Farm plan will lead to jobs bloodbath
Draft policy on land rights will have dire consequences if put into action, say Andries du Toit, Johann Kirsten and Julian May.
Cape Town - As he intended, Minister of Rural Development and Land Reform Gugile Nkwinti has sparked debate with the release of the draft policy on relative land rights for farmworkers.
And, as with any policy, this proposal must be judged on its likely impact on the welfare of all 53 million South Africans, over two-thirds of whom live in urban areas.
One dimension of our welfare is food security – whether “all people at all times have physical and economic access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life”.
This focuses our attention on the questions we must ask: will this proposal strengthen the productive capacity and investment climate in commercial agriculture?
Will it ensure that more people will be employed, and thus have access to income to buy food? Will the proposal help to make food more affordable for the urban poor?
Our new Centre of Excellence on Food Security is concerned with questions such as these. First, let us consider the likely impact of the policy on farmworkers.
First, one of the problems is that most farmworkers will be excluded, since the proposal only benefits long-term permanent workers. Second, the poorly defined equity share scheme proposed by the policy is unlikely to do workers much good anyway. Third, no rational farmer will choose to extend employment to a worker when this will incrementally lead to a loss of equity.
The proposal is thus likely to worsen the jobs bloodbath that has already been destroying farming employment since the 1970s – and will make the National Development Plan’s promise of 1 million new jobs in agriculture completely unattainable.
Displaced workers will seek refuge in rural shanty towns, adding to the numbers of the urban poor. The housing, water and other public services which had been provided on farms, however inadequate, will become the responsibility of local municipalities, increasing pressure on local government and the fiscus.
Even more serious problems arise when we consider the impact on the rest of the country. Urban poverty is increasing, and the poorest South Africans are still those who live in the former “homelands”.
This means the majority of the food-insecure in South Africa are not farmworkers or farmers. They will not be direct beneficiaries of the policy. But they will be indirectly affected by the consequences of the proposals for farming and agriculture – and by the ability of the food system to deliver affordable food to cities, towns and rural settlements.
These are likely to be disastrous. The main impact of the proposals on the productive capacity of South African agriculture will be through farmer asset value, production levels, and the financial institutions and other businesses.
Last year, the value of farmland and the fixed improvements on it amounted to R173 billion. The value of farmers’ investments in machinery and implements would also be affected.
If commercial farmers were to lose half of this, it would mean an erosion of their capital base of about R100bn as a result of this transfer. In addition, the proposal means that farmers will be signing over half the collateral that they use to secure loans. This, in turn, means that, unless government is willing to write off half the debt outstanding, the financial sector (including the Land Bank) could face a default on loans of at least R51bn.
Lost investments in machinery and implements, which would add another R7bn to the equation, means that, if this scheme were to be implemented, the total direct effect on the farmers would be conservatively R235bn – almost a quarter of a trillion rand, and equal to half of South Africa’s gross fixed capital formation in the first quarter of 2014.
Input suppliers, the processing industry, trade, banks, providers of agricultural services and consumers would also be affected, both directly and in the subsequent second-round effects.
But what about food production? The effect is likely to be disastrous. If the schemes mean that workers get half the land, production may initially be slashed by as much as 50 percent. If equity schemes mean that farming operations continue as before, workers will not benefit, but life will continue unchanged for the rest of us.
But if, as is likely, equity schemes perform as badly as those already in place, commercial farming might market less than half the produce that is currently produced. As a worst-case scenario, we can expect to see a drop of roughly R91bn in the value of marketed production. The result would be enormous increases in urban food prices.
This then is the most likely impact of the policy: billions of rand would be spent, billions of rand lost – and all to no avail. Farmworkers will not benefit, unemployment will get worse, and hunger could well increase, both in rural and urban areas.
We suggest that a comprehensive plan to boost labour-intensive farming, both in the commercial farming areas and in the former homelands, along with improved access to nutritious food in urban areas, will go much further in reducing poverty and increasing household food security, and be a more fruitful option for policy development.
* Andries du Toit, Johann Kirsten and Julian May are with the Department of Science and Technology-National Research Foundation’s Centre of Excellence on Food Security, co-hosted by the University of the Western Cape and the University of Pretoria.
** The views expressed here are not necessarily those of Independent Newspapers.