Land reform: a political not economic problem
Minister of Rural Development and Land Reform Gugile Nkwinti kicked off the Land Tenure Summit yesterday by making several statements about land reform that has left me perplexed. Reported here, the minister said that “privately-owned land is a serious problem”, that “we want to correct a particular South African historical problem”, that “it cannot be that the worker will work forever and at the end of their time on earth, have nothing to show for it. It is not right, it cannot be right” and again promoted the department’s radical plan to give half of each farm to the labourers working on it.
The distribution and productivity of land is the most serious political issue facing South Africa. The alienation of Khoesan lands by European settlers had already started soon after Van Riebeeck arrived in South Africa, but it was really the expropriation of land in the nineteenth century (as British settlers arrived in the Eastern Cape and the Voortrekkers moved into the interior of the country) that has created a legacy of injustice. By 1913 when the Land Act was signed, black South Africans (and those living in neighbouring colonies like Basotholand, Bechuanaland and Southern Rhodesia) had lost large territories of their most fertile land. The Land Act consolidated this expropriation, and even may have prevented further expropriation (see my earlier post on this).
There is no doubt that redress is needed. The question, really, is how to affect this redress. The reason Julius Malema and his Economic Freedom Fighters did so well in the recent elections was because he pushed the land reform agenda to priority number one, and he had a plan. The EFF wants “expropriation of land without compensation for equitable redistribution” and propose a system whereby the “State should, through its legislative capacity transfer all land to the state, which will administer and use land for sustainable-development purposes. This transfer should happen without compensation, and should apply to all South Africans, black and white.” The State will then lease the land for 25 years.
My suspicion is that performance of the EFF in the recent elections has forced the ANC’s hand, and they’ve come up with their own plan for land redistribution. The plan will force commercial farmers to cede 50% of their farms to their workers. This is not the forum to critique these plans in detail, but I can point to others who have done so. Read this, and this. My field of expertise is economic history, not agriculture, and so my only recourse is to look at land expropriation in history. It is not a story to smile about: during the process of collectivisation in the Soviet Union, at least 4 million people died of starvation alone, and the recent land reform in Zimbabwe has resulted in large declines in production, malnourishment and close to 4 million Zimbabweans emigrating to other countries, notably South Africa.
Yet knowing that something has failed in the past – and even knowing that it will fail again – is usually not enough reason for politicians not to attempt it again. In the absence of alternatives, my sense is that black voters will be happy to go along with any plan to redress land, because it will by implication by more fair than the counterfactual, which is to continue the status quo. (This reminds me of why the National Party won the 1948 elections. The ‘racial issue’ had come to dominate the national agenda after the Second World War but the United Party under Jan Smuts had not articulated a clear plan to tackle this issue. Instead, DF Malan proposed a clear plan of separation, of apartheid. Sometimes all you need to win is a plan, even if it is a bad one.)
So what are the alternatives to the Minister’s proposed plan? It depends on your objectives. If the only criterion is to redress past injustice, land expropriation, either fully or, as the Minister suggests, partially, seems like a solution, right? But what are the consequences of such a policy? One can only speculate, but it is likely that commercial farms will see large-scale disinvestment. Farm prices will collapse, forcing other farmers, who have used their land as collateral for loans, to also sell their properties. Movable assets will be sold to provide some capital for a new life in the city. (Other perverse outcomes: expect more golf courses, light industry parks, gated communities and rural retirement villages, and conservation parks and holiday resorts as farmers shift into other industries not affected by the policies.)
Little of this will benefit the new owners. Land is only as useful as the capital investments on it, and without capital (or, at least, new investment in the farm), many of the new owners will find it increasingly difficult to continue the earlier outputs. The state can help, of course, but the state is not a bank who can easily make decisions about which risks to take and which to avoid. (See my earlier post on Tito Mboweni’s plans for a state bank.) Where the new owners are not former workers, an even more serious issue arises: skills and experience. Farming is an increasingly scientific industry. Our agricultural colleges are simply not producing enough graduates nor would they have the experience to take over the immediate operation of large-scale commercial farms producing for the export market. Learning-by-doing is really the only option, which is why this opinion piece by Peter Curle is a useful read. He suggests that the principles of successful BEE transactions could easily be applied to the agricultural sector. This would mean that farmers are able to choose their black shareholders, train them, and be partly responsible for – and benefit from – their success. That is a system that gets incentives right.
The government could, of course, also take another approach. Given that the agricultural sector employs large numbers of unskilled labour (and has the potential to employ more), it could focus on improving the productivity of existing farmers. To do this, the most obvious thing is to identify the currently most unproductive land. That turns out to be communal and state land, not privately-owned land. (And certainly not foreign-owned land, which seems to get all the blame, but is in fact a tiny share of land owned in South Africa.) The power of traditional leaders, however, prevent such communal or traditional lands from being used more productively. In a recent working paper, Daniel de Kadt, PhD-student at MIT, explains why these traditional leaders continue to have such a powerful hold on the ANC:
We argue that traditional leaders, whose power depends on the state, may be incentivized to strategically support political parties who can guarantee their survival and provide them with rents. We study this quid pro quo in the Apartheid-era Bantustans of South Africa. We show that an alignment between the state party and the chiefs maps to increased political support for the party. Further, we provide quantitative evidence consistent with chiefs acting as clientelistic brokers. Our results suggest that chiefs boost African National Congress (ANC) vote-share by 8.2 percentage points in the Bantustans. This translates into roughly 4.5% of the ANC’s total vote-share, and a distortion in the national vote of 2.5 percentage points. This distortion is pivotal in determining whether the ANC is able to alter South Africa’s constitution.
You could also translate it thus: The poorest of the poor South Africans live in Bantustans on communal lands. They, however, are being held ransom by their chiefs who are in cahoots with the ANC, who rely on their support for 2.5 percentage points in each election.
To eradicate the legacy of colonial land expropriation, a thriving agricultural sector is key. The problem is not “privately-owned land”, as the Minister seems to think. Policies that affect commercial farms will only hurt workers and the consumers of cheap food, exactly those people that suffered because of the initial land expropriation. The solution lies in tackling the unproductive, communal lands that is currently held by chiefs or the state. If these areas can prosper, not only will it pull millions of poor South Africans out of poverty, but it will create the necessary skills and capital to allow faster land reform elsewhere. Yet this most important step is unlikely to occur any time soon. That is because poverty alleviation and real redress is not an economic problem, but a political one.