Land: ‘first refusal’ plan stirs a storm

A proposal being put to Cabinet that landowners wishing to sell their properties should first offer them to the state has sparked fears the land market could grind to a halt because an overstretched and poorly skilled land affairs department already struggling to meet land transfer demands will be faced with a massive increase in the number of property transactions it must process.
Issue Date: 30 March 2007

A proposal being put to Cabinet that landowners wishing to sell their properties should first offer them to the state has sparked fears the land market could grind to a halt because an overstretched and poorly skilled land affairs department already struggling to meet land transfer demands will be faced with a massive increase in the number of property transactions it must process.

Conveyancers and estate agents say property transfers on the open market take between six weeks and two months on average. Farmers throughout the country consistently complain of waiting up to 18 months for sales to go through. Farmer’s Weekly has seen sale agreements over two years old awaiting transfer. Many farmers have said the government remains the buyer of last resort because sales take too long to process, jeopardising future business or retirement plans.

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Property analysts said the proposal, raised this month at an agriculture and land affairs portfolio committee meeting, would result in a bureaucratic nightmare in an area already sinking in red tape. All agree transfer times involving state transactions are unacceptably long, and delays would be compounded by giving the government right of first refusal.

Erwin Rode, property economist at Rode & Associates, reportedly said the plan would harm the agricultural sector because it was unthinkable the department would be able to administer it. “The land market will grind to a halt if estates can’t be disposed of and retiring farmers can’t sell their land,” he said. Opposition parties branded the move as socialist intervention in the land market that could cause it irreparable harm, with the Freedom Front Plus warning it would result in a “second Zimbabwe”. Farmers’ union Agri SA said it was taken off guard by the proposal, and had expected to be consulted in advance. “There has been no consultation,” the union’s parliamentary representative Annelize Crosby said.
 

But land affairs director general Glen Thomas told parliament his department was aware of the need to beef up capacity to be able to process an increase in properties being offered to government. This is supported by this year’s sudden upward revision in estimated administration costs, from R337 million to R411 million. He said it was premature to debate the merits of the proposal as it had not received ministerial or Cabinet approval yet.

To turn the plan into law, amendments to the Provision of Land and Assistance Act of 1993 will have to be passed by parliament. The proposals would only apply to agricultural, vacant or undeveloped land – not residential properties. roperty developers have warned the proposal could drive them out of business because any increase in delays between buying land and earning a return would translate into a significant increase in investment risk. he plan forms part of a raft of proposals being hammered out by Land Affairs as part of its latest three-year plan to speed up land reform.

Others will include the introduction of a tax on unused land, legislative amendments to speed up expropriation and expand its application, and removing restrictions on subdividing agricultural land. First refusal rights are seen as a tool to help implement the state’s area-based planning model, which involves determining land needs in a district and devising a comprehensive redistribution plan with the emphasis on best land use for environmentally sustainable economic growth, taking local conditions into account. Officials fear if the state is not given first option, private sales could jeopardise carefully laid plans. he idea was strongly endorsed at the 2005 Land Summit and during its provincial offshoots. proposal was repeated in an internal discussion document flowing from the summit drafted by Land Affairs last year.

The document suggested owners wishing to sell peri-urban or high-quality land be issued a “certificate of no present interest” to make it impossible for owners to walk away from negotiations if they don’t consider the price right. his model was implemented in Zimbabwe prior to the land grabs but failed to deliver much land because the government lacked the funds to buy it (and Britain was no longer willing to chip in). Most Zimbabwean farmers who lost their land after 2000 were issued “certificates of no present interest”. his month the influential National Emergent Red Meat Producers’ Organisation (Nerpo) repeated its call on government to intervene in the land market because farm prices were spiralling out of reach of aspirant commercial black farmers.

First refusal was central to Nerpo’s proposal submitted late last year to land and agriculture minister Lulama Xingwana on how to speed up land reform and contain land costs. Nerpo wanted government to buy land available on the open market and lease it to black farmers, who would be screened for suitability by commodity groups, including Nerpo. Only those deemed suitable after leasing for a few years should be allowed to buy. he key innovation would be buying land at market value, and selling it at production value.
This would take the political sting out of land reform by placing the fiscal burden of redistribution on the broader tax base, not just farmers, and ensuring sellers received market value compensation. erpo said its members consistently complained of a lack of land available on the open market, and urged government to draft legislation giving it the first option to buy.

However, there remains broad consensus among most commentators, including Nerpo leadership, land rights activists and academics, that increased intervention will fail to deliver results without improved performance from land officials, and unless their efforts are integrated into broader planning processes for economic growth and poverty reduction. – Stephan Hofstätter