Opinionista Mzukisi Qobo 21 May 2018

Transforming the food value chain should be part of land debate

The land question is now firmly the centrepiece of the ANC’s vision for transformation. The implementation Gordian Knot lies in navigating expropriation without compensation within a constitutional framework, and without disrupting the economy, especially food security.

Land and agriculture were in the spotlight again this past weekend. The ANC convened its National Land Summit to formulate an implementation strategy for its 2017 conference resolution on land reform. A few days before the Land Summit, the Land Bank announced a R15-billion allocation to finance black emerging farmers, which triples the Bank’s previous support.

The land question is now firmly the centrepiece of the ANC’s vision for transformation. In his opening address at the Land Summit, President Ramaphosa stated that this push for land reform, in which expropriation without compensation is a central element is necessary to “undo a grave historical injustice”, and that this is both a moral and a political imperative that is about dignity, identity and security. The implementation Gordian Knot lies in navigating expropriation without compensation within a constitutional framework, and without disrupting the economy, especially food security.

Implementing Transformation is Urgent

One of the positive aspects of the ANC’s rhetoric on land reform is that it has placed transformation at the centre of public discussions and policy thinking. It is a discussion that frames the thinking of both the private sector and public institutions that have been lethargic thus far. Even the annual gathering of white farmers in the Free State, the Grain SA sponsored NAMPO event, which overlapped with the ANC’s Land Summit, has had many panels this year focusing on transformation.

However, beyond the Land Summit, the ANC will have to show that it is serious about transformation. There have been three major criticisms of the party since it took power in 1994. The first is that it spent the first decade in office using its political capital to assuage white fears. Efforts were expended performing for the white gaze as part of an unremitted national reconciliation project and working hard to prove that the ANC can run a modern government in a “civilised” fashion.

In some respects, this governing posture was at the expense of the majority of South Africans who continued to collect crumbs on the margins of the economy. Second, the ANC privileged the adoption of economic policies that were palatable to the global markets, even if they were bitter for the majority of South Africans and yielded paltry transformative results: patterns of ownership in the economy, equity profile of top echelons in industry, and the apartheid-era spatial arrangements have remained unchanged.

Third, while the ANC generated lots of high-sounding policies – borrowing best practices abroad – it has been a serial failure at implementation. This implementation deficit is partly responsible for lack of economic transformation. In a year’s time, South Africa will be a quarter of a century as a democratic country, run by a predominantly black government, and still with an economic structure that is predominantly owned by a minority, still exhibiting race-based inequalities.

Dignity, Identity, and Security

There are multiple dimensions to the land question as it is sharply raised by the governing party. As Ramaphosa pointed out, there are at least three salient factors the land debate needs to respond to. There is the question of dignity, which includes property ownership (or lack thereof) by the majority of South Africans and the imperative of breaking down of the invisible barriers to spatial settlement that are a throwback to the era of Group Areas Act and influx control.

Restoring dignity is not just a matter of giving people free land for settlement, it has to go hand in hand with creating economic opportunities to ensure sustainability. It is not either or, but all these factors should be taken into account in thinking about restoring dignity. Second, there is what Ramaphosa referred to as the question of identity.

How we conceive our identities is linked to our relationship with the land – a sense of belonging to a place, as well as assets that we consider belong to us. For many years, it has been inculcated into the minds of South Africans that their identity is tied by an umbilical cord to the homelands system and its traditions, and the rest of the country was not theirs. There is an expression in my language when you are asked about where your home is, you refer to your home as where your umbilical cord is buried.

Historically, arable land was out of reach to the majority of South Africans. Their psychological identification to the place they own had to be toil and poverty. The sense of property ownership was blunted, in part by the traditional authority structure that was spawned to buttress the apartheid system. Even under the democratic government, the effects of this system are still etched in practice and in lack of policy innovation to shift the spatial arrangement and empower black South Africans to have a sense of ownership of productive assets, and to participate meaningfully in the capitalist economy.

This links to the third component that Ramaphosa underlined, which is security. This is both about feeling a sense of ownership of one’s country, identification with its economy, and possession of economic security – all important in enhancing a sense of psychological security or self-esteem. The majority of black South Africans remain economically insecure on the margins of the economy.

Transformation Across the Value Chain

The land debate is only the beginning of attempts at restoring dignity, enhancing the sense of identity of the marginalised, and bolstering economic security. In the sphere of agriculture, for example, there is increasing talk about agrarian reform. There are many proposed initiatives, some of which are unco-ordinated, aimed at supporting smallholder and emerging farmers.

The Land Bank, which has in the past come under severe criticism from the black farming community for behaving more like a commercial bank than a development finance institution, has recently announced a significant portion of money earmarked for emerging farmers. While this move by the Land Bank is commendable, more is required, for example to transform the financial intermediation sector that actually delivers the Land Bank loans to emerging farmers. Importantly, greater consideration should be given to changing the food value chain, beyond just focusing on primary production support.

One of the unintended consequences of focusing on primary production level support is that this could leave the bulk of South Africa’s agribusiness untransformed. The deeper form of transformation, and something that the agrarian aspect of the land debate should also pay attention to, is to overhaul the food value chain which is currently owned by a few white players. Many of these white groups emerged during the shift towards deregulation in the agriculture sector in the early to mid-1990s.

The signs of consolidation in the agribusiness sector began at the closing years of the GATT Uruguay Round of multilateral trade negotiations that commenced in 1986 and ended in 1993. South Africa negotiated its accession under difficult terms and joined the GATT during this period. As part of its accession negotiations, South Africa offered deep liberalisation of its agriculture sector. This meant that the previous state-sponsored support measures (subsidies and marketing boards) for farmers were to be abolished. By 1997, the agriculture sector was deregulated. The farming units shrank by nearly 60% to 40 000 in the absence of state support. Various co-operatives that were formed in the 1920s with Land Bank support were privatised.

Groups such as Afgri SA, Senwes, BKV Co-operative, Kaap Agri, and Pioneer Foods grew through consolidation to dominate the value chain from production to storage to processing and marketing. Some of these organisations still take the lion’s share of the Land Bank’s loan book for their on-lending facility and earn profits, with no effort at creating black financial intermediaries. It will not be surprising that the R15-billion set aside by the Land Bank for emerging farmers will leak into white-owned financial intermediary companies who will be asked to deliver it.

Part of the value chain transformation should be a serious attempt to empower black financial intermediary businesses that are likely to be more familiar with the unique challenges faced by black farmers, including those in the former homelands. This is important since Land Bank loans through financial intermediaries are often bundled with non-financial support such as training, mentorship, and other extension services.

It is one thing to support farmers at a primary level, and quite another for them to access storage facilities, logistics, and linkages to markets. If black farmers are to be a serious player in the capitalist farming economy, they would need to be supported across the value chain. As Timothy Keegan says in his book, Rural Transformation in Industrialising South Africa:

A capitalist farming economy can only emerge on the basis of developed transport and marketing facilities. Productive resources can only be turned to profit if market are readily to hand which are sufficiently elastic to absorb a growing output without serious logistical obstacles…”.

Many black farmers continue to encounter finance, storage, logistical, and marketing bottlenecks – because all these enablers are owned by a tiny minority whose interest is to reinforce its dominance and price setting power.

State-backed investment vehicles such as the Land Bank, the IDC, and the PIC have the muscle to change the shape of the sector, and to deliberately empower new black players across the food value chain. Currently they are fragmented in their operations even when they are working on the same sector. The Land Bank, for example, has an agro-processing unit; the PIC has set aside R70-billion to promote development activities, including agro-processing, among others.

It makes little sense for the Land Bank not to work towards unlocking the bottlenecks across the value chain, something that will help to augment and diversify its loan book in the long run. These institutions can also work together to develop agriculture infrastructure, invest in storage facilities, and force private sector companies who either receive Land Bank loans or PIC investments to off-take from emerging farmers.

The land reform debate, and agrarian reform in particular, should be broad-based: addressing property relations challenges faced by black farming communities in the former homelands, empowering smallholder farmers, supporting black emerging farmers, and overhauling the food value chain and creating a new class of black-owned agribusiness groups. DM

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