News/Nuus

Land Reform

Land reform not only has the ability to blow new life into the economy, in especially rural areas, by reducing unemployment and allowing the commercialisation of previously disadvantage farmers, but also to reduce social unrest by shrinking the historic and ongoing gap between white and black land ownership and the haves and the have-nots. 

In spite of all the talk about its importance, since the thirty percent redistribution target was set in 1996, land reform has never really enjoyed political priority. Instead the issue has been shrouded in controversy, with hundreds of millions of Rand being wasted on failed projects due to various reasons ranging from government ineptitude to a lack of skill, business and financial support.  

The topic seems to flair up just before elections. During the previously election, for example, a lot of fuss has been made about the use of expropriation without compensation, allegedly to accelerate land reform. Since then, very little attention has been given to the draft, which will probably gather dust in parliament until it can be used as ammunition during the next election. 

Besides this, it is uncertain how many hectares of land have already been transferred. While government last year argued there was still a long way to go, a special report by Wandile Sihlobo and Tinashe Kapuya, The truth about land ownership in South Africa, estimated that a total of 17 439 million ha had already been transferred from white ownership since 1994, which is equal to 21% of 82,8 million ha currently farmed in South Africa. 

The estimates includes 2 772 457 ha for which financial compensation was paid as well as funding used to buy farms as part of the Proactive Land Acquisition Strategy (PLAS). 

In 2017, government sat with over four thousands ha, covering an area of 4027 million ha farmers thanks to PLAS, presenting its own unique problems, ranging from managing these land if there is no lease on it, to farmers getting the wrong farms, trouble getting production financing because the farms do not belong to the farmers, to leases not being long enough to justify the production of long-term crops, such as fruit. 

At the recent Bridge Building Land Summit, hosted by Partners in Agri Land Solutions (PALS), it became increasingly clear that there is not a one-shoe fits all solution. Yet, it seems that the most successful attempts entailed partnerships with commercial farmers, who want to make a difference in the country, with people making the most of their available resources. 

The Karsten Group and DuToit Group are two examples of commercial farmers who have taken matters into their own hands. Both these farmers have been practicing transformation long before the current urgency to do so. To them, it is a way to giver their workers and the country in general a brighter future. 

Piet Karsten founder of the Karsten Group
The Karsten Group’ involvement in land reform ranges from equity scheme investments with permanent employees as partners, to strategic partnerships with land reform beneficiaries, ranging from the physical management of farms to mere sharing of advice and production facilities. The company has also been involved in strategic partnerships with the Department of Rural Development and Land Reform to assist ten land reform projects in various parts of the country. 

How do you feel about land reform at the moment?
Land reform needs to be done. It is something we owe to ourselves and others. It is not only about the land, but about the empowerment of people … our own people. 

What were some of the biggest lessons you have learnt during your involvement with land reform projects so far?
Firstly that size matters. Working with more than fifty individuals in a group becomes too difficult to manage because of differing backgrounds and expectations, the fact that beneficiaries do not always work in the same place and administrative challenges. 

To illustrate, if a group with more than a hundred beneficiaries want to apply for a loan, it is not only a matter of getting everybody to buy into the idea of getting a loan, but you would also need proof of addresses, ID copies and signatures from each beneficiary to make the loan application. 

Secondly, you cannot make these projects work if you have to buy the farm with borrowed money. Farming is too risky and the return on investment too low. For the project to be viable, beneficiaries need to receive something from the deal from the very first year. Having to wait for thirty years is simply demoralising and will cause in-fighting.    

Besides this, as commercial partner, you need to put your money where your mouth is. In other words, you need to have a vested interest in the success of the project and the best way to do this is by sharing the risk.

How about the government projects in which you were involved. What did you learn there?
Land has to be transferred to the beneficiaries, without it the beneficiaries have no collateral. Lease agreements might be okay for livestock and vegetable farmers, but with fruit orchards farmers need to know they will see the benefit of their efforts over the long term otherwise they are not going to investment in new orchards or infrastructure.  

Do you have any advice concerning how farmers should approach government to help in these projects?
Land reform will not succeed without government’s buy in and buy in needs to come from a high level, such as the presidency. The problem is that agriculture is not the “flavour of the month”, so it does not receive as high priority as Eskom or SAL. 

Government does not necessarily need to provide financial aid, but can use its influence to improve the business environment and grow the market to improve the overall sustainability of the sector. The Extension of Security of Tenure (Esta) Act, for one, is a problem for well-established and new entrants, as it often results in housing that should have been used for labourers going to people who are not active on the farm. Labourers then usually have to be transported from other areas, adding to production costs. 

In my experience, it takes very long to get any feedback or support from government and the support usually comes at the wrong time. My advice to farmers is therefore not to put all their hope on government, but rather get on with their own thing.  

What are your plans in terms of transformation for the future?
The fruit industry has suffered a couple of tough financial years because of the drought and difficult market conditions. Our biggest objective at the moment, for ourselves and the initiatives in which we are involved, is to get back on our feet to ensure the 7 000 to 8 000 people who are directly and indirectly financially dependent on us will continue to have a job.

On the long term, we will aim to restructure some projects to improve their viability. For example, in projects where there are too many beneficiaries, we want to create mechanisms that would allow beneficiaries to buy people out who no longer want to be part of it. Or, get into partnerships with government, retailers or exporters to help us expand production.

Empowering my own work corps has always been a high priority for me. This not only awards people for the hard working they are doing, but allow you to grow them into a position where they will later be able to buy and manage their own farm. 

Pieter du Toit, managing director of the Dutoit Group
Pieter du Toit is one of the founding members and vice-chair of the Witzenberg PALS, a community initiative aimed at transforming the agricultural industry through the establishment of successful black commercial farmers. 

Dutoit Group has been involved in three successful transformation businesses, namely the Crispy Group, which was established thirteen years ago, Koukamma Fruit Packers, established twelve years ago and Milau in the Eastern Cape. 

How do you feel about land reform at this very moment?
Farmers realise that times have moved on and that the industry needs to transform. Most of them, the commercial farmers and new entrants, feel that the transition is happening too slow. The goodwill is there, but there are so many challenges obstructing progress. 

What are the biggest lessons you have learnt so far from your land reform attempts?
First of all, there is no such thing a quick fix to the past. Real transformation is going to take time, as farms are expensive, the return on investments are low and it takes years to develop the business acumen and skills required to be an okay farmer, never mind successful farmer. 

Even so, we have to realise that land reform needs to be more a matter of the heart than pure economics. In other words, you should not be blinded by the economics but sometimes be willing to take a risk on someone. 

Banks, as such, should look at lower interest rates and more lenient lending criteria, whereas commercial partners should look at lower return on investments and beneficiaries should settle on waiting longer for businesses to become financially feasible. 

We have also learnt the importance of communication with beneficiaries, since people’s expectations often do not match what an initiative is able to achieve. Disappointment when they have to wait for returns on investment can cause a lot of unhappiness and tension in a group. 

Politicians and activists should also be kept away from projects, as they often use these projects to make themselves look good or to cause dissent.   

How has these lessons changed the way in which you approach land reform?
We spend more time in communicating the purpose, goals, strategy and structure of a deal to ensure all the beneficiaries are on the same page.

What are your plans for the future?
We will make use of the Witzenberg PALS model to focus both on commercialising small black farmers and encouraging investments in bigger projects to grow with black investors.

The Witzenberg PALS model is especially great, because instead of everyone doing his own thing, it represents a combined effort from farmers in the Ceres Valley which helps to prevent a duplication of resources. Besides this, we now have a central point from which to manage projects and a united front from which we can negotiate with government. 

Witzenberg PALS currently has 160 projects on its books. 

What are the biggest obstacles to land reform at the moment?
Regulation issues where government is involved, in terms red tape when it comes to the approval of funding, water and land rights issues and the subdivision of land. Furthermore, it is difficult to get the right partners and for black investors to access financing without collateral. 

To overcome these issues, projects need to be financially feasible and farmers need a backup plan in case government support does not materialise. 

Do you have any advice to farmers who want to get involved in land reform in terms of how they should approach government?
Establish a good network and work together with agricultural industry bodies. You are not going to get much done on your own. 

Farmer's Weekly: Glenneis Kriel