Land ceilings could endanger food security

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The euphoria following Minister Gugile Nkwinti’s excited acceptance of Agri SA’s land reform strategy was rudely shattered with the ANC’s proposal of land ceilings. This despite studies showing that the concept has not worked anywhere else in the world – and South Africa is unlikely to be any different.

READ:Rhino poaching numbers down in Kruger, but spiking elsewhere

The move has also put a question mark on the real value of negotiations with the ANC-led government. The leaders of organised agriculture still firmly believe in negotiation, but many farmers are wondering if it’s worth it.

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A serious threat to food security – do the maths
There are many reasons land ceilings will not work. The top of the list are the economic considerations. Simply put, if government goes ahead with land ceilings, food security will be seriously endangered. The ratio between the prices that farmers pay for farming requisites and the prices they are paid for their products (terms of trade), decreases over time. This decrease is not constant and there are periods when input prices increase at a slower rate or even decrease compared with the prices that farmers receive.

Frequently, however, decreases in the prices of basic commodities used by input suppliers are not followed by decreases in the prices of farm requisites. In the long run, farmers’ terms of trade are weakening. This has forced them to increase production and production efficiency. Farms are growing bigger and the number of farmers is decreasing. It’s a trend seen around the world. Nowhere do you see farmer numbers increasing. Margins are squeezed and farmers unable to grow bigger sell their farms to their neighbours.

But, with a ceiling on land ownership in force, the neighbouring farmer won’t be able to buy this land if they already own two farms. Perhaps the ANC sees this as an opportunity to transfer ownership to previously disadvantaged people. But even if possible, this will result in a sharp decrease in agricultural production. And higher production is needed to feed our growing population!

As I’ve noted before, South Africa’s population is growing at a faster rate than its economy. This has already resulted in higher unemployment and, as a recent Stats SA report clearly shows, the number of people living under the poverty line has increased. Moreover, our population is highly urbanised and these city dwellers will have to be fed with food produced by commercial farmers.

To ensure higher food production, farmers need modern technology. This is expensive and is affordable only to larger farmers. Putting a ceiling on farm sizes will prevent farmers from utilising new production technology.

Practical difficulties of land ceilings
In addition to these economic reasons that render any form of land ceiling a major folly, there are practical aspects that make such a plan untenable:

Any cut-off point simply based on farm size will be insane. You cannot compare a 12 000ha farm in a drier area with a 12 000ha intensive vegetable farm. There are very few farms in South Africa that are not a combination of two or more registered units. Will government base the two-farm rule on registered units or on what is popularly known as a ‘farm’?  When a farmer farms on an adjacent farm situated in another district, will this be regarded as one farm?

Some sensible alternatives
The dairy industry has examples of several successful empowerment programmes. In most, the project is based on a share-equity scheme. A farmer’s workers form a trust and use their empowerment funding and a soft loan from a commercial bank to buy a farm. The farmer provides the livestock and movable infrastructure and enters into a ‘share-milking scheme’ with the workers. A few of these share-equity schemes have been operating successfully for a number of years.

There are other examples of successful empowerment programmes, such as the National Woolgrowers’ Association’s woolshed projects in the former Transkei and a few others. The failed projects are those where a farm is procured for a group of beneficiaries, they are given some aid, usually in the form of infrastructure, and then left to fend for themselves. In some cases these farms are then re-capitalised so that they can fail again.

Viable empowerment will only succeed if done on business principles and in co-operation with farmers. We need common sense, not foolish, politically motivated plans!

Dr Koos Coetzee is an agricultural economist at the MPO. All opinions expressed are his own and do not reflect MPO policy.