Look east for reform model

SOUTH KOREA’S STRATEGY ‘WORKED’ President may push for this kind of approach.

Even though the ANC is not in favour of expropriating white farmers’ land as was done in Zimbabwe, investors are right to worry about its land-reform deliberations. The fundamental problem that’s causing them will not go away by itself.

President Cyril Ramaphosa’s announcement that an amendment which would set down more clearly that land can be taken from owners if the government deems it necessary, would go ahead.

This drove down the rand, a sign of investor dismay; however, markets concluded that nothing more serious than electioneering was taking place. It remains to be seen how the constitution will be amended, and Ramaphosa, who has pledged to attract $100 billion in foreign investment in the next five years, has long emphasised that land expropriation shouldn’t threaten economic growth.

Such an approach would rule out what happened in Zimbabwe after 2000, when former president Robert Mugabe announced so-called fast-track land reform – the seizure of about 4 500 farms owned mostly by whites, and their redistribution among more than 200 000 black families.

The campaign was marked by violence and led to a collapse of agricultural production. Ramaphosa and the ANC won’t rush headlong into a Mugabe-style land grab, but SA has a land ownership problem akin to Zimbabwe’s pre-reform one.

In the 1990s, black South Africans received grants and subsidies to buy plots of land, which resulted in overcrowding and poor land use. Former president Thabo Mbeki prioritised helping black citizens buy into large-scale farming, and those who took advantage of the new policy ended up deeply indebted and barely able to compete. Under former president Jacob Zuma, the government started buying up land for temporary redistribution through leases rather than property transfers.

Through it all the land reforms remained market-based rather than confiscatory, and since apartheid had left blacks and whites with unequal starting circumstances, the capitalist approach perpetuated the inequality.

The Zuma approach hasn’t worked much better. The leaseholders often lack funds to invest in production, and they end up unable to pay the leases; the government lets them remain on the land, but they can’t get credit to develop it. So, in some cases, the white-owned commercial farms end up working the land again. This can’t be fixed by increasing the government’s power to seize land without compensation.

SA needs both a framework for giving farmers solid tenure on the land they use and a better mechanism for redressing economic inequality. Ramaphosa has cited the model of South Korean land reform, started in 1950, as a positive example.

“We will explain to potential investors that land reform is not incompatible with agricultural productivity and economic development, as the experience of some East Asian economies, like South Korea, demonstrates,” he told parliament in May.

That reform was confiscatory in that it offered Korea’s large landowners little compensation – 150% of the average value of a year’s crops. They were urged to invest the money in industrial production, with the government guaranteeing cheap loans.

The land was handed to the former tenant farmers, who had to work it and pay for it in instalments. Though most of the landowners and many of the farmers went bankrupt, the reform is considered successful because it changed the structure of Korean society.

Ramaphosa appears to believe something like this is necessary here too — and he might be right after two decades of half-measures. – Bloomberg

We will explain to potential investors that land reform is not incompatible with agricultural productivity and economic development, as the experience of some East Asian economies, like South Korea, demonstrates Cyril Ramaphosa President of SA