Land plans would cost SA on the ground, says AgriSA’s Omri van Zyl
Constitutional change could rock access to capital, says Agri SA
● Agri SA CEO Omri van Zyl says the expropriation bill put before parliament in 2016 would achieve the same land reform goals as expropriation without compensation, which President Cyril Ramaphosa says the government will push for.
The bill, which is the product of lengthy negotiations, does away with the willing buyer, willing seller concept, has the support of Agri SA and its affiliates, will not require changes to the constitution and will not sink the economy, he says.
Ex-president Jacob Zuma didn’t sign it. “It’s a better mechanism,” says Van Zyl. He’s not sure what the intended goal of expropriation without compensation is.
If it’s to boost agriculture, which Ramaphosa acknowledges is one of the biggest contributors to GDP, or to grow the economy and create jobs, which he has committed himself to, changing the constitution to allow expropriation without compensation makes no sense at all, says Van Zyl.
Over the past three years, the agriculture sector has been one of the most buoyant in the economy, in spite of two major droughts.
“So from an economic perspective it doesn’t make sense to now look at changing the constitution.”
Ramaphosa’s assurance that food security won’t be impacted is nonsense, he says.
The value of farm assets is R460-billion, and against that value farmers owe R151-billion to the banks.
“The moment you start tampering with the value of land the debt-to-equity ratio gets skewed. That has a massive impact on the cost of capital because farmers won’t get collateral lending on the terms they’re getting now.
“That will have a major impact on their profitability, and that, in turn, has a massive impact on their ability to produce.”
That will affect food security.
“If we say by 2050 there’s 80 million people in South Africa, we really need to protect the production base . . . rather than erode it.”
Populist pressure on the government for expropriation without compensation is the result of bungled land reform, he says.
“The pressure cooker has come to the boil because the government’s land reform projects have not been successful.”
Expropriation without compensation will not change this.
“The government can expropriate land without paying for it, but what then?
“There’s no follow-on financial solution, or sustainable agri-financing for the farmers they put on this land, as we have seen with the land reform projects which have failed.”
A recent Agri SA land audit shows much of South Africa’s high-potential land is in government hands.
“Government is sitting on multiple millions of hectares of agricultural land which has not been collateralised and is not productive.
“If the aim is to chase after the goals of the National Development Plan and Operation Phakisa, then the lowest-hanging fruit is obviously to look at government land and give title to farmers on that land.
“The moment you do that, those farmers can go to the bank and collateralise it so they can borrow money to develop their farms.
“There’s a massive amount of capital that can flow into that land.”
He says Agri SA’s solution is a form of agricultural development agency that would be a public-private partnership providing capital for developing farmers.
“Even if you give a guy land right now he is not going to be able to capitalise it because of lack of security.
“We want to create a vehicle where you have a form of subsidised capital.
“In that way, you can circumvent the security of tenure issue.”
The strategy is being finalised so it can be presented to Ramaphosa and his team next month.
Van Zyl says that research has shown that properly incentivised private sector involvement “will see transformation happening a lot quicker than by doing it any other way”.
He says the plan has been taken to the government “quite a few times. It’s been discussed in a variety of forums, it was tabled at Operation Phakisa in 2016, which focused on agriculture, land reform and rural development.
“There wasn’t any impetus to implement it,” says Van Zyl, 45, an MBA graduate from the University of Pretoria who headed Deloitte’s African agribusiness unit before joining Agri SA three years ago.
“We are formulating our strategy and will engage government on what they want to achieve and what we want to achieve. A lot of what we want to achieve is the same if you take the populist stuff out of it.”
He says that the government should be under no illusions about the damage that expropriation without compensation would do to the whole economy, and not just to agriculture.
“There’s a whole value chain that starts with a primary producer that contributes 2.8% of GDP, and 25% of the economy if you take the whole value chain into account.
“The source of that value chain is the farmer.”
Just the talk of changing the constitution to allow for expropriation without compensation, never mind whether it actually happens, or who the land is taken from, increases the already high risk of investing in land, he says.
“Who’s going to invest in land with that sword hanging over them?”
This cloud of uncertainty needs to be removed as soon as possible.
He understands that Ramaphosa is bound by ANC policy decisions.
“We want to sit down and navigate the economy through these obstacles,” he says.
“This is the economy we’re talking about, not just agriculture.”
Who’s going to invest in land with that sword hanging over them?
Omri van Zyl Agri SA CEO