Dilemmas of land reform for the Ramaphosa era

Dilemmas of land reform for the Ramaphosa era

At the launch of the GGA publication Rights to Land, from left to right, authors Michelle Hay, and Peter Delius, Bridget Impey, publishing director of Jacana Media, GGA Executive Director Alain Tschudin, and author William Beinart. Image Lloyd Coutts

Land issues are being debated intensely and there are a number of interesting new developments: a new presidency of the ANC; a pending Restitution Amendment Act at present invalidated by the Constitutional Court; the High-Level Panel report to parliament; a new Communal Tenure Bill; and a land audit by AgriSA.

Cyril Ramaphosa, now President of the ANC, has specifically addressed land issues on a few occasions since his election in December 2017. He has, following a resolution at the ANC conference, raised the possibility of expropriation of white-owned land without compensation as well as radical socio-economic transformation in relation to land: “The land question,” he is quoted as saying, “must be resolved … Land needs to brought back to its rightful owners. We must find solutions.”

He and the ANC have, however, also articulated some caution. Firstly, Ramaphosa said that radical transformation should be in the interests of the people and not a few individuals.
Secondly, in recognition of widespread failure to maintain production on transferred land, he said: “Government must not give land back and stand by. Government must work with people hand in hand to support them.”

Thirdly, the resolution on land at the ANC conference specified that “such redistribution does not negatively impact on the agriculture, food security or other sectors such as financial services, which hold around 70% of commercial farmers’ debt”. These provisos were reinforced by Ramaphosa: “We must ensure we do not undermine the economy, agricultural production and food security. That is what is important. The ANC has always taken care to seek to manage the economy of our country in a way that seeks to advance our people… We will manage the implementation of this with due care.”

Depending on how they are interpreted, these could be very major constraints on a more rapid redistribution. This tension has long been at the heart of the ANC’s dilemmas in relation to land reform and a factor in their wisely cautious approach up to now.

Ramaphosa appears to accept the dangers of rapid land reform guided by policies designed to rectify injustices of the past without much regard to the consequences for production and food security. In a speech during his recent Eastern Cape trip, he seems to have come even closer to recognising some of the realities rather than engaging in the rhetoric of land reform. He noted that some of the farms transferred since 1994 were “derelict” and “not being worked”. A subsidiary question, that also came up at the ANC conference, concerns the tenure and control of land that is transferred – in particular the role of traditional authorities.

The shadow of Zimbabwe hovers around the South African debate. Does Zimbabwe teach us that a failure to address land reform can result in disaster? Or that a fast track land reform results in disaster? In Zimbabwe, land reform was highly successful until about 1997, when nearly 30 per cent of commercial farm land was transferred without any loss of production.
The government provided effective support to smallholders. After fast track land reform in 2000, maize production plummeted by more than half over a fifteen year period and tobacco production initially declined even more.

These were significant factors in the halving of the Zimbabwe’s GDP and the impoverishment of the country. Tobacco has now crept up again to its 1990s level but not to its peaks in the 1960s. Last year, in 2016-7, maize production probably reached 2 million tonnes or about the average of the 1980s.

But it was a particularly favourable year in which South African production reached its all-time high of about 17 million metric tonnes. The lesson we can draw from Zimbabwe’s experience is surely that the ANC should continue to err on the side of caution.

This is especially so because there is little evidence from South Africa that smallholders are maintaining or expanding production on the considerable areas of land they occupy. Nor is there much evidence that the South African state provides adequate back-up for smallholders.

Recent government statistics, and also a land audit by AgriSA, suggest that the pace of land transfers from white to black owners has increased significantly. The former homelands represented about 14-15 per cent of the land in 1994. Government reported last year that it had redistributed 9 per cent of the agricultural land, about 8 million ha, with compensation paid on another 2.7 million ha under the restitution programme.

Some sources suggested that another 4 million ha was owned by the state, although not all of it was available for land reform. In addition an unknown amount was privately purchased – perhaps 2-3 per cent. Together this amounts to around 26 per cent in black hands with additional land held by the state.

AgriSA employed researchers to examine every land transaction in the Deeds Office since 1994. They arrive at similar quantities: 27 per cent of agricultural land by area, 29 per cent by value and 46 per cent by potential for production is now held by ‘previously disadvantaged individuals’ and government. The reason for the latter figure is that most of the former homelands, and most of the transferred land, is in the wetter, eastern half of South Africa. According to their audit, over 70 per cent of agricultural land in KwaZulu-Natal is now occupied by black people. AgriSA suggest a higher percentage of privately transferred land than government, perhaps because such transactions have been underestimated or because some government-sponsored transfers did not pass through state ownership.

The status of government-owned agricultural land is not clear. The state is no longer transferring ownership of land to all black beneficiaries of the redistribution programme, but some of this state-owned land is probably occupied by such beneficiaries.

Although it is difficult to interpret the figures precisely, it is likely that black South Africans occupy 25-30 million ha out of a total area of about 93 million ha available for agriculture. This is a sizeable area; Zimbabwe as a whole is about 39 million ha. Malawi, including the lake, is only about 11 million ha yet its smallholders produce a great deal more maize than those in Zimbabwe or those in South Africa on larger areas of land.

The statistics on production for South Africa are by no means complete, firstly because there is no longer an annual agricultural census and secondly because figures are not effectively collected for smallholders.

Agricultural economists such as Ferdi Meyer point to a surprisingly successful growth in the value of output on privately-owned commercial farms over the ten years to 2015.
These are no longer all white owned. Despite the uncertainties caused by restitution and the removal of subsidies, production increased annually by about 2.5 per cent a year, which is less than China at 4 per cent and Chile at 3.5 per cent but more than major agricultural producers such as the United States, Russia and Mexico.

This is largely due to investment in higher value crops and associated processing, such as citrus, vines/wine, forestry, canola/rapeseed, beans and a wide range of fruit and vegetables.
Maize farmers suffered during the drought of 2015-6, but produced a record quantity in 2016-7 when the summer rains returned. Wheat, by contrast, has gradually declined since subsidies were removed in the 1990s and is hit by the Western Cape drought.

Sugar production has fallen but livestock has remained stable, with a rapid increase both in intensive poultry and extensive wildlife farms. Expanding wildlife farming on private land may have negative implications for food production, and this has become an issue for debate, but some wildlife farms use land that may be marginal for crops.
Information on smallholder output is inadequate and dependent largely on local studies. These point to some “pockets of dynamism”, especially on a few irrigation schemes, and in Limpopo and KwaZulu-Natal.

But the general picture is one of decline of arable output, with most activity now taking place in smaller gardens next to homesteads rather than in the old arable fields. Livestock are still largely farmed in small, free-ranging herds and flocks, dependent on the veld for fodder. It is easy to underestimate the value of smallholder livestock and chicken holdings, most of which is locally slaughtered and eaten. But there is still considerable scope for more intensive operations and better veterinary care.

This contrast should give pause for thought. Production has probably gone down in the former homelands since the 1980s – a trend that has not reversed over the twenty years since the democratic transition. New land can be of value to smallholders and communities in symbolic terms and especially in relation to extending livestock production.
In some cases, farms with high value investments, such as citrus, have been transferred. But much of the new transferred land is held by Communal Property Associations (CPAs) and Trusts, and these forms of collective ownership do not generally provide a successful framework for investment into agricultural production.

It is clearly critical to consider the impact of land transfers (and wildlife farms) on agricultural output as a whole because this is important for national food security, for the food and processing industries, and for export income. Some products are valuable in all these respects.

For example, South Africa is one of the world’s leading citrus exporters, but citrus is also enormously valuable in drinks, and as widely consumed, nutritious and relatively cheap fruit within the country.

This brief discussion underlines the dilemma faced in land reform policy and the tension that Ramaphosa expresses between a desire, on the one hand, to rectify the injustices of the past, when black people were disallowed from purchasing land, and, on the other hand, the need for pragmatism in order to prioritise production.

What sort of policy options might help to resolve this dilemma?

A first priority should be to follow the people and try to meet the most urgent demand for land, which appears to be for secure residential land and urban housing.
Urban incomes are, on average, higher; between the 2001 and 2011 censuses, the population of Gauteng and the Western Cape increased by about 3.8 million while that of three of the most rural provinces remained static.

RDP housing has been a significant achievement by the state but provision in the major conurbations still needs to get ahead of the curve and demand is also evident in medium sized towns.
Secure housing with title to the land and further prioritisation of services would go a long way to meeting both the rhetorical demand for land and urgent material needs.

The future of the restitution programme also needs to be clarified and it is important to distinguish between this policy, initiated in 1994, which requires legal proof of dispossession since 1913, and that of redistribution, in which the government buys land, or subsidises land purchases, for agricultural projects.

President Zuma prioritised restitution as an instrument for land reform and, without sufficient consideration of the consequences, passed the Restitution of Land Rights Amendment Act in 2014.
In the first phase of restitution 80,000 claims were made and some are still being resolved. 160,000 new claims were made in a couple of years before the Constitutional Court invalidated the Amendment Act in 2016.

Restitution was a valuable short-term response to the injustices of the apartheid era and resources should certainly be focused on resolving the outstanding claims under the 1994 Act.
But it was not intended as a long-term policy and is not conducive to enhancing production and rural incomes. Given current government propensities, a new phase of restitution might well see land transferred to chiefs in large claims.

It will be difficult to withdraw from this policy but the consequences may be an extended period, lasting decades, of instability in the countryside and an ethnicisation of rural politics. At this moment, a critical policy aim should be to keep capital and investment on the land.

As an alternative, the government could articulate and define a clear and specific policy around gradual redistribution that prioritised production and was specific about the areas to be affected. The large farm sector does not require subsidy but would greatly benefit from more certainty in order to encourage investment. Within corporate-owned enterprises, such as sugar and forestry, and many processing industries, there are clearly further opportunities for deracialisation and training. Land tenure is also an important area for discussion if the redistribution programme is to succeed.

The Communal Land Tenure Bill published in 2017 provides for a number of different outcomes, but seems to lean towards collective ownership, both through traditional authorities and CPAs. In a recent book, Rights to Land (Jacana, 2017), Beinart, Delius and Hay argue for a focus on stronger family and individual rights.

With respect to agricultural land and agriculture, the state’s priority should now be on unlocking the productive potential of the areas that are already occupied by those who suffered discrimination in the apartheid era. Innovative programmes are needed for smallholders where they hold land, as well as support for those who have recently moved onto transferred land.
If AgriSA is correct to estimate this area as including over 40 per cent of the country’s agricultural land, measured by its productive potential, then gains could be very considerable and contribute to those elusive goals of increasing rural wealth and employment.

This is not the place for a detailed discussion of existing or new projects but it is unlikely that the state acting alone will make much impact. Land reform should move beyond a polarising policy and this should be a major aim for Ramaphosa and the ANC (or any other future government).

Synergies are clearly possible between commercial farmers, expanding agricultural servicing organisations, NGOs, CPAs and smallholders. Some success is evident on outgrower schemes, for example in sugar, forestry and wool, as well as irrigation projects. Extension services and animal health technicians, as well as education and training, can play a larger role in expanding the knowledge-base of smallholders.

Many other ideas have been suggested but few tested: input subsidies; decentralised strategies of water capture and reticulation; higher value crops for garden production; education programmes around nutrition focused especially on younger people to enhance more positive associations with agriculture.

Tourism, potentially connected with the “cultural economy” or protected areas is often raised as a means to diversify rural economies but this too has tended to follow the lines of privately owned, commercial farming zones. Top-down schemes run by the government have generally faltered; increasing connectedness, knowledge and credit may offer a way forward. A buoyant agrarian sector will require cooperation between commercial farmers and smallholders, as well as private enterprise and the state.

 

William Beinart was educated in South Africa (UCT 1968-71), did his doctorate at SOAS, University of London (1975-9) and was Professor at the University of Oxford from 1997 to 2015. His recent research has focused on land issues, rural local knowledge and livelihoods in South Africa. He has assisted with research on land restitution cases and rural chieftaincy claims, and has written on smallholder production in South Africa (see the GGA website). He is co-author of the recent GGA publication Rights to Land: A guide to tenure upgrading and restitution in South Africa.
The decline of local informal retailers in South Africa

The decline of local informal retailers in South Africa

Spaza shop in Delft South. Image: Sustainable Livelihoods Foundation

South African small grocery businesses need to learn lessons, and so do legislators

Informal retailing offood and drink accounts for some 54% of all township micro-enterprises and is a critical business activity for economically marginalised South Africans.

Most significantly, spaza shops represent the dominant grocery trading business in the townships. There are over 140,000 of these micro-enterprises nationally, collectively trading over R42 billion worth of goods a year, according to 2016 figures from Neilson.

Nevertheless, not much data is available on the economic impact and scale of such informal businesses, particularly with regards to the scope and scale of self-employment in contexts such as township settlements. Moreover, South Africa’s efforts to engage or support such enterprises through appropriate and effective policy efforts have been minimal, despite their important role in food security and local employment.

Following extensive anecdotal reports of increasing foreign national ownership of township spaza businesses, researchers from the Sustainable Livelihoods Foundation (SLF) revisited a township in Delft, near Cape Town, where they had carried out research in 2010/2011 as part of a study of micro-enterprises around the country.

Their aim was to examine the nature of change in the local grocery economy, given that a shopping mall was being built near the suburb (Delft South) where they had previously carried out research.

Using a “small-area census approach”, we aimed to identify and log the GPS co-ordinates of all existing micro-enterprises (including grocery retailers) within the suburb, a 2,93km2 area of 11,000 households that is home to 43,185 people. We also conducted interviews with spaza business owners, using a semi-structured questionnaire to establish product pricing, enterprise operations and business challenges. The research was undertaken over a three-month period from June to August 2015.

During our earlier research, we identified some 879 micro-enterprise activities, including 177 spaza shops. The underlying residential environment and Interestingly, the spaza sector was one of only two business categories that declined in number in Delft South, with  some  32 categories considered.

All the other categories experienced considerable growth between 2011 and 2015. While some activity in certain business categories might have gone undetected in the initial survey, the growth in enterprise types other than spaza shops was startling.

In takeaways (364%), tailoring services (355%), street trade (776%) and in the sale of meat, poultry and fish (391%), for example, the data revealed an astounding growth of activities. Also noteworthy was the growth in liquor retail – predominantly, the very small micro-enterprise variety – which increased by 32%. This was remarkable, given the risks of illegal liquor trading. Such micro-enterprise growth places the decline in spaza shop numbers in a startling context. There had been an enormous expansion of informal business activities in that time.

The size of Delft South’s local population had changed little since 2010/2011, but in 2015 we found that the number of spaza micro-enterprises in the neighbourhood had decreased, with some 152 outlets now operating, representing a decline in outlets by 14%. The growth of street trade and informal businesses has meant a decline in spaza shop numbers.

In 2010/2011, spaza shops and smaller “house shops” accounted for one third of identified micro-enterprises, whereas in 2015 these forms of grocery retail outlets represented only about 15% of these businesses. Nonetheless, food, drink and groceries still dominated, in numerical terms, the range of micro-enterprise activities within the Delft informal economy.

Furthermore, within the spaza sector, of the 177 shops originally identified, some 126 (70%) had ceased trading by 2015. Only 53 shops had continued to operate from the same premises, though in many cases the ownership had changed. A mere 12 shopkeepers recalled participating in the 2011 survey. Local residents reported that spaza shops were frequently bought and sold, even changing hands between entrepreneurs of different nationalities. It was clear there was considerable fluidity in the sector.

Immigrant businesses have found a role in Delft by responding to market opportunities through providing more competitive services and by introducing innovation. In 2010, ownership of spaza outlets on the site was evenly split between South Africans and foreign migrants. At that time, they were Somali and Bangladeshi nationals. In 2015, however, some 82% of the 157 spaza shops remaining in the district were owned by immigrant entrepreneurs, predominately Somalis, Ethiopians and Bangladeshis. Most of these outlets were operated by employees of the owners, who were rarely seen in Delft.

Through extensive interviews with local shopkeepers, the researchers learned that the dominance of foreign shopkeepers in Delft  South was due to their ability to leverage competitive advantage through a range of business models and strategies.

These varied from shop to shop and nationality to nationality, but commonly included supply chain wholesale linkages, integrated distribution networks, price discounting, retailing of contraband cigarettes, labour practices based on kinship, and maintaining multiple retail outlets under centralised ownership.

It was apparent that immigrant traders and South Africans in the sector had sought to gain competitive advantage through aspects and combinations of the above practices, but the evidence indicated that entrepreneurs who embraced informal processes had generally been more successful.

Informal economic survivalists, especially South Africans who exclusively operated single operator and micro-business models, were vulnerable to business failure. The township grocery market had become an increasingly contested business space.

The ability of supermarket chains and their holding companies to influence municipal regulation and land-use zoning is a major inequity compared to the limited power and political influence of township micro-enterprises. The business and policy environment greatly favours the rise of formal businesses over the emergence of a new class of township entrepreneur.

It emerged, for instance, that the City of Cape Town had sold off a 9.7ha site adjacent to Delft to Shoprite Checkers, a South African supermarket chain. In 2016 it was announced that a shopping mall would be built on the site. Supermarkets and shopping malls often include high-street liquor and takeaway businesses. These business-outlet types alone would directly compete with over half the nearby township economy.

By actively facilitating shopping-mall development near the township, yet making no allowance for informal business, local government and big business form a highly effective partnership to out-compete and dominate the township retail grocery sector. The new mall will form a localised monopoly of formal retail businesses – against which no township grocery retailer can hope to prosper or grow beyond its current informal status.

Overall, the second round of research in Delft South revealed a story of demographic and competitive change within the township informal retail grocery sector (much of it replicated across South African townships). While this change has in many cases led to reduced prices for township grocery consumers, it has come at considerable cost to South African-owned micro-enterprises.

Foreign entrepreneurs have increasingly embraced their informal status and capitalised on weak governance, and they openly oversee trade in products such as contraband cigarettes while using non-normative employment models.

Furthermore, supermarkets and malls, due to their size and scale, have the power to procure land, change land-use zoning, and leverage their businesses in ways far beyond South African independent spaza owners.

As such, many South Africans have ended up sandwiched between these two extremes: on the one hand, they are too survivalist in orientation to embrace informality, but on the other they are too small to command influence from the state. Both of these factors squeeze survivalist business opportunities out of the township economy.

Combined with the unfortunate reality of recurrent xenophobic violence and social and economic upheaval, this means that the informal sector in South Africa is nationally significant – and it needs appropriate policy intervention. Policies that help to ease the legal and technical processes for formalising informal businesses are urgently needed. Town-planning laws need to incorporate the residential reality of township informal grocery retailing. A national system that brings spaza businesses of a minimum size into the regulatory framework, where their activities can be better overseen, is also needed.

As the Delft South research shows, future shopping mall developments must be required to satisfy social and economic impact assessments for their impact on local micro-enterprises. At least 25%, or indeed more, of their retail space should incorporate local township businesses, and supermarkets should be required to carry a proportion of stock produced by smallholders.

Leif Petersen co-founded the Sustainable Livelihoods Foundation in 2010. His PhD (2013) studied Cape Town’s informal economy of natural resources. He is currently a postdoctoral scholar with the National Research Foundation Centre of Excellence in Food Security. He has conducted township micro-enterprise spatial studies, investigations of informal economy value chains of manufacturing and food, and most recently a nationwide study of the informal grocery sector.