It’s not the willing seller, but the corrupt buyer sabotaging land reform

2019-06-24 09:29

The ANC finds itself in the position where much of what it wanted to cover up by blaming the willing seller principle, and calling for expropriation without compensation, has already been exposed, writes Theo de Jager.

Land reform in South Africa has since 2002 increasingly been under pressure, and no one, not government or opposition parties, land owners or beneficiaries, the private sector or foreign countries deem it to be successful.

In every budget debate, election speech and departmental report, the ANC and government officials blame this failure on the “failure of the willing seller principle”. “Farmers want too much for their land!” is the most common accusation, and by repeating it at every possible opportunity, they managed to set it as a general narrative.

Since August 2007 government stopped offering market related compensation in land reform transactions, calling on the so-called “discount clauses” in Section 25(3) of the Constitution. The department could never provide a proper formula for calculating these discounts though, raising the suspicion that it’s all thumb sucking by some activist official. Farmers who refused their offers, were branded as greedy and obstructive.

On the ANC’s controversial list of farms targeted for expropriation, which got leaked to AfriForum in April 2018, the average offer to land owners was less than 60% of the market value as determined by government’s own valuers. Akkerland, the first farm on that list, was expropriated at only 25% of the value at which it was eventually sold after the court overturned the minister’s disastrous decision to expropriate.

The biggest problem with forced discounts, is that the collateral value of farms serves as the foundation of agricultural financing. Banks and other financial institutions forward production loans to farmers, based on security which is calculated on the market value of their properties. The total value of farm debt is some 60% of the total value of agricultural land. So if a farm is expropriated at only 60% of market value, the implication would be that the bank and cooperative would be able to recover their money, but that the average farmer would be left without a pension or livelihood.

Farmers have long proposed to government that it should tap into bank valuations to ensure the integrity of the quantum of compensation offered to land owners, and it’s unclear why this was rejected. Bank valuations are inherently conservative, and if a bank is prepared to finance a farm based on those valuations, then government’s risk of paying too much, is very limited.

There is a different motive for the ANC’s accusations that greedy farmers are derailing land reform. Following years of complaints from the agricultural sector, the report of the High-Level Panel on Land Reform and Rural development under the leadership of former president Kgalema Motlanthe, reached the same conclusion; that corruption, nepotism and incompetence are to blame for failed land reform. It is self-enrichment, state capture, cadre deployment and farms-for-friends that caused the dismal failure of land reform.

For 18 months, nothing was done about the Motlanthe report and its recommendations. Then the Special Investigating Unit (SIU) revealed how 148 land reform projects between 2011 and 2017 have been flagged for suspicious or fraudulent activity, confirming the horrors alluded to in the Motlanthe report. At the same time, specific land reform projects started making headlines every week, such as the Gupta’s Estina dairy project in Vrede, the R100m Limpopo farm for the former ANC staff member from Luthuli House‚ Errol Velile Present, and many others.

Both the media and the Zondo commission’s revelations on the extent of corruption and looting in land reform eroded the legitimacy and integrity of government to the level where no one engages the department without serious suspicion and prejudice.

Now the ANC finds itself in the position where much of what it wanted to cover up and hide by blaming the willing seller principle, and calling for expropriation without compensation, has already been exposed, even by investigations from its own ranks. Its silence on the matter is deafening, adding to its poor global image as a party of thieves and thugs.

It would be very naive to believe that the media coverage and social media discourses on this are not echoing in the board rooms of investors, and in the global corridors of power where policy makers decide on engagement and cooperation. It would be even more naive to hope that the world would have sympathy with those who looted the scarce resources meant for the development of a new class of profitable black farmers.

The opposite is true; the world is very much aware of what is at stake in the land debate. The ghosts of Zimbabwe and Venezuela are haunting every podium from where expropriation without compensation, or at less than market related compensation, is promoted. There is absolutely no reason why the same policies in South Africa will be met by a different approach from the international community.

Because the world knows that it’s not the willing seller principle which has failed. To the contrary, it was never given a fair chance to prove itself. It’s a hopelessly incompetent and corrupt buyer that has derailed land reform in South Africa.

– Dr Theo de Jager, executive board chairman of the South African Agri-Initiative (Saai) and president of the World Agricultural Organisation (WAO).

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