Is agricultural land a good investment? This is the question posed by Dr Frikkie Maré in a recent edition of Stockfarm. Based on his assessment of the returns offered by a farming enterprise and another fixed investment, his answer is yes.
In economic terms, Dr Maré may be correct. Understand, though, that the anaemic state of the economy has done great damage to the attractiveness of the South African economy. A good deal of this has been due to unstable and counterproductive policy.
And this is unfortunately the key problem with Dr Maré’s analysis. As potentially attractive as farmland may be as an investment, the government’s determination to push through a policy of expropriation without compensation (EWC) throws a question mark over in fact making such an investment.
While Dr Maré acknowledges the uncertainty that this creates for agricultural land – in fact for all assets – he says that ‘all indications are that productive agricultural land will not simply be expropriated’.
Actually, it is unclear what the government’s intentions are. Much of the rhetoric around this has been deeply hostile to commercial farmers, and part of the motivation behind this policy drive is clearly ideological.
This is not only about EWC, but about the latitude the state might have to seize private assets, with compensation (which might in any event be nominal) or without it.
Need not be responded to
The newly published Expropriation Bill for example, requires negotiation between the ‘expropriating authority’ and the owner. If this fails, a notice of intention to expropriate must be issued. Representations on this must be considered, but need not be responded to. Thereafter a notice of expropriation is served. It will stipulate the date on which the property and the right to possess it passes to the state. This may be weeks or even days after the notice is issued (the Bill only requires that this ‘must not be earlier than the date of service’ of the notice).
It is possible to approach a court to contest this, but this comes with steep costs, and may also need to be done after the owner has lost possession of the property.
The point is that the process is weighted in favour of the state, and this is likely to encourage it (this includes its cash-strapped and often dysfunctional municipalities) to go after private property with low-cost expropriation in mind from the outset.
This is in terms of the Bill currently published.
Section 25 of the Constitution is still to be amended, and the ANC indicated at the beginning of the year that it wanted compensation decisions removed from the ambit of the courts. If this comes to pass, the latitude granted to the state is widened and the protection given to private property holders will be weakened further.
The possibility also exists – and has been explicitly endorsed by several figures in the ruling party – of effectively nationalising all land, with the state as custodian. This is along the lines of water and minerals, and was proposed in an iteration of the 2014 Preservation and Development of Land Framework Bill.
Undermining these farmers
Meanwhile, City Press newspaper reported several weeks ago that as part of its release of state-owned farmland for redistribution, the state was effectively evicting a number of productive black farmers. The state is not overly concerned about undermining these farmers.
So, are we saying that farmland is a bad investment?
No, and for the sake the country, we need to hope that farmers are willing to make the investments that make the agricultural economy possible. But the farming community should not underestimate the role that ideology, corruption and state dysfunction play in policy and its implementation.
The community needs to recognise this threat and brace itself to push back against it.
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