Medium Term Budget Policy Statement: Briefing by the Minister and Department of Land Affairs

Budget Committee on Appropriation

11 November 2008
Chairperson: Ms L Mabe (ANC)
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Meeting Summary

The Minister of Agriculture and Land Affairs and the Department of Land Affairs briefed the Committee on the steps being taken at the moment by the Department. In 1994, land reform was identified as an integral part of the Reconstruction and Development Programme. However, the 30% target that had been set by Government placed greater emphasis on hectares to be delivered, and less on sustainability. The Department set out the issues that the Department would take into account in selecting beneficiaries. He stressed that land acquisition was a negotiation process and thus took a lot of time and that it involved challenges such as the management of property and assets by the State after acquisition. The Department considered that it was necessary to explore alternatives to the present course of redistribution, in order to find a path towards achievable, affordable, significant and sustainable land and agrarian reform. It suggested that the 2014 target either must be revised, or a new approach should look to 2025, so that the budget, key support measures and relevant products could be in place to address the current challenges.

The Department described the four main products – being the Proactive Land Acquisition Strategy, the Settlement and Production Land Acquisition Grant, the Land Redistribution for Agricultural Development and Acquisition for Sustainable Settlements. Each of these was described and the main purpose of each was highlighted. Some of these required own contributions, either by way of finance or labour input.

Members asked questions about how the strategic plans and programmes were devised, whether there was contact with municipalities around coordination, and whether the Departments of Land Affairs and Agriculture interacted to align budgets and projections. They discussed the re-zoning of agricultural land, especially for game farms and golf courses, and the effects on agriculture. Members commented that they would be pleased to see the Development Facilitation Act repealed and the Land Use Management Bill put into operation as it would help to address many issues. Members asked how much the Proactive Land Acquisition Strategy was likely to cost, whether loans had been underwritten, and the rate of interest, any plans to assist defaulting farmers, the assistance that could be rendered in future, and what was to be done about land owned by foreigners and the problems with the Willing Buyer / Willing Seller principles.  Members also discussed human resource issues, including the training and employment of extension officers, and the need to devise a strong strategy to ensure that land redistribution became a reality.


Meeting report

Medium Term Budget Policy Statement (MTBPS): Department of Land Affairs (DLA) report

Mr Thozi Gwanya, Director-General, Department of Land Affairs (DLA), said that in 1994 Land Reform had been identified as an integral part of South Africa’s Reconstruction and Development Programme. He noted that the 30% target that had been set by Government placed more emphasis on hectares to be delivered and less on sustainability.
Three important factors had to be considered when discussing the land questions. These were the ever-increasing characterisation of larger and more sophisticated capitalised units, rising farmland prices, and a decline in employment on commercial farms. He noted that between 2001 and 2006, land prices had increased by approximately 108%, with the estimated average land price per hectare ranging between R7 000-R8 000, with land bought under the Land Redistribution for Agricultural Development (LRAD) project averaging R7 254 per hectare.

When selecting beneficiaries for land reform, the Department would take into account a variety of issues, including what budgets were available, the level of skills, the specific needs, and how this could be matched with the right product, and eventually the land. It was noted that land acquisition involved a negotiation process and thus took a lot of time. The Proactive Land Acquisition Strategy (PLAS) process involved challenges such as the management of property and assets by the State after acquisition. It had become necessary to explore alternatives to the present course of redistribution, in order to find to way to achieving affordable, significant and sustainable land and agrarian reform. The DLA was of the opinion that the targets set for 2014 either had to be improved, or a new approach towards 2025 had to be created, so that the budget, key support measures and relevant products could be in place to address the current challenges.

Mr Gwanya outlined that the DLA currently had four products ranges; The Proactive Land Acquisition Strategy (PLAS), the Settlement and Production Land Acquisition Grant (SPLAG), the Land and Agrarian Reform Project (LRAD) and Land Acquisition for Sustainable Settlements (LASS). He described each of these in turn.

He noted that the PLAS proposed a very different role for the State. Linked to the area-based planning processes, the land needs of farm workers, labour tenants, residents of communal areas, as well as emerging farmers in urban areas would be identified. The State, through the DLA and in collaboration with the Department of Agriculture (DoA), would proactively acquire land to address this need. The land would then be transferred to identified beneficiaries through a number of mechanisms, including leasing with an option to buy.

The SPLAG was focused more on farm dwellers and farm workers, as it had been designed to assist with agricultural production, land improvements, infrastructure investments, capital assets and short-term agricultural inputs. This grant also effected settlement improvement through the provision of on-site basic infrastructure such as water, sanitation, internal roads, top structures and fencing. The grant currently stipulated that R111 152 would be allocated per household.

The LARP was intended to address the fact that most South Africans did not have sufficient money to buy land for farming purposes. This programme would make some money available to successful applicants to help supplement what they already had, for the purpose of purchasing agricultural land. This would be done in the form of government grants, and was a non-refundable form of funding or financial contribution by government to help prospective farmers to purchase land. A formula would be used to determine how much an individual could get. This formula was based on how much money or input into the farming operations on that piece of land (own contribution or contribution in kind), or a combination of the two, would be contributed by a person towards the purchasing of that particular piece of land or on-farm implements. The grant would only serve as a financial supplement to what an applicant already had. The applicant must make his or her own contribution to the process, to form part of the whole capital package.

Mr Gwanya noted that the Agricultural Development sub-programme was also set out in the framework document. The agreed objectives included:
- to increase access to agricultural land by black people (Africans, Coloureds, and Indians) and to contribute to the redistribution of approximately 30% of the country’s “formerly white” commercial agricultural land over the duration of the programme;

 - to c
ontribute to relieving the congestion in over-crowded former homeland areas;
- to improve nutrition and incomes of the rural poor who wanted to farm on any scale;
- to o
vercome the legacy of past racial and gender discrimination in ownership of farmland;
- to facilitate structural change over the long term by assisting black people who wanted to establish small and medium-sized farms;
- to stimulate growth from agriculture;
- to create stronger linkages between farm and off-farm income-generating activities;
- to expand opportunities for promising young people and encourage them thereby to stay in rural areas;
- to empower beneficiaries to improve their economic and social well-being;
- to enable those presently accessing agricultural land in communal areas to make better productive use of their land; and
- to promote environmental sustainability of land and other natural resources.

Mr Gwanya said that certain basic principles underlay the
Land Redistribution for Agricultural Development (LRAD) project. It was unified and basic, and beneficiaries could use it in flexible ways according to their objectives and resources. All beneficiaries had to make a contribution in kind or cash, but varying in amount. It was demand-directed, so that beneficiaries defined the project type and extent. Implementation was decentralised and local-level officials provided opinions and assistance in preparation of the project proposal, but would not approve the application.  He stressed that inter-departmental collaboration would take place at all spheres of government, with the district government assuming a key role. Projects would be undertaken in a manner consistent with district and provincial spatial development plans. These projects would then be reviewed and approved at provincial level. Audits and monitoring after approval would supplement the lengthy pre-approval process. The mode of implementation was adopted in the interest of maximum participation and empowerment of beneficiaries, speed of approval and quality of outcomes.

Mr Gwanya then moved on to describe the
Land for Agriculture and Sustainable Settlements (LASS). This programme had been implemented in urban areas for urban agriculture (commonages) and land for housing.  The DLA had decided to ring-fence 20 % of the land reform budget allocation for LASS projects annually, dependent on the needs of the community.

Mr M Swart (DA) asked why the DLA had not decided to devise their strategic plans and programmes so that they could have a clear understanding of where these were going.

Mr Gwanya said that there had to be an indication that the changes the DLA wanted were happening in terms of long term planning, and that a short term response to objectives was needed. The DLA had thus taken a long-term view of the desired results for the implementation of the Land Reform Programme and the Post-Settlement Support Programme.

Mr Swart asked whether the DLA had been in contact with municipalities regarding the scenarios that pertained to them.

Mr Gwanya said that the DLA had engaged with municipalities in the Durban and e-Thekwini  areas and that coordination was also planned within the various clusters of government.

Mr G Schneemann (ANC) said that he was glad that an official from the DoA had accompanied this delegation, as interaction between the two departments had been wanting.

Mr Schneemann asked whether the DLA had shared its projections with the DoA so that the latter’s projections and budget could be aligned.

Mr Gwanya confirmed that the DLA had shared its plans with the DoA and that this had led to the plans being revised. A problem had occurred when the budget had been presented to the National Treasury, who had turned it down.
Ms J Fubbs (ANC) said the reference by Mr Gwanya to the different prices for land and across the sector had been very useful, as many people had vast areas of uncultivated land. She added that many professionals and private business had taken a keen interest in buying this land and having it re-zoned for game farming purposes

Mr Gwanya said that in cases where there had been no land claims nothing stopped people from developing that land as they pleased. He added that many farmers had re-zoned their land for purposes other then agriculture, and that this had led to farmers selling more land than would have been the case had the land simply be retained for agricultural use alone. He said that the Development Facilitation Act (DFA) had allowed this to happen, and that there was hope that the Land Use Management Bill (LUMB) would be revived, as it would repeal the DFA.

Mr Gwanya noted that the emergence of game farms had been a rising phenomenon over the past ten years, as many farmers could not cultivate huge pieces of land any longer. In the past, South African farmers had tended to follow the American model of buying and cultivating large farms. However, it had become very expensive to cultivate them. This led to part of the farms being sold off, or converted to game farms, where the operating costs were lower. The emergence of game farms had also been linked to tourism and tourism development, but it had a negative effect on employment as many people lost their jobs when these farms had been rezoned. He said that there was a need for a clear policy on game farming and it was hoped that the DLA would be able to deal with this issue, through the LUMB.
Hon Lulama Xingwana, Minister of Agriculture and Land Affairs, said that the emergence of game parks and golf courses had also become problematic when many foreigners bought this prime land and used it to entertain their family and friends. She agreed that there had been instances where cattle farms had been turned into game farms, which in turn had led to job losses and a negative impact on food security. She said that these ventures also consumed a lot of water that could have been used for agricultural purposes.

The Minister added that the LUMB would have empowered Government to regulate the development of golf courses, but due to complications this Bill had been placed on hold. She said that most of the opponents to the LUMB had been developers who would have lost millions if it were passed. The present position was not contributing to food security. Minister Xingwana said that only a few people enriched themselves through these developments and that she hoped that that the Bill could be enacted as a measure to control these golf-course type developments, as South Africa had enough golf courses by now
Ms Fubbs asked how much the Proactive Land Acquisition Strategy (PLAS) would cost over the next three years.

Mr Gwanya said that the PLAS had been aligned to the Medium Term Expenditure Framework (MTEF), and that R3; 2 billion had been allocated over the current MTEF period.

Ms Fubbs asked whether the loans that the DLA made available had been underwritten by the Land Bank, and what rate was set for the interest.

Mr Gwanya said that the issue of finance for Categories 1 and 2 had been resolved through Mafisa, which had made funds available for farmers in these categories at an interest rate of 18%. He said that the DLA wanted farmers in Categories 1 and 2 to become more focused, as they could be more productive if they harvested the right crops and had a suitable climate.

Ms Fubbs asked whether the DLA had a plan or strategy in place that assisted farmers who had defaulted on their payments due to a serious or legitimate reason.

Mr Gwanya responded that most of the defaults on payments had not been due to the inadequacies of farmers, but rather due to the difficulties of running projects that these farmers had inherited. Many of the projects did not speak to the needs of the community. The Department was also looking at assisting communities through social mobilisation projects, to come up with solutions to reduce the pressure of reliance on core projects and to address the need for diversification.

Minister Xingwana added that in most cases Government had invested a lot of money through the comprehensive settlement programme, CASP. This had seen a massive rollout of resources to emerging black farmers. It would be unacceptable if this would be repossessed, and Government had been looking at policies that would rectify the problems. She noted that high land prices contributed to high food prices.
The Minister said that the DLA had to be particular as to how beneficiaries had been selected. She noted that the previous legislation had only empowered the DLA to buy land. This meant that the DLA could not provide emerging farmers with the necessary resources for an adequate start to their operations. The Provision of Land and Assistance Amendment Bill would remedy this situation, as it empowered the DLA to also buy equipment, livestock and other resources.

Ms L Mabe (ANC) said that the presentation had been silent on land owned by foreigners.

Mr Gwanya noted that purchasing of land by foreigners had been a major problem, especially since the exchange rate favoured foreigners when acquiring land in South Africa. This had led to a situation where property prices had become very high and effectively excluded South Africans from buying property in their own country. He added that in the United States, foreigners had to live in the USA for ten years before they could buy property or land, and that foreigners were prohibited from buying property or land situated near beaches. He said that Australia and New Zealand also had strict policies in place that regulated foreign ownership of land.

Ms Mabe asked whether the DoA had any plans to increase the number of existing extension officers, besides the ones being trained at universities.

An official from the Department of Agriculture said that the DoA had done an assessment of how many extension officers it employed and had discovered that there had been issues of capacity. He said that great emphasis had been placed on extension officers becoming specialists or experts on one crop or commodity only, so that an integrated system could be developed. The LARP already required of provinces to identify which crops or commodities best suited their environment.

Mr Gwanya said that the Minister had issued a “Green book” to farmers that would serve as a record of visits by extension officers and what they had done, which would be assessed quarterly.

Minister Xingwana said that it had been true that extension officers had not been as visible as they were supposed to be, and that there had been no skills transfer at all. She said that the introduction of the “Green book” would assist Government in keeping track of the work of these extension officers. She also conceded that there had been a shortage of these officers, but that a proposal had been made to National Treasury to allocate funds so that one thousand new extension officers could be trained and appointed over the next three years.

Mr M Sogoni (ANC) said that the willing buyer/willing seller policy had caused a lot of problems and that the Land Expropriation Bill had to be used as a tool to fast track land reform.

Minister Xingwana said that her Department had worked on several policy documents that would address the problems highlighted by the Committee, especially those that pertained to game farms, the willing buyer/willing seller principle and the LUMB.
Minister Xingwana said that land prices had also escalated when sellers had become aware that Government had to buy land for land restitution and distribution, and thus sold their land at inflated prices. The Minister noted that Section 25 of the Constitution directed the DLA to ensure equity in terms of land. It was unfortunate that when black farmers lost their farms through repossession, these would mostly be bought by white farmers, who would sell them back to Government at exorbitant prices. At present, South Africa had 82 million hectares of agricultural land, of which about 2 million hectares were owned by government. The DLA had so far transferred nearly half the percentage of State land, but this would not be enough to address identified needs. She added that Government would still look at what it could do with white-owned commercial land.

Ms R Mashigo  (ANC) said she was happy that the Development Facilitation Act (DFA) would be repealed as it had caused major suffering.

Mr Gwanya replied that he was aware of the problems that the DFA created and that it had been used as an interim measure. It had however only benefited planners and developers. He said that the main point for these developers had been to make as much money as possible. However, the new structures envisaged in the LUMB would be to the benefit of the community.

Ms Fubbs said that Mr Gwanya and the Minister had a clear understanding of the challenges that the DLA faced and of the resources required. She added that the DLA had to review its financial resources as well as its human resources. She felt that DLA had to implement a “warlike strategy” to ensure that struggling farmers would be adequately assisted, especially by successful farmers.

Minister Xingwana replied that the Department had been working on such a “war room approach” for almost two years. The DLA would aim to work with all relevant stakeholders and line-function departments to turn rural land redistribution and development into reality. She said that the DLA had to lead by example and that it was hoped that the project leader, who would be appointed to facilitate engagement between the DLA and the DoA, would address this issue.

The meeting was adjourned.


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