Time for some straight talk on land reform

Talk is cheap, they say. But in South Africa’s case — in a literal sense — talk of a new land reform policy could be costly. It is still early days, but negative sentiment is already reflected in the latest Agricultural Business Chamber-Industrial Development Corporation agribusiness confidence index, in which respondents have indicated reluctance about further investment due to uncertainty over land reform.

It is clear that investors see through the political tactics and euphoria that followed Cyril Ramaphosa’s ascension to the presidency in February.

Despite his assurances of a fair process, economists and market pundits this week continued to flag the land policy’s possible impact on property rights and the Mining Charter — albeit still in draft format — as significant risks to the economy. These trump fears about global political and trade tensions and tighter liquidity conditions.

Agriculture’s share of GDP has shrunk over time. In the first quarter of 2018, its nominal share of GDP was 2%. But it remains important as a labour-absorbing sector. So when the Agbiz subindex that gauges confidence in capital investment slips four points to 64, it raises a red flag.

The index is a reflection of about 25 agribusiness decision-makers on the 10 most important aspects influencing business in the agricultural sector, which include turnover and employment.

Wandile Sihlobo, head of agribusiness research at Agbiz, said there was no “notable dent on investments in the sector — yet”. But uncertainty over land reform “remains a key risk that could potentially undermine investment”.

Figures collated by the chamber show that investment in the sector declined from about R20billion to R16-billion over the four years up to 2017. Foreign direct investment dropped from R1.73-billion in 2012 to R1.45-billion in 2016.

The land reform debate should be viewed in a moral context as well as a financial one. We’ve lamented the high unemployment rate and the government’s ineffectiveness. We know the World Bank has highlighted South Africa as the most unequal society, 24 years into democracy.

But there is an even more compelling reason. Lionel October, directorgeneral at the Department of Trade and Industry, this week painted a graphic picture of the need for land reform to address deep inequality. Throughout apartheid, 90% of the population was excluded; only 10% could open a business, own land and practise agriculture, he said, adding: “In a sense, we did not really have a capitalist economy; we didn’t even have a free-market economy.”

He said a bold plan was necessary for investment in the real economy, but also in townships and former homelands, which were starved of investment under apartheid and where poverty and unemployment are concentrated.

It is time for the sweet talk to end. Now we need real action on land reform, and a system that benefits women and men.

‘In a sense, we did not really have a capitalist economy [under apartheid]’