Agbiz’s John Purchase on land reform and hunger
Irresponsible moves on land reform could affect SA’s food supply
● SA could pay a heavy price for the government’s refusal to listen to land reform proposals put forward by the Agricultural Business Chamber, says CEO Dr John Purchase.
Its latest agribusiness confidence index, released recently, shows confidence has plunged to its lowest level in nine years.
Purchase, who is also deputy head of economic policy at Business Unity SA, blames this on expropriation without compensation.
“The last year in SA has been dominated by those three words,” he says.
This has already had a damaging impact on investment in the agricultural sector, which, in the medium to long term, will affect SA’s food security in the form of higher prices.
Though the chamber has vigorously opposed expropriation without compensation, it strongly supports land reform, he says.
“We all know that we’ve got to do land reform.”
In 2014, the chamber presented to the government a detailed model for commercial banks to assist and accelerate land reform, “but it just was never implemented”.
It was part of the National Development Plan in 2012, “which is where we got our cue from”.
“It was never implemented, even though we did all the hard work, we submitted it to government and I did a presentation.
“Now you sit with a failure and radical options for land reform, and then obviously it becomes a populist situation and obviously it’s going to impact negatively on the sector.”
The release of the index came hours before parliament voted to amend the constitution to allow expropriation without compensation in spite of clear evidence of the negative investment consequences.
Purchase participated in a recent JPMorgan investor conference in Cape Town where it was the first thing potential investors asked about, he says.
“Immediately, international investors want to know what’s going on. ‘Why would we invest if this is the mindset?’, they ask.
“They say just bringing up the question of expropriation without compensation raises huge question marks because they’ve got many alternatives. They can invest in other countries where property rights are entrenched.”
Investment in the sector is going to be needed more than ever to mitigate the effects of devastating weather changes, which have played havoc with farming. Since 2015, SA has had severe droughts in summer rainfall areas and a prolonged drought in the Western Cape.
“The weather we’ve been seeing is unprecedented,” says Purchase.
The consensus among top climatologists he’s consulted is that “things are changing. These are not business-as-usual droughts.”
It’s part of global climate change and is likely to be the new normal, he says.
Technology related to water-use efficiency has become critically important for the sustainability of farming, but it will require massive investment. Because of the uncertainty about property rights, this may not be forthcoming, he says.
This will harm food security, which will drive food prices up. The poor will suffer most. From being a net exporter of food, SA will become a net importer.
In the case of maize, for example, this means a doubling from R2,500 a ton to R5,000 a ton, which will hugely affect all the value chains animal feed goes into.
“It will impact on our food security with dire implications for consumers,” he says.
Greater use of technology can mitigate these effects, but requires huge investment.
One of SA’s biggest assets is the number of top multinationals that invest in the local agri sector, including in irrigation technology.
“They won’t invest in a climate of political uncertainty, nor will local farmers invest in this technology,” Purchase says.
This is not idle speculation, he says.
“Graphs show that the relationship between confidence and investment is a near perfect fit.
“Using expropriation without compensation as a political tool has harmed investor confidence in SA, in agriculture specifically, there is no doubt about that.”
Recent government attempts to provide more clarity or assure investors that there won’t be land grabs won’t change this, he says.
“The very notion of expropriation without compensation just does not fall positively on any investor’s ear. It’s as simple as that.”
A question he is asked “continuously” by international investors, “and it’s a hard one to answer”, is that if people locally aren’t investing, why should they invest?
And the fact is that local investment by farmers and others in the agriculture value chain is tracking down, as is evident from the agri-business chamber confidence index.
“We’ve been engaging with government at the highest level about this,” he says.
In its comprehensive written and verbal submissions to the constitutional review committee, the chamber explained “with figures, in an evidence-based way, exactly why this is so bad”, and what the long-term impact on food security, food prices and consumers is likely to be.
So why was their input so conspicuously ignored?
“Politics, is the short answer. We’re all aware of the situation in the country and in the ruling party itself, and staying in power obviously trumps economic reality at the moment.”
He believes there are many in the government who take their arguments seriously, including President Cyril Ramaphosa.
“I’ve spoken to him about food security and competitiveness as the imperatives of our food system, so he knows this very well. Those concepts were very clearly explained in our presentation to him. He understands, as do many ministers.
“We also explained to MPs the direct link between expropriation without compensation and rising food prices. We explained to them in detail.”
Because SA has never had a shortage of relatively cheap food by international standards, food security is taken for granted, he says.
“But you can’t take this as a given. Once you start impacting negatively on the investment environment, this will change.”
He says he has some sympathy for Ramaphosa’s position.
“He’s got to win an election. But I’m disappointed that while we made very constructive proposals to government from when the green paper [on land reform] came out in 2011, none of them was listened to.
“And now we sit with the consequences.”
Staying in power obviously trumps economic reality at the moment
John Purchase
CEO of the Agricultural Business Chamber