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The target II

13 November 2009
Victory is our target

"Victory is our Target" Target Comics book cover: Vol 4, No. 7

I’m aware that some readers found my earlier posting regarding the re-scheduling of the 30% target too obscure. This seems to have been especially the case regarding what I meant by there being ‘no real budget constraint’ on land reform. I would like to sketch my argument a little more carefully and clearly. (For my own benefit as well.)

In a given year, the Department of Rural Development and Land Reform (DRDLR) has a fixed budget for land reform purposes which it must not exceed. So in the short-term, of course there is a budget constraint. Because of this, DRDLR officials often complain about the fact that rising farmland prices have eroded the purchasing power of its land reform budget. And of course, this is true. Average farmland prices rose by about a factor of 3 between 2001 and 2008. This is hurting.

However, it’s also true that over this same period, capital spending on land reform rose almost ten-fold, from R560 million to R5.3 billion. What does this huge increase reflect? It seems to reflect two things. First, it reflects the acceleration of restitution settlements, which National Treasury had no choice but to try to accommodate. And second (and somewhat later in time), redistribution budget rose dramatically, largely reflecting the increased ability to spend money through ever larger grants (which as I argued previously, has had very modest positive impact).

And yet, expenditure on land reform – even including current (i.e. non-capital) spending – has never reached a full 1% of the total national and provincial consolidated government expenditure. In 2001/02, land reform expenditure was only 0.27% of consolidated government spending; by 2007/08 this share had increased to 0.92%, and since then it has declined somewhat. Why so little for such an important programme? Because there are many other important programmes, and land reform just has not demonstrated that it’s a particularly good way of spending scarce resources.

I would interpret the increases in the budget for redistribution in particular as being more of an indulgence on the part of Treasury than an affirmation of its worth. (Never mind the DRDLR’s new rural development programme; Treasury officials privately shake their heads when you just mention it.) This indulgence has been made possible in large measure by the programme’s initial small size, as well as by the fact that government spending overall has risen so much (between 1999/00 and 2009/10, there was a 91% increase in consolidated expenditure, after adjusting for inflation – so much for fiscal austerity!). But note that the current budget for ‘social protection’ (largely consisting of social grants) is 22 times as great as that for land reform. For health and education, the figures are 16 and 26 times, respectively. It’s not as though the government is shy about spending money to benefit low-income households. (Perhaps less understandably, the budget for ‘recreation and culture’ is 38% greater than the land reform budget.)

Before I completely lose sight of what point it is I want to make, it is this. While DRDLR’s sense of not having enough money is understandable, the reality is that there is enormous scope for their budget to increase, if and when they can demonstrate ‘success’. What ‘success’ means should not be taken simplistically to mean agricultural productivity or enterprise profits, but the absence of success right now is obvious, and both the Director General and the Chief Land Claims Commissioner have candidly and courageously shared their concerns about the ‘challenges’ experienced. All of this is to say that we need to focus our efforts on improving land reform, rather than achieving some arbitrary hectarage target. The hectares will follow.

I’m aware that some readers found my earlier posting regarding the re-scheduling of the 30% target too obscure. This seems to have been especially the case regarding what I meant by there being ‘no real budget constraint’ on land reform. I would like to sketch my argument a little more carefully and clearly. (For my own benefit as well.)

In a given year, the Department of Rural Development and Land Reform (DRDLR) has a fixed budget for land reform purposes which it must not exceed. So in the short-term, of course there is a budget constraint. Because of this, DRDLR officials often complain about the fact that rising farmland prices have eroded the purchasing power of its land reform budget. And of course, this is true. Average farmland prices rose by about a factor of 3 between 2001 and 2008. This is hurting.

However, it’s also true that over this same period, capital spending on land reform rose almost ten-fold, from R560 million to R5.3 billion. What does this huge increase reflect? It seems to reflect two things. First, it reflects the acceleration of restitution settlements, which National Treasury had no choice but to try to accommodate. And second (and somewhat later in time), redistribution budget rose dramatically, largely reflecting the increased ability to spend money through ever larger grants (which as I argued previously, has had very modest positive impact).

And yet, expenditure on land reform – even including current (i.e. non-capital) spending – has never reached a full 1% of the total national and provincial consolidated government expenditure. In 2001/02, land reform expenditure was only 0.27% of consolidated government spending; by 2007/08 this share had increased to 0.92%, and since then it has declined somewhat. Why so little for such an important programme? Because there are many other important programmes, and land reform just has not demonstrated that it’s a particularly good way of spending scarce resources.

I would interpret the increases in the budget for redistribution in particular as being more of an indulgence on the part of Treasury than an affirmation of its worth. (Never mind the DRDLR’s new rural development programme; Treasury officials privately shake their heads when you just mention it.) This indulgence has been made possible in large measure by the programme’s initial small size, as well as by the fact that government spending overall has risen so much (between 1999/00 and 2009/10, there was a 91% increase in consolidated expenditure, after adjusting for inflation – so much for fiscal austerity!). But note that the current budget for ‘social protection’ (largely consisting of social grants) is 22 times as great as that for land reform. For health and education, the figures are 16 and 26 times, respectively. It’s not as though the government is shy about spending money to benefit low-income households. (Perhaps less understandably, the budget for ‘recreation and culture’ is 38% greater than the land reform budget.)

Before I completely lose sight of what point it is I want to make, it is this. While DRDLR’s sense of not having enough money is understandable, the reality is that there is enormous scope for their budget to increase, if and when they can demonstrate ‘success’. What ‘success’ means should not be taken simplistically to mean agricultural productivity or enterprise profits, but the absence of success right now is obvious, and both the Director General and the Chief Land Claims Commissioner have candidly and courageously shared their concerns about the ‘challenges’ experienced. All of this is to say that we need to focus our efforts on improving land reform, rather than achieving some arbitrary hectarage target. The hectares will follow.

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3 Comments leave one →
  1. 29 November 2009 10:52 pm

    Having visited South Africa last year I am amazed that the “land reform” programme involves the purchase agricultural land from existing landowners.
    Consider the following:
    The most valuable land in South Africa is in your towns and cities.
    As the economy and society develops all land values will rise.
    By purchasing land, the Government is wasting resources that could be better spent on transport, health and education.
    By purchasing land for redistribution, the Government is pushing up the price of land for everyone, because mother nature has fixed the supply (our planet does not grow any bigger) and so the additional buyer in the market can only increase the price.
    The South African constitution claims that South Africa belongs to the people. So as landlords – why not charge landowners the economic rent on an annual basis?
    This could simply be achieved by valuing ALL land – urban and rural, for its annual rental value (ignoring all improvements)and then charging an Annual Land Value Tax as a percentage of this value.
    The effect will be to:
    REDUCE the selling price of land;
    discourage land hoarding;
    create jobs;
    and provide the Government with a sustainable source of revenue to spend on health, education and transport etc.

  2. Sonja Vermeulen permalink
    19 November 2009 6:00 pm

    With regard to the threefold increase in farmland prices over seven years, is it possible to say what the impact of international investors has been on land prices in South Africa? Certainly the view from London is re-emergence of agricultural land as an attractive “asset class”, with investors such as Emergent Asset Management pursuing ambitious targets for land acquisition in South Africa (and a minority of other African countries with similar privatised land tenure).

  3. Paul S. Landau permalink
    18 November 2009 6:47 pm

    Let me add a few remarks from a faraway observer with a particular (and perhaps to many, remote) expertise: the politics of African land usage in the 19th century. It seems to me that the focus of land reform has inherited a structural constraint from the ancien regime, the idea that self-constituted groups must be given security, without enough land. The essence of productive (market-oriented) land usage in the 19th century was a lack of constraint over mobility given the unpossessibility of land. Patriarchal enforcement was tempered by the ability of enterprising men with ploughs to move away a bit. This was true for instance in the Mohokare/Caledon valley until the 1860s, a grain-producing area even under sharecropper production in the 1880s and 1890s. People’s chief- and alliance-centered politics permitted them to form productive solutions if it meant de-constituting the group. People could move even under share arrangements with reference to African (Basotho netowork) and Boer/Afrikaner landlords. Group rights in contained areas have no such safety valve and patriarchal rights over minors get abused.

    Assuming I am right, what to do about it? One solution would be to restore political autonomy over civil matters to a big piece of territory, — not to focus on which *people* or group gets a smaller piece of territory.

    In other words, to define very broadly the ethnic or chiefly identity of people allowed to be there, not to recognize a particular group, but instead to pose requirements for productive farming in a wide area. To require residence for those working the land, with a marketing board, and a certain level of production (low, managable, but real), then to back off otherwise in every imaginable way. The key thing is to allow wide tracts of land to be un-owned and un-farmed for long interim periods. In short a massive extension of communal areas without a state-sponsored chiefly structure.

    There is no way to (re) establish permanent group rights as groupism was a development constrained and so defined by NAD and Apartheid administration. And there is no way in a small, contained area to prohibit resale or alienation or capitalization of scarce resources and thus the undoing of reform. The key must be to make the land as a resource not scarce. That takes a lot of land and perhaps tenure rules pertaining to that land, and resident farmers.

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