A Bigger Question
The complex issues surrounding land reform, black economic empowerment and rural development have been on the minds of both the commercial farming community and government for at least the past 20 years. It has resulted in endless sleepless nights for both farmers (especially white farmers), and those in government responsible for its implementation. While the impact of land reform, B-BBEE and rural development is much wider than agriculture, every related discussion seems to default to agriculture.
In some ways, this is understandable. Due to the land-intensive nature of farming, farmland forms a substantial portion of all privately owned land in South Africa (as measured in a geographic area and not in financial value). Furthermore, comparatively few people hold the title deeds to agricultural lands, thus ostensibly skewing the data in favour of a rhetoric focusing on ‘land reform in agriculture’.
Our leadership team at the Cairo Group shares the following views on these issues.
More Than a Question of Economics
The land issue in South Africa is more than a question of economics. In fact, it is primarily a moral question, which too often devolves into a discussion of economic implications. While it is true that an impulsive approach to the land issue poses an incredible risk to the economy, food security, social security and the nation’s general well-being, it is equally true that the country must redress past injustices. The problem of unproductive land addresses both the economic and moral issues. This entails good agricultural land that lays fallow and inhabitable land that lies undeveloped. At the same time, one cannot lose sight of two significant facts, namely that:
- The government already owns an enormous amount of unproductive and undeveloped land, which can be better utilised for land reform;
- Most land allocated to land reform in agriculture and made available to beneficiaries is an abject agricultural and financial failure.
We believe our approach to these issues probably represents the only realistic plan to make good on the promise of land reform and B-BBEE in agriculture.
The Current Agriculture Environment
Agriculture in South Africa suffers from some of the lowest levels of government support globally. Yet it has some of the highest, if indeed not the highest farm input costs in the world. At the same time, local agriculture enjoys virtually no market protection.
Combined with recent threats of ‘expropriation without compensation’, it paints a bleak picture of farming in South Africa, and we may well be experiencing the most farm-hostile period in our country’s history.
This situation has had a knock-on effect with commercial banks moving to reduce the availability and/or increase the cost of credit to white agricultural land-owners. This, in turn, casts serious doubts on the continued viability of agriculture in South Africa and will likely drive food inflation to untenably high levels.
The Consequences of Failure
A failed agricultural sector will have at least the following negative effects:
- Food hyper-inflation means that food inflation is likely to increase to double- and triple-digit figures;
- Along with the collapse of the agricultural sector, it will also lead to the demise of rural areas as rural economies;
- Hyper-urbanisation, for which no South African city is sufficiently prepared, will place even greater pressure on service delivery and infrastructure;
- Virtually the entire agricultural skills base will be lost;
- Direct and indirect job losses will occur, which could number in the millions;
- Violent civil unrest could take place, resulting in unprecedented rioting and looting in the streets;
- It will lead to a further downgrade of the South African economy;
- International investors are likely to abandon the South African market en masse.
Any analyst can deduce the impact of a failed agricultural sector, but far more alarming are the hundreds of unforeseen second- and third-order impacts. A failed agricultural sector will not only negatively effect established (white) farmers, but also emerging (black) farmers and indeed all people living in South Africa. The message is clear: allowing the agriculture sector to fail is simply not an option. That is why we at the Cairo Group made a management decision in 2014 to address the issues head on instead of shying away from them.
Upwards and Onwards
Although the future for agriculture seems dark, it is not all doom and gloom. If all stakeholders – including government, farm owners, rural communities and political parties – would commit to finding solutions to move forward, the country can reverse the current situation.
Land Reform Challenges
Market pressure: Commercial agriculture is an incredibly challenging environment within which to survive. Farmers are not just competing locally, but also within a global context. Despite South African farmers receiving almost no government assistance (as opposed to their international counterparts), local farm input costs are some of the highest in the world. Thus, long-established commercial farmers, especially smaller commercial farmers, are leaving the industry due to the unrelenting pressure on their businesses. If established farmers can hardly stay afloat, the challenge to small emerging farmers just starting out is even greater.
- Skills: Skills transfer in agriculture has been a crucial missing link in land reform efforts to date. Of the hundreds of attempted land reform projects, only a fraction of a percent has succeeded. That may in part, be due to corruption, but the larger culprit is likely a lack of skills. Formal education can play some role in alleviating the problem. However, as one commentator remarked, ‘you shouldn’t think that a degree in agricultural science means you can farm’. The ability to farm relies on much more than knowledge. It is gained by spending years – often decades – working the land under the tutelage of other, more experienced farmers. That is part of the reason why successful commercial farming is so often a multi-generational business.
A Model for Success
Cairo Group has committed itself to find ways in which the values espoused by the policies of land reform namely; black economic empowerment and rural development can be regenerated. In 2014, we embarked on a route to land reform that holds a much greater chance of success. This program consists of partnering on an equal foot with black farmers who are the beneficiaries of land redistribution initiatives.
This represents true empowerment—
The parties jointly work the land and a formal process of skills transfer takes place, which is aimed at enabling the black farmer to become a self-sustained commercial producer over time. During the project, both parties share equally in the profits and losses of the venture. The emerging partner thus ideally:
- earns a sustainable income for them and their family;
- becomes a sustainable employer in their community;
- makes improvements to their farm;
- practises the skills necessary to be a successful commercial farmer;
- integrates into an existing farming ecosystem and builds a network of market relationships;
- learns how to successfully market and price their produce; and
- learns how to successfully administer their farm.
At present, we have five such partners who now all run profitable farming operations. The project has been so successful that we are looking to expand the programme aggressively going forward.