Agrekon, Vol 32, No 3 (September 1993) Van Rooyen, Coetzee and Swart VIEWPOINT: PROPOSALS ON LAND REFORM, PRIVATISATION AND FARMING MODELS - SOME LESSONS FROM EXPERIENCE IN SOUTH AFRICAN AGRICULTURE Johan van Rooyen Centrefor Policy Analysis, Development Bank of Southern Africa, Midrand Gerhard Coetzee Centrefor Policy Analysis, Development Bank of Southern Africa, Midrand Danie Swart Operational Complex, Development Bank of Southern Africa, Midrand Abstract Privatisation of farming and land use should be viewed as potentially an important strategy in the process of agricultural restructuring and land reform in view of its "empower" attributes as well as providing incentives to productively invest in farming. Privatisation, however, is but one instrument towards rural restructuring and land reform. Farming is essentially a private sector action. Ownership of assets and the right to decision-making are vital elements for successful farming. The choice of farming model will therefore be important. Present land tenure arrangements must be expected to be an additional major factor in the selection of appropriate farming models. 1. Introduction The right of decision making is seldom absolute as it is directed and supported by certain rules, rights and The concept of privatisation provides potentially a viable regulations. Such guidelines relate to aspects of econ- strategy to restructure economic activity while accommo- omics, ecological/conservation principles, regulatory and dating both growth and equity considerations. Privatisa- legal stipulations etc. Often as formulated by government tion as an approach to open up farming land and to ac- and/or the judicial system. Cultural and religious values commodate new farmers can indeed not be divorced and ethics impact on the right of decision making. It from the present debate on land reform and agricultural should thus be stated that privatisation should occur restructuring in South 'Africa. within the broad, cultural, social, political, ethical and economic milieu prevailing in a country. The need for and inevitability of agricultural restructur- ing in South Africa has been established inter alia The discussion of privatisation in agriculture can be di- through the White Paper on Land Reform and various rected at two levels viz. The macro-dimension and the recent professional and political statements from various micro or operational dimension. For a comprehensive groupings and parties. Access to farmland by all South discussion of some macro features of privatisation in Africans must be viewed as an important element of agriculture refer inter alia to (Brand, 1988; Swart, agricultural restructuring, (Brand, et al; 1991; Van 1991). Rooyen et al, 1992). It has been argued that a move- ment towards empowering black smallholders will This paper will focus on privatisation as it is defined achieve important gains from an efficiency and equity above and as it applies to some micro-level aspects of viewpoint. In this paper certain viewpoints on access to farmer development policy. Farmer settlement, small far- land for farmers through privatisation strategies will be mer support programmes,settlement through the outright discussed. These viewpoints are largely based on purchase of land and related mechanisms between willing "lessons from experience" from DBSA funded agricul- buyer and seller and some equity share options will be tural programmes and projects over the past ten years discussed. The purpose will be to provide a broad frame- where privatization of certain elements and land reform work of reference for further study and application. are viewed as some of the vital components for success. Farming and Farmers 2. Privatization, farming and land reform Farming is defined in this paper as those activities i) Privatization related to the primary production of basic foodstuff and fibre. Farmers will therefore be those whom utilize Various definitions of privatisation can be quoted. Es- resources in the production of basic foodstuff and fibre. sentially it argues that privatisation can be defined as: This definition accommodates full-time and part-time The transfer of the right to assets from the public sector farmers, as well as, commercial, emerging and subsis- to the private sector. The private sector includes com- tence producers and does not discriminate against panies, groups and individuals operating for their own gender, race or economic status. account. This definition also implies that: The right of decision making on the utilisation of such assets will be Privatization and Land reform transferred from the public sector to the private sector. Privatization can be a powerful tool for land reform as it involves the transfer of rights of land security and land 129 Agrekon, Vol 32, No 3 (September 1993) Van Rooyen, Coetzee and Swart exchange via the market mechanism. Privatisation, other farm resources, or having resources transferred to however is but a mechanism towards land reform, and is them through other means. The "project approach" was not an objective on its own. Privatization however, also generally followed to structure the process of settlement has severe potential limitations where "willing buyer according to a programme. Farmer settlement through willing seller" approaches are left to market arrange- the project approach can be approached within two basic ments in societies where access to income and assets are models: skewed by various policies. Hans Binswanger(1992) of the World Bank Mission to South Africa also argues con- i) Settlement Projects (SP): vincingly that more that often "the market value of farm land exceeds the farm production value". Reasons for These schemes often have as their ultimate objective the this phenomena, commonly observed in South Africa, establishment of productive commercial farmers through can be found in policies of subsidization, taxation, a system of co-ordinated support services. The income marketing etc. These causes are well documented and earning potential of farming should therefore be suffi- debated by various authors and academic studies. The cient to compensate for commercial risk and entrepre- situation still applies in South Africa although agro- neurial effort and the substantial costs required for ecological regional variances are observed. For farming. In some situations, farmers can be established example, farm land prices in the summer rainfall areas as independent entrepreneurs right from the start of a have declined (almost by 50 percent in real terms since project or scheme. Alternatively farmers gradually be 1981) inter alia due to agricultural policy reform and come more independent in terms of a predetermined pro- reduced subsidization (Brand et al, 1991). gramme emphasising counselling, training and "learning by doing" approaches. The general concept of market value above production value however, still has relevance and should be taken On these types of schemes farmers are often supported into consideration. Privatization through market based by a service unit or co-operative responsible for the transactions will only be a viable land reform alternative management of and delivery of support services such as if market value approximate farm production value. To input supply, credit and marketing. Training, extension, use this strategy for land reform, other policies impacting counselling and regulatory and administrative arrange- on the market value of land will have to be reformed ments are centrally co-ordinated by this service unit in concomitantly. co-operation with the government service and private sector. Some examples of this model is the Mid-Letaba Privatization also has various further limitations as a land project in Gazankulu, and the Kwandebele Consolidation reform strategy. Some of these will be discussed in this Land projects. paper. It must however, be emphasised that the notion of privatization as the "only" or "major" land reform Central(or core) unit/farmer settlement pro- strategy, following on the scrapping of the land acts, will jects (CUP) be totally unrealistic in the present political economy of South Africa. The extremely skew distribution of land This is a variant of the settlement project. On these and land rights as well as financial constraints compared projects estate farming' constitutes an important produc- against "land hunger" arguments render obvious limita- tion activity. Farmer settlement, still occurs within the tions to this strategy. Legitimate land claims can also scheme. Support services are provided to farmers on the not be solved via privatization arrangements. Alternative project but these services are linked to the central estate and complementary strategies must therefore be devel- farm. Two types of CUP's can be described: oped to attend to the complexity of the land issue in South Africa ie. mechanisms such as land courts, and the An estate farm utilising agro-industrial services provision of an extended bundle of rights to accommo- which are also available to project farmers and date various forms of land use security, compensation, outgrowers (processing, packing, marketing, etc. (Van Rooyen, et al, 1992). Privatization must mechanisation etc.); and therefore only be viewed as one option for land reform and distribution in South Africa. Two features will have a central unit attending to estate farming while an important impact on land reform options viz, the also performing non- commercial type of func- choice of farming system and model and existing