28/02/2018 14:21 SAST | Updated 28/02/2018 14:21 SAST

The Economics Don't Add Up On Land Expropriation

Expert warns that a decision to expropriate land without compensation may not work out the way government intends it to.

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It will be very difficult to reconcile the injustices of the past through land expropriation without compensation and not tamper with the economy and food production.

This is according to agricultural economists, who warned that the process may not lead to potential land recipients being able to develop and cultivate their space, as government intends them to do.

On Tuesday, Parliament made a landmark decision, passing a motion to review section 25 of the Constitution, which deals with property and land expropriation. The ANC took a resolution to begin the processes for land expropriation without compensation at its national conference last year, but the decision came with clauses.

The party wants to expedite the process without it taking a toll on the economy, food security and agricultural production.

READ: This Is What The Constitution Says About Land

Chief economist at AgriSA Hamlet Hlomendlini says the ANC has not been able to outline how it plans to roll out land expropriation without compensation while keeping to its own clauses.

"It is very difficult to reconcile land expropriation without compensation and not tamper with food security and the economy... This decision may have come out of government's realisation that [it has] failed in the land-reform programme. This is not going to address that failure," he said.

"[President Cyril Ramaphosa] made it clear that this must not affect the economy. But we have seen this model in many countries, and the opposite has happened. Agriculture's contribution to the economy is driven by farmers who own their property."

Hlomendlini explained that the banking sector only extends loans to farmers based on a number of indicators.

"They look at the land as security against borrowing. Expropriation will mean land as a resource won't serve that purpose for the banks. Farmers have been spending money on capitalisation. If you expropriate that land, what will happen to the investments they made? The uncertainty is causing panic in farming communities, and farmers are holding back on making further investments," Hlomendlini said.

"Economically, this decision is irrational. Government will be cutting channels to developing farmers by giving people land without the money or resources for production. The whole model for banks extending loans to the agricultural sector will have to change."