate in most of these regions, thus rendering traditional crops less productive. So what we need, before we do anything else, is a complete investigation into four aspects of the process:

  1. The viability of different crops and livestock in different regions
  2. The amount of land that would constitute a “living income,” i.e. how much land is required in the different areas that would enable the farmer to make a decent living off the land, otherwise there is simply no point.
  3. The size, scope and cost of the required capitalisation and infrastructure spend as it would most likely be the biggest determinant of the pace at which land reform can be achieved.
  4. The total amount of outstanding bonds against agricultural land, because if the land is expropriated, who is responsible for the bond against it? We simply can expect the bank or previous owner to accept responsibility for this, so the responsibility should either fall to the new tenant or Government, since we risk huge losses in the financial system if the bond is merely “written off.”

Finally, a decision must be taken in the historical context; do we continue with historical land restitution claims as we have been doing or do we make the available land open to all South Africans who have a demonstrated will and ability to farm productively? This is perhaps the most sensitive and emotion laden issue surrounding the entire process, but both the domestic and international statistics show that tribal or communal tenure of large tracts of land is simply not as productive as land under individual curatorship.

What we as South Africans from all walks of life and economic persuasion must realise is that this debate is far from over, but if the day should arrive that a political organisation has a land reform policy that answers these (and I’m sure other people will have more) questions to my satisfaction, then I will most likely support it.