Land-Seizure Talks Have Hit South Africa's Farming Industry
(Bloomberg) -- It’s not just the rand that’s been hurt by the South African ruling party’s plan to change the nation’s constitution to make land expropriation without compensation easier.
Confidence indexes and agricultural land prices are slumping in part due to the potential constitutional amendment that the African National Congress says is needed to correct racially skewed land-ownership patterns. With elections looming next year, President Cyril Ramaphosa has embraced land expropriation without compensation, but insists there won’t be a land grab and any policy changes won’t be allowed to damage farming production or the economy.
Some critics say the constitution already enables the state to tackle land reform, restitution and redistribution, and that changes are unnecessary. The populist Economic Freedom Fighters party, which has won support from young voters in impoverished townships, supports the change and wants all land nationalized. A parliamentary committee is considering possible amendments.
White farmers own almost three-quarters of South Africa’s agricultural land, according to an audit by Agri SA published last year.
These charts show how the debate has affected the farming industry since the ANC decided in December to seek constitutional change:
The Agbiz/IDC agribusiness confidence index declined to the lowest in more than two years, the Agricultural Business Chamber said Monday. That’s the weakest since 2016, when the nation was in the grips of a drought that ensued after the lowest annual rainfall in at least a century.
Farm prices in South Africa have plunged by a third since December. The average price of agricultural land sold in July was 9,318 rand ($613) a hectare compared with 13,700 rand, according to Johann Bornman, an economist who is the chairman of Agri Development Solutions, who obtained the data from the country’s Deeds Office, which maintains the property registry.
The country’s gross domestic product contracted in the second quarter from the previous three months, landing the economy in its first recession since 2009. Agriculture output shrank 29 percent, the most among all industries. The sector employs 843,000 people, almost double the number of jobs in mining.
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