What happens if SA expropriates land without compensation?

Three Agriculture Business Chamber (AgriBiz) experts have warned that government’s populist proposal to expropriate land without compensation might result in a prolonged period of no new investments in SA’s agriculture sector and food insecurity for the poor.

AgriBiz’s Theo Boshoff, Wandile Sihlobo, and Sifiso Ntombela have argued in a research paper that expropriation without compensation has massive economic implications and could impact property rights across key sectors of the economy.

Buckling under pressure to fast-track its land reform targets, the ANC agreed to push for land expropriation without compensation at its elective conference in December 2017. In doing this, the governing ANC requires a two-thirds threshold in Parliament to amend Section 25 of the Bill of Rights, which promotes access to land by citizens, just and equitable compensation in the event of expropriation.

By the government’s admission, SA’s land reform programme is widely considered to have failed over the last two decades, with over 80% of beneficiaries unable to build an agricultural surplus and productive capacity.

The experts said agriculture makes up 2.5% of SA’s GDP but when including the sector’s entire value-chain (industries including animal feed, plant health, food processing, transport, and storage) the contribution increases to 7%.

Mass expropriation without compensation will result in a protracted period of no new net investments in agriculture, which “means no growth in agricultural output as well as no growth in the agribusiness sector”.

“This is because commercial farmers, regardless of race, who have not yet been expropriated, are hardly likely to start new investments and because the new farmers would not have the necessary means to invest.”

And with declining investments, higher food prices are expected, which will hit the poor the hardest. “It is, of course, possible to import many commodities and process them in SA, but there is a limit to this, and the country would have to give up foreign exchange in order to import the raw materials that go into the production of the food we eat.”

The government has not elaborated on how expropriation without compensation would work, only saying that it will be done in a sustainable manner to ensure the economy and food security are not affected. The uncertainty on the mechanics of expropriation is expected to see investors put their investment decisions on hold.

During the State of the Nation Address debate in Parliament on Monday, President Cyril Ramaphosa said the government will not allow “smash-and-grab interventions”.

“We will handle this matter [expropriation] in the same way we have handled all difficult issues our country has had to handle. We will always seek to do what is in the interests of our people,” Ramaphosa said.

The scuppered new investments in the sector are expected to have an impact on employment. Boshoff, Sihlobo and Ntombela said the push for radical land reform might result in a decline in employment.

According to the adopted National Development Plan, primary agriculture employs (on average) 4.5 additional workers for every R1 million in capital invested, compared with 2.94 for the economy as a whole.

Land reform scenarios

AgriBiz has compiled four scenarios that may happen should the Constitution be amended to allow expropriation of land without compensation. In the first scenario, incidents of illegal land occupation and farm invasions may emerge given the lack of clarity on popular statements often made by politicians such as “take back the land”. The three experts said this scenario would make the agricultural sector non-functional and unproductive.

The second scenario includes land reform taking place within the ambit of the law, disputes being settled in court and no evictions without a due court process. Property rights and agricultural and agro-processing investments would diminish in this scenario.

Plans to amend the Constitution would be abolished in the third scenario. It would be business as usual as the current mechanisms of acquiring land for redistribution would continue. “This scenario could lead to the long-term sustainability of the food sector, but in the short term might not meet the demands of those calling for the rapid redistribution of land.”

The last scenario entails a hybrid approach, where compensation would be paid for expropriation and a public-private partnership embarks on a process to identify farms for sale, the state and private contributes finances for farm purchases. This scenario has been described as moderately good as it increases access to land, respects property rights and might minimise the negative impact on production and investments in the sector.

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