News analysis

Sheep on a farm
(Getty)
  • The Presidential Advisory Panel on Land Reform and Agriculture thinks one model of farming is best to ensure South Africa sees growth in agriculture: individual commercial operations on land not owned by government.
  • At the very least, if commercial farmers work land owned by the government, they must have long leases secure enough that banks accept those as collateral, the panel says.
  • Farming by collectives, on the other hand, it has severe reservations about.
  • For more stories, go to www.businessinsider.co.za.

President Cyril Ramaphosa's Advisory Panel on Land Reform and Agriculture believes individuals or companies should own commercial farms in South Africa, or should at least have leases so iron-clad they can literally take them to the bank.

Any models involving groups working the land collectively, on the other hand, should be approached with great care the panel suggests – and with the assumption that it will make people poorer.

Group farming by way of community associations or other structures fail so often that as a farming model it is unlikely to increase either household income or food security, the panel says in its final report released on the weekend.

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Individual commercial operations, on the other hand, have proven successful both internationally and locally, the panel says.

"The reason is that work, management and investment incentives are all aligned because of the private profit objective of the model and farmers who use it," the panel says in an annexure to the main report that explores "the merits and likely success of different farming models".

This, it says, "is also the model of the large scale commercial farming sector in South Africa which has been a high performing sector in the past 20 years, even though all programs and policies that provided it with special benefits, have been abolished." 

The panel does not quite endorse private commercial farming unequivocally; it warns that the employment objectives of the National Development Plan will not be helped by individual commercial farms unless such farms are small.

But its criticism of collective farms is far more harsh.

Group operations tend to cause a decline in both agricultural output and revenue, the panel told Ramaphosa, which means people can not make a decent livelihood from the land they work. Poverty and unemployment increases, while overall economic growth is also hit. 

"The poor incentives to work hard and invest in group ventures, the intricacies of large farming operations, and the need for critical and timely decisions put any group operation at risk of failure," the panel says.

A possible exception, it says, is when common land is used for grazing, as long as rules are well enforced by community leaders.

But communal land can not be used as collateral for loans, it points out.

Individual smallholder farmers on state-owned land face the same problem, it says: banks want decent collateral before they hand over production loans. This is why it recommends that anyone who gets the right to work state-owned land should have a minimum lease of at least five years – and should be "transferrable after a certain period".

The panel also recommends that legislation be put in place that such long-term, transferrable leases "would be so secure that banks would be willing to accept them as collateral", as freehold land would be.

Where smallholder farmers do not own the land they work, the panel says, their success often depends on special arrangements to give them access to credit or to support services and infrastructure. But the most successful model for small farmers around the world is one where the farmer is also the owner.

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