Prof Meyer, who is an expert in Local Economic Development (LED), is seated at the NWU’s campus in Vanderbijlpark.
The agricultural sector plays a strategic role in the economy of South Africa and in 2017 contributed significantly to the country’s economic growth recovery. Unfortunately the sector is now caught up in the battle for land, as it is used as a political play ball with the EFF successfully putting enough pressure on the ruling ANC to agree to land expropriation without compensation in terms of Section 25 of the Constitution.
The EFF is even taking the issue a step further by openly promoting anarchy in parliament by urging supports on to break the law through the illegal occupation of land. Meanwhile in another political ploy the ANC is also capitalising on the land issue in an effort to retain voters for the 2019 elections.
Agriculture as a significant job creator
The agricultural sector is a significant job creating sector within the South African economy as it provides employment opportunities for approximately 875 000 people and, according to StatsSA the sector contributes 3% towards the country’s Gross Domestic Product (GDP). It therefore becomes clear that the sector should be regarded as the backbone of the economy and in many cases give way to forward linkages to other sectors such as manufacturing, transport, and service delivery. The sector furthermore ensures food security and contributes to exports and a positive balance of payment.
The cycle of disruption
Any negative impact absorbed by the sector therefore has dire consequences for the economy – be it on a regional or national scale. Despite a positive trajectory during 2017 the sector is currently under pressure due to three major issues, namely: land redistribution without compensation, rising violent crime levels and policy uncertainty.
The economic impact of the so-called “land war” in South Africa is significant and is causing policy uncertainty, especially since the protection of property rights is globally viewed as a pillar of democracy. Policy uncertainty affects the property market and as such the value of agricultural land is steadily decreasing. In light of this, commercial farmers are holding back on investment opportunities which in turn impacts negatively on production. As the cycle of disruption continues, capital investments are held back due to a fear of losing property in land grabs.
If the current situation is not resolved soon the South African growth trajectory will be impacted negatively, as will SA’s GDP. Economic growth is based on positive policy statements and investment confidence and at present these economic stimuli are not guaranteed. The land issue, as with most African countries, has now risen to the top of the highly contested political agenda.
Talks of expropriation and nationalisation of land are further damaging the property sector and the economy at large and both land owners and investors are panicking.
The debate about nationalisation and expropriation
Nationalisation leads to the centralisation of assets and as history has taught us, central decision making leads to increased opportunities for corruption. Land owners who have bonds and must service bank loans, are experiencing uncertainty as to the impact of expropriation. Will existing debt be written off by the banks? What impact will this have on the South African economy? Whose land will be taken first? Will all available land be absorbed through nationalisation?
On the flip side of the coin, the question arises on who will qualify to receive free land. The issue is surely heading towards the courts and I am of the opinion that it will happen sooner, rather than later. Policy statements such as the nationalisation of land, banks and industry are based on the principle of communism and as such removes incentives to work hard and to increase returns and production. As a process it simply does not work and have been proven a failure in many countries.
Possible interventions
The land issue needs to be resolved and in immediate short term solution could be to release millions of hectares of suitable government owned land to bono fide and qualifying farmers. It should be noted that since 1994 only 4% of all land reform beneficiaries have chosen to take the land instead of the cash offered.
Secondly, the levels of crime in the country, affecting all citizens, are out of control. Statistics indicate that on a daily basis an average of 49 people are murdered, 110 cases of rape are reported and, 821 robberies and house break-ins take place. Add to this one farm attack per day and it becomes clear why South Africa is regarded as one of the most violent destinations in Africa. In 2016 a total of 369 violent attacks were reported, followed by another 423 during 2017. It has become unsafe to live on a farm and the costs to save-guard people, livestock and equipment is unsustainable. Fighting crime should be a national priority since it directly or indirectly affects all South Africans.
Policy uncertainty should also be addressed pro-actively and as a matter of urgency. The uncertainty stems from the National Development Plan (NDP) which is not being implemented as intended. It would seem as if President Cyril Ramaphosa is caught between the proverbial rock and a hard place when it comes to matters of policy. Just recently he undertook a world tour to meet with investors, stating that SA is open for business, but back home the country was in a grip of violence, protests and land grabs. If government is to foster investment it is of cardinal importance to first create confidence and an enabling environment on the home front.
Prof Danie Meyer
