Recently the South African Institute of Race Relations published a report highlighting the concerted efforts of the African National Congress government to nationalize land (republished in SAReporter).  The authors pointed out that the Department of Rural Development and Land Reform had outlined two policy proposals, both effectively transferring agricultural land from private to public ownership.  The first option openly calls for the government to appropriate all productive land and then tenure the property to private citizens.  The second option would envisage a redistribution of available land to farmers as the government saw fit.  Presumably the government would ration land and break-up larger landholdings.

The government justifies state sponsored private property seizure with the argument that agricultural land is a “national asset.”  To-date the South African government has declared that mineral and water resources are “national assets” to be controlled by the government in the “public interest”.   

In the case of agricultural land, the government has been clear on what it defines as the public interest.  In the name of economic transformation, it aims to redistribute farming properties from white citizens to the rural black poor.  By the government’s own estimates, there are roughly 19 million rural poor, the vast majority of whom are black.  There are also estimated to be around 40,000 white farmers remaining in South Africa.  It is impossible to envisage a “transformational” redistribution of privately owned land from 40,000 white farmers to 19 million rural blacks without there being a revolution in the methods of agricultural production.  Effectively, for the South African government’s plan to redistribute land to have any meaningful social impact, there will necessarily be a dramatic reduction in the average farm size in the country. 

South African farming is widely regarded as being modern and efficient by world standards resembling agricultural industries in advanced nations such as the United States and Australia.  The nature of commercial farming in South Africa, as elsewhere favours large, family run farms benefitting from scale economies.  A study conducted by P.G. Moll of Oxford University concluded that large South African farm sizes are a product of market-driven signals and rational economic behavior on the part of farmers and less a result of Apartheid era agricultural policies that favoured larger estates. 

There are arguments suggesting that less efficient, smaller farms benefit agricultural employment, a serious social issue in a country with so many landless blacks.  However, as the authors in a University of Cape Town study entitled Agricultural Efficiency and Welfare in South Africa have pointed out, the gains in rural employment from inefficient agriculture are far outweighed by the gains from lower food prices which disproportionately benefit lower income consumers.  Further, the increase in employment outside of agriculture will more than offset the loss in employment resulting from technological innovation in agriculture.  Thus, any government distortions to reduce farm-size and subsequently efficiency in South Africa will not only benefit poorer South Africans through higher food prices but also reduce employment opportunities by artificially promoting an inefficient agricultural sector that will drag down the rest of the economy.  Given the evidence, there can be little doubt that the Department of Rural Development and Land Reform’s proposals are politically motivated rather than driven by a sense of public interest. 

In a free market economy, which the ANC claims it is committed to, soil is another factor of production like any other.  However, what ANC policies amount to is the granting privileges to less efficient producers at the expense of the overwhelming majority of consumers.  Subsistence farming, as is prevalent in much of Africa, is the direct cause of low productivity and high food prices.  The very nature of subsistence farming in its strict definition is producers producing only enough to satisfy their own needs.  There is no surplus income to save and invest in capital improvement that would result in productivity gains of the kind South Africa has enjoyed.  It is a dangerous circle that leaves both the producers and the wider community dangerously susceptible to famine or disease.  Scarcity of food has potentially tragic results.  Africa, even its agriculturally most promising areas, has a long history of destructive consequences resulting from groups competing for agricultural resources.  This was pointed out by the Professor Jared Diamond in his acclaimed book Collapse, which describes the conflict over farmland that was the origin of the genocide in Rwanda in the 1990s.

In a free market, subsistence farming will be replaced by more capital intensive farming activities.  The market will also determine the efficient size of farms and the methods of production applied.  If the government in South Africa is convinced that farm sizes are a result of Apartheid era policy, then it needs simply to remove any policies still in place that sustain those distortions.  Any ANC policies assuming that the government knows the socially beneficial size of farms or methods of production can only lead to higher agricultural prices and lower productivity.

Evidence of this is in Venezuela which, like the South African government, claimed it was acting to reverse injustice by breaking up larger landholdings and distributing it amongst the rural poor.  Venezuela was at one time a major producer of coffee beans whose value is said to be second only to oil amongst natural commodities.  Enjoying the right soil and both moderate rainfall and sunshine, the country has the perfect climate to grow coffee beans.  Brazil and Colombia, Venezuela’s neighbours and enjoying similar climates, are the two largest coffee producers world-wide.  Despite once rivaling Colombia as a major coffee producer, today Venezuela produces less than one percent of the world’s coffee.  Indeed Venezuela’s productive decline has been so marked that it cannot even satisfy its own domestic demand the country now has to import beans from Brazil.

Venezuela’s exit from the coffee business began with the country’s Land Act of 2001.  Large, family-owned plantations, were effectively confiscated by the government and redistributed to poor rural workers in the name of land reform not dissimilar to the justifications given by the ANC in South Africa.   The result was a huge decline in output and rise in prices.  Venezuela’s leader, Hugo Chavez, responded by fixing prices of coffee and subsequently the country’s coffee roasters stopped producing.  Consequently, Chavez nationalized the country’s largest roasters after accusing them of behaving as monopolies, speculation and hoarding coffee.

In many ways the policy consequences of Venezuela’s Chavez led government resemble those proposed by the supporters of land reform in South Africa.  Indeed, by the government’s own striking admission, 90 percent of all government transferred land from white farmers to black ownership has resulted in failure with those once productive farms no longer producing anything at all.  If the government continues with its current policy, let alone adopting the proposals of the Department of Rural Development and Land Reform, the country faces the threat of serious hardship that will hit its poorest hardest.  The relatively slow pace of “land reform” in South Africa is the only reason it hasn’t descended into a crisis triggered by food scarcity.

The government needs to wake up to reality and stop resorting to the use of meaningless terminology such as “national assets” which is simply code for government granting privilege to its favoured groups in society at the expense of those not favoured.  If the government is to become serious about genuinely acting in the public interest then it needs to disband policies encouraging waste and poverty and swallow its pride and acknowledge that one of South Africa’s genuine national assets is its world-class agricultural sector.