Scaling back on land reform spending, half a billion more for extension officers, VAT red tape relief, more sin taxes and a fuel levy hike were some of Trevor Manuel’s budget announcements that will affect the farming sector. Stephan Hofstätter reports.
Treasury has turned down a request by the Department of Land Affairs for R60 billion to meet the target of transferring 30% of white-owned farms to blacks by 2014. So far only 4,2 million out of 82 million hectares have changed hands. In the next seven years, 20,4 million hectares must be transferred to reach the 30% target. Based on current land prices, the Department of Land Affairs estimates this will cost about R60 billion. “For electricity, yes. For land, not a chance,” says a Treasury official.
Defending the decision in parliament, finance minister Trevor Manual said throwing money at land reform would trigger massive land speculation and force up the price of every hectare of arable land. Instead, Treasury has allocated less than R1,9 billion over the next three years, or about 3% of the total needed for the next seven years. This includes R1 billion reclaimed by the restitution programme. It failed to spend the money last year because of squabbles among claimant communities, price negotiations with farmers and the poor capacity of land officials delayed sales. The redistribution and tenure reform programmes were allocated an extra R900 million over the next two years.
Overall, land reform budget allocations have increased dramatically over a 10-year period, from R500 million in 2000/01 to R5,4 billion in 2010/11, mostly for land acquisition. The lion’s share goes to restitution, peaking at R3,1 billion in 2008/09 and dropping to R1,3 billion in 2010/11 as the programme winds down. This is woefully inadequate to settle all land claims, secure tenure rights for an estimated 1 million farm tenants or distribute enough white farms to establish a sizeable community of black smallholders and commercial farmers. Treasury’s tightfisted approach is likely to fuel fears that the post-Polokwane ANC will try to push through drastic measures such as large-scale expropriation at below-market value to make land reforms cheaper. The discrepancy between what’s needed and available was not lost on land and agriculture minister Lulama Xingwana, who told parliament this month her plans to redistribute 5 million hectares to farmworkers within a year were realistic, because beefing up government’s expropriation powers would cause land values to tumble and make land reforms cheaper. Her department has struggled to transfer less than that amount in 14 years. Her remarks were later downplayed as a joke, but they echo a commitment made at Polokwane to intervene in the land market to reverse racially skewed ownership patterns.
Government changes its strategy
In particular, the willing-buyer/willing-seller principle, a cornerstone of the 1997 White Paper on land policy, has come under fire for making land reforms unaffordable. Xingwana’s department pledged to amend the document by March 2009. Cabinet is considering proposals to curb price escalation and land speculation including taxing underutilised farmland and placing a ceiling on the amount of land a single person or entity can own. The Expropriation Act is being revised to give Xingwana’s department greater powers to force farmers to sell land for redistribution. In theory this could bring down the land reform bill because the constitution provides for below-market-value expropriation. This has never been implemented in the restitution programme, which already allows for expropriation, because of fears that devaluing commercial farmland would have a ripple effect on back and forward linkages that could devastate rural economies. International experience also shows expropriation is more expensive in the long run, because of protracted legal battles, and provokes needless hostility from landowners.
Rising land costs have certainly played a role in government’s failure to meet targets, particularly with restitution, where the state is a captive buyer. The land claims commission spent R2,8 billion on land alone in 2006/07, at an average cost of R4 800/ha. This is almost 40% more than restitution’s average cost (R3 500/ha) since 1994. But administrative inefficiencies must share the blame for the department’s inability to spend R150 million of its land-buying budget in 2007/08. Anecdotal evidence abounds of farmers unable to sell their properties for land reform because officials don’t have the capacity to process claims quickly or conclude complex land transactions. It’s also becoming increasingly common for claimants or workers to join forces with landowners in putting pressure on officials to speed up paperwork that often drags on for years.
The department is taking skills shortages seriously. Its administration budget almost doubled from R220 million in 2004/05 to R430 million in 2007/08, although R40 million won’t be spent this financial year because of staff vacancies. Interventions to improve performance included placing 218 interns in 2006/07, incentive schemes to retain staff, an outsourced recruitment drive and courses for middle management.
Budget at a glance:
Treasury turns down a request for R60 billion for land reform.
Extension services get R500 million extra.
Levy hikes push the price of petrol and diesel up by 11c/ℓ.
The biodiesel fuel tax concession is raised from 40% to 50%.
The VAT registration threshold is raised from annual turnover of R300 000 to R1 million.
The threshold for farmers who submit VAT returns every six or four months is raised from R1,2 million to R1,5 million.
Electricity levy of 2c/kWh.
Taxes rise to 23% of the price of a bottle wine, 33% of a can of beer, 43% of a bottle of spirits and 52% of a pack of cigarettes.
R160 million goes to entry port inspection services.
