Let's Think

Land reform needs a common solution to benefit al

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The redistribution of agricultural land via expropriation without compensation could lead to self-help chaos, or a plurality of mechanisms to speed up the pace of land reform.

This is the picture that emerges from a research/discussion paper published by the Agricultural Business Chamber (Agbiz), “which attempts to unpack the ‘expropriation without compensation’ decision (by the ANC’s conference in December), as well as the economic and legal consequences of the various forms that the decision may take.

Agbiz’s researchers, Theo Boshoff , Wandile Sihlobo and Sifiso Ntombela notes that from a legal point of view, there is great uncertainty about what compensation is payable in select circumstances under the current constitutional provisions. Likewise, it is still unclear exactly what the scope and extent will be of the mooted amendments.

“From an economic point of view, a key point to highlight is that property rights are inherently required to establish capital investment across the entire economy. If one set of property rights is to be affected by ‘expropriation without compensation’, the expectation will be that other forms of property might also be affected,” they write.

They developed four possible scenarios, based on various policy decisions that might be taken.

Legal background

From the legal background explored by the researcher there are still much uncertainty about what compensation is payable in select circumstances under the current constitutional provisions.

Should the Constitution be amended to allow for the expropriation of land without compensation, it may be permissible, subject to legal challenges, not to compensate owners for land acquired as a result of racially discriminating laws or practices in the past.

However, there is an argument to be made that some compensation will still need to be paid for relocation costs, machinery (if acquired as a going concern) and other incidentals.

Taking this into consideration, some compensation, although less than market value, may still need to be paid.

There are many differing theories about what ‘just and equitable’ entails, as the courts have had only limited opportunities to give content thereto, but there could be instances where the public interest should compel compensation to be significantly discounted.

Economic implications

Agriculture makes up only 2.5% of South Africa’s GDP, but when the upstream (input supplies of fertiliser, seed, feed, animal, and plant health industries) and downstream (food processing, distribution, transport and storage, trade industries) food chains are added, this comes to close to 7% of GDP, which makes it a large part of the total economy.

A programme of mass expropriation will result in a protracted period in which there is no net new investment in agriculture, which means no growth in agricultural output as well as no growth in the agribusiness sector. This is because commercial farmers, regardless of race, who have not (yet) been expropriated, are hardly likely to start new investments and because the new farmers would not have the necessary means to invest.

The agro-industrial complex is also more labour intensive than most other industries in South Africa – on average, primary agriculture employs 4.5 additional workers for every R1 million in capital invested, compared to 2.94 for the economy as a whole. And, the food-processing industry is the most labour-intensive component of South Africa’s manufacturing sector.

Overall, growth in employment can only happen because of growth in investment. Therefore, it could be argued that radical land reform will lead to a decline in employment.

The land is simply one form of property and it is not practical to differentiate. Property rights are inherently required to establish capital investment across the entire economy. If one set of property rights is to be affected, the expectation will be that others/all might be affected in the future.


The four possible scenarios spelled out by the researchers are:

  • Self-help scenario (economically and legally bad) in which they envisage a situation in which ordinary citizens, ’behaviour changes, triggered by political statements, resulting in them taking the law into their own hands in an unusual manner. In this scenario, a lack of clarity on what is meant by statements such as ‘taking the land back’ could prompt citizens to disregard the rule of law. As a result, incidents of illegal land occupation will escalate, coupled with farm invasions, subsequently making the agricultural sector non-functional and unproductive.
  • The gradual decline scenario (bad economically, but better legally). In this scenario, a view is that the ANC, possibly with assistance from the EFF, would amend section 25 of the Constitution, thus paving the way to implement expropriation without compensation at government level. Land reform still takes place within the ambit of the rule of law. This scenario also gives rise to the agricultural, financial and agro-processing sectors being the biggest losers in terms of production, exports and employment. The expected effects of this scenario are expressed in the economic sustainability scenario below;
  • The economic sustainability (business-as-usual) scenario (Good economically, but Mixed legal merits). This scenario prioritises the significance of sustaining the agricultural and food system, as well as not harming other sectors of the economy as stated in the ANC’s decision. While there are differing opinions regarding the extent to which the state-led land reform programmes have delivered on their constitutional mandates to date, the public discourse leading up to the ANC’s elective conference has been aimed at accelerating land redistribution and to expedite the realisation of the constitutional mandate to enable equitable access to land; and
  • The hybrid approach, scenario with a plurality of mechanisms used to speed up the pace of land reform. A blended financing model and AgriBEE are used to transform productive farmland, and land that is unbonded, unused and uninhabited by the owner is targeted for expropriation to reduce the economic impact. Policymakers realise that it might be possible that a nominal amount of compensation still needs to be paid for relocation costs and other incidentals, even if the Constitution were to be amended. This is based on a number of untested legal assumptions, but it is argued that the public interest would require compensation to be significantly less than market value in instances where land is unused, unbonded and uninhabited. As far as productive land is concerned, stakeholders work towards public-private partnerships (PPP) in line with Chapter 6 of the National Development Plan (NDP). As the NDP suggests, the identification of transferable farms and beneficiaries takes place at a district level, facilitated by District Land Reform Committees (DLRCs), which were already established in 2015. The PPP models are flexible and can take several forms.


The researchers conclude that while the scenarios deal primarily with the financial aspects related to acquiring land for redistribution, but there is general consensus amongst authors and stakeholders that there are other issues related to the policy design that also need to be addressed.

These include:

  • Legislative interventions that are required to recognise a continuum of rights in communal areas;
  • Enacting of a framework legislation to guide the implementation of all land reform programmes towards a common goal of inclusive agrarian transformation; and
  • There is a need to tackle barriers to market for communal and smallholder farmers, as well as access to inputs and seeds for sustainable production.

Distributing and increasing access to land without addressing the market access barriers, and input supply constrains coupled with a lack of infrastructure for smallholder and communal farmers, will not yield to production growth, but subsequently will exacerbate the food insecurity problem in the country, which is already at unacceptable levels and could get worse if land is distributed to previously disadvantaged individuals without putting proper mechanisms in place to increase access to markets, financing, inputs, and infrastructure.

by Intelligence Bulletin Team

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