Land Redistribution in South Africa: Towards Accelerated Implementation

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Land Redistribution in South AfricaTowards
Accelerated Implementation

• Glen Sonwabo Thomas and Rogier van den Brink
• International Conference on Agrarian Reform and
  Rural Development
• Organized by the FAO and the Government of Brazil
• Porto Alegre, Brazil, March 6-10, 2006

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Outline

• The case for land reform
• What have we learned?
• How do we move forward?
• Conclusions

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The case for land reformfaster economic growth
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The case for land reformhigher living standards

• Rural areas with family farms have higher
  standards of living
• Production can be highly efficient
• More of income spent locally (multiplier effect)
• More social capital (schools, churches, clinics,
  etc.)
• And equity is good for growth
• Countries with more equitable distribution of
  land grow faster, permanently
• While unresolved equity issues can plunge a
  country into long periods of civil unrest and
  economic crisis
• Note Family farmer owner-operator, using mostly
  family labor

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• The case for land reform
• Country comparisons

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The case for land reformFew economies of scale
in agriculture

• A century of empirical research on agricultural
  production has found
• Few cases of economies of scale
• Most countries (at many different levels of
  development)
• Diseconomies of scale (inverse farm
  size-productivity effect) or
• Constant returns to scale
• Land redistributiontransferring land from large
  to small farmerstherefore need not result in a
  loss of aggregate production

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The case for land reformSouth Africahave
land, need jobs

• Substantial amount of under-used land exists in
  commercial farm sector
• Target is 30 of the land redistributed by 2014.
• About 83 of agricultural land is held by 50,000
  white farmers
• But only 4 redistributed since 1994
• This would cost
• Around R35 billion or US5.8 billion
• Note this fiscal year, there was a windfall
  extra revenue of R40 billion..
• Create 600,000 net full-time farm jobs at about
  R60,000 per job
• South Africas unemployment rate is around 30
• No other sector can create quality jobs at such a
  low cost
• Source costing updated from Van den Brink, De
  Klerk and Binswanger in Van Zyl, Binswanger and
  Kirsten (1996) Agricultural Land Reform in
  South Africa Policies, Markets and Mechanisms.
  Cape Town Oxford University Press.

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What have we learned?A decade of land reform in
South Africa

• Land markets need help
• Much more than land needs to be financed
• Need flexibility in financing to assist poor and
  non-poor
• Supply-driven implementation through stovepipes
  is unworkable
• Government officials cannot run groups and farms
• Land reform needs to be part of local government
  development priorities and planning
• Impact evaluation to be stepped up

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Land markets need help

• The price of land in the market reflects
• Income stream from agriculture
• Plus value as asset, hedge against inflation
• Farmers can typically only afford to pay the
  agricultural value
• So will be outbid in the land market by the rich
• Need to remove all distortions favoring large
  farmers
• Need subsidies for the poor
• Need a land tax

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But current property rates tax is regressive
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Much more than land needs to be financedland is
only 30-40 percent of costs
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Need flexibility in financingto assist poor and
non-poor
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Supply-driven implementation through stovepipes
is unworkable
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Government officials cannot run groups and farms

• Farmers are not allowed to implement their own
  projects, so project effectively becomes the
  governments project
• Beneficiaries legal entity most often created to
  receive the title deed is the so-called Communal
  Property Association, which has explicit
  government oversight
• Many group problems end up on the desks of
  government officials
• Officials go out on tender on behalf of
  beneficiaries for services and contractors, from
  project preparation to fertilizer procurement
• and therefore end up practically running farms

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Consequences.

• Some land reform projects then end up as
• Collective farming experiments
• Run by absentee landlords, because housing is not
  provided
• This disempowering of communities leads to
• very slow implementation
• High costs, lots of consultants
• failed projects

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How Do We Move Forward?

• Broaden land acquisition
• Expropriate when necessary
• Scrap sub-division act
• Impose a land tax
• Integrate service delivery
• Empower beneficiaries
• Increase capacity
• Do more ME

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Broaden land acquisitionmenu of options

• Expropriation
• When necessary
• Voluntary, subsidized
• Market-assisted
• Negotiated
• Between stakeholders
• At various levels
• Using developers
• Purchase of large-scale farms
• Restructure into family farms
• Redistribute to beneficiaries

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Expropriate when necessary

• Expropriation is a legitimate approach to land
  reform as part of overall land reform strategy
• But expropriation does not speed up land reform
  and does nothing to reduce the land costs, rather
  it tends to increase it.
• Only confiscation reduces the land costs, but has
  many other undesirable consequences.
• Unless strong legislation is in place which
  limits the power of former owners to go to court
  to block the expropriation, it will also slow
  down implementation.
• But even then will need substantial capacity to
  manage the legal process

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Grantsliding scale
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Scrap sub-division act

• Sub-division law
• sets a minimum viable farm size below which no
  farm can be sub-divided
• every sub-division has to be approved by the
  Minister
• Instead allow sub-division on demand in certain
  zones
• Local development plans should explicitly define
  these zones or corridors
• Ex-ante environmental impact assessments to be
  done on these zones
• Allowing, ex-post, individual projects to receive
  automatic environmental clearance
• But tighten effective sanctions on those who do
  environmental damage

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Impose a land tax

• Land tax is politically and economically
  attractive
• To be designed in such a way as to exempt most
  productive farms
• For instance by taxing area above certain farm
  size
• Which varies by agro-climatic zone
• Several advantages
• bring more unused land onto the markets
• control land price inflation (also due to land
  reform grants)
• reduce speculation by absentee landlords
• Source of revenue for land reform and local
  government

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Integrate service delivery

• Beneficiaries needs are integrated
• To be met by a single budget which disburses
  depending on demand and quality of proposals
• One accountability mechanism
• One appraisal and approval procedure
• A single operational manual
• As part of local government development plan
• Which should constitute the contract between
  all stakeholders

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Empower beneficiaries

• Financial management regulations do explicitly
  allow government to transfer funds directly to
  beneficiaries, given certain guidelines
• Disbursement can go to beneficiaries, estate
  agents or escrow agents for subsequent
  disbursement to former owners and service
  providers
• Beneficiary accounts may be subject to control of
  escrow agents

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Increase capacity

• Create stakeholder committees at various levels
• Can assist with screening, appraisal,
  implementation, and monitoring
• Thereby increasing implementation capacity

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ME

• Intensify monitoring of projects
• Continuous field visits by ME section to check
  and verify that the communities and local
  authorities are correctly executing their tasks
• If serious problems, then ME can pull the
  string and corrective measures have to be
  introduced (training, communication, amending the
  Operational Manual)
• Ensure regular impact evaluation

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Impact evaluation

• Need proper baselines and control groups
• Need to measure
• total income and assets, including that of HH
  members living elsewhere
• primary impacts (beneficiary incomes,
  consumption, assets farm productivity all net
  of losses)
• secondary impacts (reduction of landlessness and
  increase in wages in sending communities)
• Full impacts will be spread out over 2 to 10
  years
• need to keep tracing the samples for that period,
  and
• revisit them once or twice every year
• Need to explore how to build local interest and
  capacity for long-term research tracking the land
  reform beneficiaries

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Conclusion

• Improve existing programs
• Empower beneficiaries
• Menu of options for land acquisition
• Impact evaluation to judge effectiveness
• Need to go beyond projects to
• land market reforms
• agricultural and credit policies
• rural development/local government/
  decentralization