The new Regulation of Agricultural Land Holdings Bill, which puts the brakes on direct agricultural land ownership by foreigners, has also played a part in ratings agency Fitch’s decision to downgrade SA’s investment rating to junk status.
BMI Research, a unit of Fitch, has, noting the proposed legislation, warned that investment sentiment will be further harmed if the government doesn’t adopt a policy shift. Although the President has sent the Bill back to Parliament for public comment and to ensure that it complies with the Constitution, its content holds ramifications for the agricultural sector.
The Bill’s proposals include a ban on foreigners from directly buying agricultural land in South Africa. Instead, non-residents would be allowed to take long leases (30 to 50 years) on properties, or buy through a black majority-owned entity. Furthermore, foreigners wishing to sell agricultural land they already own must give the Minister of Rural Development and Land Reform first option. The Minister would have 90 days to take up the offer, after which it can be sold to a citizen – or even expropriated.
The existing status quo, which has been a vexatious issue, is that the seller should be offered a fair price. And this has generally been the case with most land reform transactions which fall under the 1975 Land Expropriation Act. However, the water has recently been muddied by the cry of the EFF and others who want the Constitution amended to allow the expropriation of property without compensation. If the issue is backed by a two thirds majority in Parliament this decision could be taken.
Under the new proposed dispensation a Land Commission will be established, to which, if the Bill becomes law, every owner of private agricultural land must lodge a notification within 12 months of the commencement of the Act (if enacted in its present form) which must include race, gender and nationality of the owner – plus the size and the use of the agricultural holding.
There are existing provisions containing the outright prohibition of private ownership of land on the grounds “of national interest” and areas of historical and cultural significance and national security; examples include coastal and conservation areas, water catchment areas, land close to military installations and national borders, and so on.
The thorny issue of regulation of land ownership goes back over a century. Efforts to right the wrong by the present government have reaped mixed rewards. Often pushed aside in the spotlight of solutions to empowering black South Africans disenfranchised from land, has been the possible detrimental effect of transferring productive agricultural land without sustainable backup and support for the new owners.
We must seriously bear in mind that South Africa is an arid country. Arable, fertile land is scarce. For example, only 3% is considered truly fertile land, compared with, for example, India where arable land covers 53% of the country. Only one third of our country receives enough water for crop production, but only about 30% of this area has fertile soil. Overall, most of our country’s land surface (69%) is suitable for grazing and livestock – by far our largest agricultural sector. Furthermore, South Africa has less than two-thirds the number of farms it had in the 90s.
Lack of water, we know to our cost, is another natural barrier to productive land – having experienced South Africa’s worst drought in two decades.
There is, however, another troubling factor; our population is growing at around 2% a year and is expected to reach 82 million by 2035. Also, the pattern of food demand is changing as South Africans become wealthier, creating a shift from staple grain crops such as maize and wheat, to such consumables as chicken and eggs. Nevertheless, maize, rice and wheat, according to a recent survey, account for 4,8% of total spending for the average South African household – up to 8% for rural households. Even more alarming, the survey reports, 22% of households in SA run out of money to buy food before month-end.
A major consideration facing the authorities as they pursue the concept of land redistribution must be to ensure that the process is not retrogressive, in that productive land is not transferred into unproductive hands. Over the past years there have been reports of farms passing into ownership lacking the skills or the financial wherewithal to maintain agricultural output.
Therefore, hand in hand with the realigning of productive land ownership must be the means of supporting, through training, advising, and meaningful financial aid, to ensure that our precious, and vulnerable, agricultural resource does not in any way diminish, but grows and prospers.