TOOL TO GARNER VOTES?

Government’s method of redistributing wealth will harm the engine that creates it

AS AN economic analyst there are two ways of approaching, or in this case disagreeing, with a proposed policy. First, one can address the vision of government – what they want to achieve or their preferred method of doing so.

An example of this is South Africa’s energy policy. I agree wholeheartedly that something needs to be done about the dismal electricity supply, but while the government feels that large, centralised, Medupi-style power stations are the way forward, I still advocate that more can be achieved in less time if we open up the market to smaller, more independent-generation facilities.

But while I disagree with the government’s method, I must concede that it will still achieve our common goal of energy security. The other type of critique is to ask whether the plan proposed will even go on to achieve its stated objective.

An example is the proposed policy to limit farm sizes to 12 000 hectares, with any excess being bought by the government for land redistribution purposes.

The government’s stated intention is to pass land ownership and wealth to those who have previously been excluded from it, and to reduce the level of inequality in our society. But their proposed method of going about it shows up their intentions as nothing more than a cheap grab for votes.

Such draconian limitations on property size will lead to more evenly distributed ownership, but by threatening the processes that create wealth through agriculture, these laws will substantially decrease the benefits that are gained from farming. The proposed policy will deal a major blow to all of society and especially to the lower-income groups that the policy claims it wants to help.

Since 1994, farms have increased in size and the number of commercial farms in South Africa has decreased from 120 000 to present day’s 37 000.

This process has its benefits. Larger farms are able to purchase and make use of more expensive and efficient machinery, increasing the total production of the land. Consistency and reliability through the use of cutting-edge technologies – both in goods and methods – allows South African agriculture to compete on a world stage, encouraging exports and warding off the competition from food importers.

Through diversity of production and distribution over large areas, larger farms are able to protect themselves against devastating natural disasters and are more resilient to unexpected events. They also have the systems in place to add value to the product they are producing (such as canning and freezing) thus maximising the wealth created from agriculture.

Larger farms are better at creating wealth and food than smaller, segregated farms are and the proposed policy threatens the total food production of South Africa. The decreased supply of food means that we either need to face shortages, or fill the gap with imports.

Big farms do come with many consequences. The employment per unit of agriculture produced is smaller for larger farms as they make more use of machinery and can avoid labour-intensive processes. An industry of fewer, larger farms centralises wealth and puts South Africa’s land into the hands of few.

But if the government wants to tackle the challenges of wealth redistribution then it must focus on the methods of redistributing the wealth created, not harm the very engine that creates it.