LETTER: Back-to-front strategy - Business Day

By Frans Cronje

Cyril Ramaphosa has his strategic objectives and biblical parables back to front. His announcement that he plans to investigate why so many land-reform farms are derelict, following his earlier announcement that the Constitution is to be changed to allow land expropriation without compensation, puts the cart before the horse.

We can predict what an unbiased investigation will uncover: that emerging farmers have insufficient access to capital, particularly where their tenure status is uncertain. Expropriating commercial farms without compensation will condemn the agriculture sector to a similar fate.

Without the more than R150bn that farmers have secured in loans, production will slump, innovation will cease and food prices will rise. Will the state step in to fill the funding gap? That is impossible, as credit extension to farmers dwarfs the land-reform budget and the Land Bank’s capacity for credit extension by several times.

AgriSA CEO Omri van Zyl has noted that "a third of the money borrowed from banks in SA is borrowed against the asset value of farms". Its chairman, Dan Kriek, has correctly warned of the political and economic catastrophe that will follow from land expropriation without compensation.

Property rights are the economic foundation of the rural economy. Threatening those rights holds some short-term political advantages, at best. But even those gains are unlikely to be realised, as polls show that what most South Africans want most is not land to farm but rather employment, education and better living standards.

In the longer term, undermining the capital base of commercial farming will have enormously adverse economic, social and political ramifications beyond rural areas as food production falters and food prices soar. The resulting rise in poverty will trigger even higher levels of public anger than state capture has.

Far from creating a "Garden of Eden", as Ramaphosa suggests, expropriation without compensation will "bring forth thorns and thistles". This is already the case on the majority of land-reform farms and will increasingly become the case throughout the economy if this path is pursued. "Thorns and thistles" will also come to dog the ANC’s electoral performance.

*Frans Cronje is CEO Institute of Race Relations, think tank that promotes political and economic freedom.

Read the letter on BDLive here.