New land law could upset S.Africa's agriculture sector - CNBC Africa

New land law could upset S.Africa's agriculture sector

Southern Africa

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Fence line. PHOTO: Getty Images

“Generally if we look at conditions in agriculture, with the good rains that fell especially in February and March, the crops were looking good in the summer rainfall area, [and] grazing has recovered remarkably well after a very serious drought,” John Purchase, CEO of Agribiz, told CNBC Africa.

“In most other areas it’s looking pretty good from a production condition side. The biggest problem in agriculture at the moment is the uncertainty around policy and legislation and so on.”

Where policy is concerned, South Africa’s Department of Rural Development and Land Reform recently proposed a strategy that could see 50 per cent of all farmland in the country under shared ownership between farm workers and farm owners.

This plan could severely change the country’s agricultural dynamics, though it is a means of implementing land equality.

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“This has been coming for quite some time and it was only after the second workshop with government that it really entered public space,” Hans van der Merwe, executive director of Agri SA, explained.

“The fact of the matter is I think government is frustrated about a couple of things: the relative slow progress with land reform, the high cost of acquiring land, and the high rate of failure of new entrance into farming. This is a model that tries to address it but I think neglects a couple of fundamentals in the economy and society in the process.”

Splitting farmland ownership essentially means splitting the economies of scale, which could filter into the existing threat of food security.

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“If you look at farming debt, what will happen with financial institutions that are funding [farmers]? I think about half the farmers, if not more, will immediately have liquidity problems, deep financial problems and the financial sector will lose money,” Van der Merwe explained.

“Agriculture is changing globally, and if you have low levels of support and low levels of protection, the only way that you can survive is by making use of economies of scale. This will be detrimental to the smaller and medium-sized enterprises especially. The backbone of rural South Africa will be broken in the process.”

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