Land reform can work: Prioritising rural economic development and inclusive change

Source: ArthurHidden via Freepik

Although rural populations make up nearly 32% of South Africa's total population, as indicated by World Bank demographic data, these regions continue to struggle with limited economic opportunities, widespread poverty, and high unemployment rates.

The most recent StatsSA estimate reveals a poverty headcount ratio of around 81% in rural areas, compared with 40% in urban areas, highlighting the significant disparity in economic conditions between rural and urban regions.

It is no surprise that South Africa is one of the most urbanised countries in Africa with around 68% of its population living in urban areas and projected to increase to around 80% by 2050 according to the United Nations.

This rapid migration of the population to urban centres will exert unprecedented pressure on social services in the cities, create unbalanced development, lead to the proliferation of informal settlements and incubate social ills such as crime.

Agriculture: Key to rural economic development

South Africa's land reform programme presents a unique opportunity to revitalise rural economies and mitigate the migration of people from rural areas to cities in search of economic opportunities. The land restitution and redistribution initiatives have the potential to drive rural economic development and create significant new opportunities for rural communities.

In an editorial titled Agriculture, Structural Transformation, and Poverty Reduction, academics Johann Kirsten from the Bureau for Economic Research (BER), Wandile Sihlobo from the Agricultural Business Chamber of SA, and Natalie van Reenen from the National Treasury highlight that agricultural growth is typically two to three times more effective at reducing poverty than equivalent growth in other sectors.

However, as they discuss in their paper How Land Reform Can Boost Inclusive Agricultural Growth, simply reallocating land without post-settlement support is unlikely to achieve the desired impact.

They emphasise that a stable policy and investment environment, well-developed infrastructure (including electricity, water, roads, rail, and ports), efficient local municipalities with reliable services, effective farmer support, and functioning state services—such as veterinary care, agricultural research, biosecurity measures, and trade support—are essential for a successful land reform programme that can revive rural economies.

The central agency's role in land reform

To enhance agricultural growth, there is an urgent need for a central agency that manages land reform and development in South Africa.

The Land Reform and Development Agency which was announced by the President a while back must be implemented as soon as possible. This will facilitate better coordination, reduce red tape and serve as a one-stop on issues related to land reform and development.

Post-settlement support remains crucial, where beneficiaries can receive financial and technical support, along with offtake agreements or contracts to ensure sustained growth and the ongoing productive use of redistributed land.

Over the past 12 years, the Vumelana Advisory Fund, for example, has consistently advocated for a supportive environment where emerging farmers can use their land as collateral to access funding from lending institutions.

We have called on the government to explore innovative and affordable financing solutions to address the challenges faced by land reform beneficiaries.

#SAelections24: A crucial turning point for rural development and land reform

Peter Setou  23 May 2024

As one way of dealing with the current challenges, we have facilitated strategic partnerships between claimant communities and private sector investors nationwide to ensure the productive use of land.

We are confident that the private sector holds the necessary expertise, access to finance, and market reach to enable beneficiary communities to sustain and expand their operations on newly acquired land assets.

Land reform's potential for economic growth

There is no doubt about the vast potential of the land reform program to reduce poverty, drive rural economic development, and generate employment and entrepreneurship opportunities for the populations within these areas.

Simulations conducted by the Bureau of Economic Research (BER) have found that successful implementation of these policy levers and interventions could increase real agricultural gross value by 14% above the baseline projections by 2030.

The study also found that total gross production value from agriculture could increase by R32bn in real terms, and the share of black farmer output could rise to more than 20% in sectors where transformation has been lagging.

Land reform can work. Working with land reform beneficiaries we have been able to demonstrate this. Over the past 12 years, Vumelana has facilitated 26 partnerships between land reform beneficiaries and private investors.

Through these partnerships we have been able to mobilise R1bn in investments, enabling land reform beneficiaries to put 76,000 hectares of restituted land to productive use. This approach has created 2,500 jobs and benefited 16,000 households of land reform beneficiaries.

Land reform: Overcoming challenges and creating opportunities for rural economies

21 Feb 2024

Policymakers have a unique opportunity to harness the land reform programme to bring transformative change to the lives of millions of South Africans. For this impact to be meaningful, structural reforms at the municipal level and targeted support for claimant communities are essential to revitalising rural economies.

When not driven by short-term political agendas, the land reform programme can be a powerful tool in reducing poverty. It holds tremendous potential to create sustainable pathways to prosperity for the rural poor.