LREAD Perspective February 2017

Making sense of land reform in 2017 after the State of the Nation Address and Budget Speech.

During February 2017, we were offered 3 important perspectives from 3 prominent political leaders in South Africa on what the future might hold for our land reform project:

1. The State of the Nation Address by President Zuma on the 9th of February.
2. Subsequent statements from Minister of Rural Development and Land Reform, Gugile Nkwinti.
3. The Budget Address by Finance Minister Pravin Gordhan on the 22nd of February.

President Zuma said in his Address, it would be “difficult if not impossible, to achieve true reconciliation until the land question is resolved”. President Zuma said radical social and economic transformation is needed. He said Government will push for the enactment of the new Expropriation Act, which will allow for the Valuator General to determine fair land value, and expropriation if “in the public interest” President Zuma promoted the Relative Rights, or “50:50” projects, congratulating the current 13 proposals affecting 921 farm dweller families, at a cost of R631 million up to date.

President Zuma also urged beneficiaries of the land restitution process to take the land offered, and not financial compensation. It is estimated that in 90% of cases up to date, beneficiaries opt for financial compensation rather than actual land.

Minister Nkwinti responded to the State of the Nation Address by supporting the notion of radical transformation, stating that it should include expropriation without compensation. He also suggested a pre-colonial land audit is needed to determine who the rightful owners of land is.

Minister Gordhan, during his Budget Address, supported the President’s call for radical transformation. He then moderated this statement, by stating that we cannot have economic growth without transformation, as this will lead to greater inequality. But we also cannot have transformation without economic growth, as this will lead to a state of patronage which will be devastating on the long run for all South Africans. He explained the guiding principles for successful transformation as follows:

• It must create jobs, eliminate poverty and narrow the inequality gap.
• Transformation must achieve a more balanced structure of ownership and control in our economy.

How does this sentiment on radical transformation, as expressed by the President and the two Ministers translate into rand and cents? ABSA’s agricultural economists unpacked the allocation of funds during a breakfast meeting shortly after the Budget Address:

• The budget for land redistribution has declined 3%, from R1.23 billion in 2016/2017 to R1.19 billion in 2017/2018. (The redistribution budget has been in decline since 2010/2011, as described by Ruth Hall in a Parliamentary presentation in 2016.)
• The allocation for land restitution increased 2.5% from R3.17 billion in 2016/2017 to R3.25 billion in 2017/2018.

It seems Treasury holds more faith in the State’s ability to facilitate restitution rather than redistribution, as reflected in the dwindling redistribution budget.

It is therefore worrying to note that at a time when less money is allocated for redistribution, we also see a renewed call for radical transformation (which one can safely assume includes redistribution of land) by political leaders.

It seems the future is set for populist political rhetoric on the one hand, and the sobering economic realities of dwindling financial resources on the other hand.

Maybe this situation should serve as a wakeup call to private sector role players, as land reform expectations are set to increase in 2017. The business community needs a stable environment in order to attract investment.  Our land reform project cannot be successful on Government’s interventions alone. Difficult as it may be, a concerted team effort between government; the private sector, and other role players is essential for future prosperity.