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July 24, 2009

South Africa: Land repossessions threaten hundreds of black farmers

Hundreds of South Africa's emerging black commercial farmers could face eviction in the next few months because of their inability to service government loans to buy the properties, granted under the land reform programme.

In July the state-owned
Land Bank, which provides financing and advice to black farmers and is pivotal in addressing racially skewed land ownership, told parliament that more than 350 farms would have to be repossessed if the non-payment of loans continued.

The bank said it was losing R100 million (about US$13 million) a month as a consequence of unpaid loans and had repossessed 25 farms in the second half of 2008, of which six were owned by emerging black farmers. A moratorium on repossessions for several years had served only to allow the debts of struggling farmers to mount.

The moratorium was lifted in July 2008 when oversight of the Land Bank - mired in financial scandals - was moved from the
Department of Agriculture and Land Affairs to the finance ministry.

However, the Western Cape provincial president of the National African Farmers Union (NAFU), Willy Williams, said the Land Bank and government were as much to blame for the situation as the struggling farmers, because they failed to provide adequate support to the new farmers.

"Our members face many challenges when getting started, and many of these revolve around a lack of expertise in running a modern farm. The state is responsible for providing training in this area, but it does not have the capacity to deliver it on time," he said.

"There is also an issue around the high cost of land in the Western Cape, because the state does not provide enough money to cover the cost of purchasing the land and the initial working capital needed to run a farm."

Kallie Geslin, 38, and Charles Pietersen, 42, were part of a group of 74 emerging black commercial farmers who secured government and Land Bank loans of R4.6 million (about $600,000) in 2003 to buy a Western Cape wine farm under the land reform programme.

The men had been brought up on wine farms in the region and said agriculture was "in their veins", but their dream of operating a successful enterprise was over by 2008, when the Land Bank repossessed their 205 hectare farm near the town of Paarl because of arrears.

Although they had practical experience of working the land in their youth, they did not have the technical expertise or management skills necessary to operate a commercial farm.

"When we started to work the farm in 2004 we did not have the skills or the working capital to get us through the beginning. We had to sell our first crop to get operating money, but we did not get enough," Geslin said.

"This caused a lot of infighting in our group, as some people wanted an income from the sale of our crop rather than reinvesting it in the farm - they did not understand we needed to put the money back into the business. Because the ownership of the land was allocated as a share to individuals, everyone had the same rights. This made it very difficult to make the right decisions for the business."

The men said the management skills training "also came very late, and by the time we began training it was too late to save the business - we were already in trouble. The farm has now been sold back to a white farmer," Geslin said.

NAFU's Williams said about 40 percent of the emerging black commercial farmers in the Western Cape were struggling to make ends meet, and many of the ventures were group initiatives, which had been government's preferred option.

"We find the emerging black farmers who are most successful are involved in the equity scheme - this is where an existing farmer sells a portion of their land to an employee and remains involved in the business, helping with expertise," he said.

Ben Cousins, Director of the Institute for Poverty, Land and Agrarian Studies (PLAAS), told IRIN that farmers experiencing difficulties were badly advised by the Land Bank in terms of the size of the loans they should secure.

"Profitable farming is not so easy in South Africa, given that arable land and proper water are scarce. The input prices [production costs] have also been rising far more quickly than the output price [sales price] recently, which is increasing the pressure in a market already squeezed by fierce competition," he said.

"So I think many of these farmers in trouble received bad advice [from the Land Bank and department of agriculture], and were given loans way beyond what they could repay."

Cousins said there was a strong argument that government should make small-scale farmers the primary beneficiaries of their land reform policy because the chances of success were much better.

"Land reform has been a big disaster story because of the high failure rates. Government officials contend that beneficiaries should mostly be emerging black commercial farmers rather than smaller-scale operators, but these can be highly productive," he said.

"They do not need major bank loans to work, but rather innovative forms of financing that are supported by the NGO sector in terms of advice and expertise."

IRIN


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