LAND REFORM IN A MANNER THAT SUPPORTS AND EXPEDITES ECONOMIC

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1 1 LAND REFORM IN A MANNER THAT SUPPORTS AND EXPEDITES ECONOMIC GROWTH AND JOB CREATION Land reform is a challenge which the government and private sector must address as partners. It provides a unique opportunity to work together as partners as provided for in the National Development Plan (NDP). The manner in which land reform is addressed will also have a huge impact on the economy, job creation and food security. One decision by government will expedite land reform and will also stimulate economic growth and job creation. This decision is namely to give recognition to agricultural producers who are prepared to contribute land, money, skills and other resources for initiatives in line with the NDP Gerrit Van Vuuren, Project Leader, Witzenberg PALS. 1. Confidence Confidence is an important pillar of a healthy economy. The belief that a return on investment will be earned for acceptable risks taken and hard work to make the business successful, is of key importance for investors. In the absence of confidence, businesses will not invest further in the South African economy to stimulate growth.

2 2 2. The National Development Plan The National Development Plan sets the goal of an integrated rural economy based on successful land reform as well as job creation in rural areas. Chapter 6 of the National Development Plan (NDP) suggests that the state and private sector form partnerships to stimulate economic growth in rural areas and to make land reform successful. In terms of Vision 2030 the dream is that agriculture can create one million new jobs. To make this dream more of a reality it is suggested that irrigated agriculture is extended, that agricultural sectors and regions with the highest potential for growth and job creation, are supported and that creative solutions and strategies are developed to stimulate job creation in agricultural industries. Minister Gugile Nkwinti, the Minister of Rural Development and Land Reform confirmed this in his budget speech on 26 April 2016 saying: The NDP views agriculture as critical to employment and food security. The McKinsey Global Institute Report of September 2015 named South Africa s Big Five: Bold Priorities for inclusive Growth confirms that agriculture has the real potential for job creation and to contribute in a significant manner to economic growth. McKinsey calculated that the potential exist to triple agricultural exports by Land Reform The suggested land reform model on page 207 of the National Development Plan proposes that each district municipality with commercial farming land in South Africa should convene a district land committee consisting of all agricultural landowners in the district, including key stakeholders such as the private sector, bankers, government and government agencies. This committee will then be responsible for

3 3 identifying 20% of the commercial agricultural land in the district, and giving the commercial farmers the option of assisting in its transfer to black farmers. The writers of Chapter 6 of the NDP then proceeds to suggest a possible manner for the financing of the land and transfer thereof to black owners. This is done after the word can. The convening of the district land committee and the identifying of 20% agricultural land in a district, are two things that must happen. The manner in which the land is procured and transferred to black farmers is discussed as one of many possibilities after the word can. The National Development Plan also provides that the government gives recognition to commercial farmers who cooperates and contributes to transfer land to black producers and who remains involved to ensure the success of the new farmers. 4. Willing Partners Many agri producers in South Africa are already involved with or willing to proceed with the implementation of land reform projects. All that is needed to expedite this process, is an undertaking from government that they will receive recognition as provided for in the NDP. An example of agri producers willingness to implement land reform, is Witzenberg PALS. Witzenberg PALS launched an initiative to expedite land reform in the Witzenberg area (Ceres, Tulbagh, Wolseley, Breërivier, Koue Bokkeveld, Ceres Karoo). This initiative was launched as partnership between all the agri producers, Witzenberg Municipality and community leaders. It was agreed to expedite land reform in a unique manner which will support economic growth, job creation and social harmony. The aims are

4 4 to establish successful black farmers, to involve the whole community in an inclusive process, to extend the initiative to other areas and agri related activities, to establish the Witzenberg Centre as one stop shop and to focus on training and mentorship. In McKinsey s report (supra), the importance of continued support to new farmers are emphasized: In its land reform process, South Africa will also need to be careful not to leave new farmers isolated and lacking support. The mentorship and training which is integral to the PALS framework, is therefore of utmost importance. The PALS (Partnerships in Agri Land Solutions) framework was developed in line with the principles of the NDP. PALS is a radical departure of previous land reform models in South Africa and includes an option to the black farmer to procure the majority shareholding in the new farming company. Many producers across South Africa are prepared to implement projects in line with this framework which relies on the experience of the commercial farmer as mentor. The initiative is supported by government as a unique approach to land reform in South Africa. In the words of Mr Ronald Ramabulana, the CEO of the National Agricultural Council: The initiative is indeed supported by government as it encompasses economic growth, job creation and social harmony, build on sound partnerships, skills transfer and mentorship aimed at establishing black commercial farmers, as envisaged in the National Development Plan (NDP).

5 5 What is needed now is that government gives recognition to participating producers as provided for in the NDP. Then PALS and other initiatives will be able to implement projects to its full potential and support economic growth and job creation. 5. The PALS initiative Currently the PALS initiative consist of the following projects 55 land reform projects, 20 value chain projects, 4 housing projects, several training projects, support to Ceres Karoo farmers and support to Ceres Agripark, Approximately jobs will be created on hectares of irrigated land. A further jobs in the value chain and with service providers in the agricultural sector will be an indirect benefit. The PALS initiative will over time require an investment of more than R4 Billion. The production and processing of food for the South African market and the export of products which will earn billions in foreign currency will be some of the benefits. 6. Recognition Witzenberg PALS as private initiative is well on its way with the implementation of a large number of projects. The initiative is coordinated from the Witzenberg PALS Centre in Ceres which also acts as the local land committee and plays a watchdog role. In the words of Professor Nick Vink of the Department of Agricultural Economy

6 6 at the University of Stellenbosch, and also a co-writer of the NDP, Land reform in South Africa has for the first time acquired a physical address with the establishment of the PALS office in Ceres. More than 20% irrigation land (which is the highest value agricultural land) was already identified for transfer to black farmers. Many producers are waiting to transfer land to new PALS companies in terms of the PALS framework. They only need confirmation from government that recognition will be granted in exchange for the land, money, effort and mentorship to make these projects a success. This may for example be recognition via Level 4 BEE status for their business and exemption from future policy changes. 7. The Solution By taking the decision to give recognition to commercial producers as provided for in the National Development Plan, the National Government can jumpstart the South African economy, especially in the agricultural sector. This will motivate private businesses in the agricultural sector to expedite land reform on a large scale and to make land, money, skills and other resources available to assist the black farmers in being successful. The PALS option to establish new irrigated agricultural areas and farms, will also stimulate economic growth and create many new jobs.

7 7 One decision by cabinet can therefor boost investor confidence with the effect that apart from successful land reform in partnership with the private sector, job creation and food security will also be improved. That will bring the NDP s vision for 2030 with which Minister Nkwinti concluded his budget speech much closer to reality. We are confronted with negative news daily and the possibility of an economic downgrade. The required decision by government, will boost investor confidence and give South Africans hope for a better future. Gerrit van Vuuren