Beware the traps of populism in dealing with land reform

The financial realities of farming need to be carefully considered

When nationalisation of mines was being peddled as a panacea to our transformation travails about a decade ago, there were quite a few prescient mine owners that were more than happy to be receiving an unsolicited bid from government for their stake in a sector that they knew was set for a very long winter. When this talk was at its height and led by the oratorically gifted Julius Malema, Impala Platinum was trading at more than R210 a share. Today, the world’s second-biggest platinum miner trades in the region of R20, valuing the firm at R14bn, and is in the throes of a massive restructuring drive.

Now just consider if the flawed argument for nationalisation had won the day and had tasked the administration of former president Jacob Zuma to nationalise Impala’s Rustenburg operations. Beyond how clumsily it would have been done and just how dubious a process it would have been, Impala’s woes would have been for the taxpayer to bear.

Today, we’d have a National Treasury struggling to raise funding not only for state-owned enterprises such as SAA and Eskom, but mining operations nationalised at the worst possible time. That’s not saying there’s ever a time for the state to take ownership of a mining asset. Zambia’s Kenneth Kaunda can attest to this.

So in much the same vein that government would have found some very eager sellers of their mining assets just after the global recession,

I’m certain that in the farming sector today, you’d find quite a few farmers more than willing to offload their assets to the state. With only

4% of farms in the country generating a turnover of more than R5m, and the vast majority indebted to the tune of more than R160bn to both private bankers (R120bn-plus) and the Land Bank (R40bn), there’ll be many willing to sign off all their liabilities.

These are just some of the financial realities of farming, which are best captured by the struggles of milk farmers in the Free State, the

North West and Mpumalanga — realities that we need to consider rather carefully as we seek to speed up what has been a land reform process that has been blighted by bureaucratic failure of the state.

So as the ANC moves ahead with plans to change a section of the constitution in an attempt to outline the conditions under which uncompensated land expropriation is effected, much consideration must be paid to the unintended consequences. Just how will the state handle indebted land, even if a farmer is not compensated? Would there be compensation to the banks, and if not, just where does it leave a bank like Absa, one of the largest lenders to the agricultural sector?

This is just one contagion risk from an untidy resolution to what is a “structural” fault line in the

South African economy — access to land. If banks are susceptible and face a real prospect of some of their loans being wiped off their books, a crisis would follow. And after that’s calmed, just how willing would they be for future loans in the agricultural sector, to farmers who would now be black?

This is admittedly alarmist, as there’s much uncertainty out there about exactly what and how the changes to the constitution will unfold. What will it mean for private property and house prices? It’s all up for speculation. There are just so many different objectives to the land debate. Apart from historical redress, there’s the promotion of land ownership of rural land. This calls into question the role of our traditional leaders such as the Zulu king. In these areas, just how we deal with the question of land tenure for women will prove a minefield to navigate.

To ease my anxieties, I, like many, will have to assume that there’ll be rationality at the end of the day. It’s President Cyril Ramaphosa’s greatest test to find social justice, without falling into the traps of populism.