Land grabs ‘bad’ for SA economy

RESEARCH: EXPROPRIATION TO HAVE NEGATIVE EFFECT

Declining investments mean higher food prices, hitting poor hardest. Moneyweb

Three Agriculture Business Chamber (AgriBiz) researchers have warned that government’s populist proposal to expropriate land without compensation might result in a prolonged period of no new investments in SA’s agriculture sector and food insecurity for the poor.

AgriBiz’s Theo Boshoff, Wandile Sihlobo and Sifiso Ntombela argue in a research paper that expropriation without compensation has massive economic implications and could impact property rights across key sectors of the economy.

Buckling under pressure to fast-track its land reform targets, the ANC agreed to push for land expropriation without compensation at its elective conference in December 2017.

In doing this, the governing party requires a two-thirds threshold in parliament to amend Section 25 of the Bill of Rights, which promotes access to land by citizens and just and equitable compensation in the event of expropriation.

By the government’s admission, SA’s land reform programme is widely considered to have failed over the past two decades, with more than 80% of beneficiaries unable to build an agricultural surplus and productive capacity.

The researchers said agriculture makes up 2.5% of SA’s GDP but when including the sector’s entire value-chain – industries including animal feed, plant health, food processing, transport, and storage – the contribution increases to 7%.

Mass expropriation without compensation will result in a protracted period of no new net investments in agriculture, which “means no growth in agricultural output as well as no growth in the agribusiness sector”.

“This is because commercial farmers, regardless of race, who have not yet been expropriated, are hardly likely to start new investments, and because the new farmers would not have the necessary means to invest.”

And with declining investments, higher food prices are expected, which will hit the poor the hardest.

“It is, of course, possible to import many commodities and process them in SA, but there is a limit to this and the country would have to give up foreign exchange in order to import the raw materials that go into the production of the food we eat.”