The private sector can plug the financing gaps to accelerate land reform but the state must create a conducive investment climate
The outbreak of the coronavirus has once again shone the spotlight on the limited ability of the state to fund the land reform programme. South Africa’s ailing economy was bludgeoned with the coronavirus when it was already in a recession recording two successive quarters of negative economic growth, low business and consumer confidence, spiralling unemployment, and the downgrade of the country’s debt to below investment grade by major ratings agencies.
This bleak economic outlook did not bode well for the ability of the fiscus to allocate funding to the land reform programme. The Covid-19 induced lockdowns dealt a severe blow to the already sluggish economy and wreaked havoc on many sectors of the economy which were compelled to shut down completely or operate below their capacity.
The private sector can plug the gap created by government’s inability to fully fund the land reform programme. The state has limited resources available at its disposal and the outbreak of the coronavirus has broadened areas of expenditure which has further curtailed the government’s ability to allocate much-needed resources to the land reform programme.
Acceleration of a sustainable land reform programme is a critical social, economic and political imperative. It is a prerequisite for social cohesion and the foundations for an inclusive economy. Access to finance for land reform projects remains an acute challenge that must be addressed if we are to drive successful land reform and improve the participation of previously disadvantaged people and displaced communities in the formal economy.
Until now, the funding of the land reform programme has been limited as highlighted by the Motlanthe Report. Sustainable funding for land reform must be urgently addressed if we are to deal with the current challenges. Limited state capacity has also been identified as one of the contributors to the slow pace of land reform and we need to tap into the goodwill displayed by the private sector and other non-profit organisations to address this. However, government needs to create a conducive environment to ensure the participation of these stakeholders in the process; and support in interventions that foster collaboration between communities and private sector investors.
It is an established fact that demand on public resources exceeds the available funds. Therefore, it is important that government works closely with the private sector and other role players to develop innovative mechanisms for financing land reform to address existing challenges related to access to finance. A guarantee or similar mechanism is required to link land reform projects to the financial system.
Without a doubt, the private sector has the requisite skills, access to finance and markets. Furthermore, they can play a meaningful role through mentoring and skills transfer. Without access to finance and organisational support failure is guaranteed. Beneficiaries further need to be supported to ensure sound governance in order to minimise conflict and corruption.
The current economic climate severely hinders government’s ability to augment funding for land reform. Having said that, it is also important to examine the factors that dissuade the private sector from investing in the land reform programme. The private sector is driven by commercial interests and investors make calculated risks to ascertain if they can get a return on their investment.
The current political and policy environment in the land reform space, unfortunately, has not done much to instil the private sector with confidence for their investments.
At the core of the problem is the trust deficit that exists between government and the private sector, especially relating to land reform issues, given the levels of uncertainty.
It is important to ensure there is policy certainty if we are to get more private sector players to contribute and invest in land reform projects. On the one hand, we have private sector players who do not know nor understand how to deal with land reform beneficiary communities as they perceive dealing with land reform beneficiaries to be risky. On the other hand, you have land reform beneficiaries who are suspicious of being taken for a ride by private sector players. It is for this reason that independent and credible transaction advisors who can mediate between private sector players and land reform beneficiaries are necessary.
There needs to be better coordination and facilitation of the relationship between communities and private investors, and this is one area in which non-profit organisations such as the Vumelana Advisory Fund play a crucial role, to facilitate such relationships and ensure that the relationship between the two is of mutual benefit for the community and investor partner.
There is an urgent need for government to create an enabling policy environment to create stability and investor confidence. As an example, the contentious issue of expropriation of land without compensation has been on the table for just over three years now. This matter needs to be finalised expeditiously in order to bring more certainty and ensure that the rules of the game are clear to everyone. This will open opportunities for working relationships that will support efforts towards a successful land reform.
The current redistribution programme must be more transparent, to provide clarity on who is eligible to apply and who is not. This will also ensure transparency in allocation of land and grants. As we have seen, unclear procedure and poor selection brew suspicion and further lead to a lack of confidence in the process.
Land reform is a constitutional imperative in South Africa. The implementation of a successful land reform programme requires close collaboration between all industry players, that includes government, the private sector and civil society. The price for failing to implement a successful land reform programme will be catastrophic for South Africa and for future generations; and will not only affect government but the private sector too – so there is a strong case for private sector involvement and for enhanced efforts to contribute towards enabling the success of the land reform programme.
Peter Setou is the Chief Executive of the Vumelana Advisory Fund, a non-profit organisation that helps beneficiaries of the land reform programme to develop their land in an effective and sustainable way. The fund was established in 2012, with the aim to support the establishment of commercially viable partnerships between investors and local community landowners to create jobs, income and skills.
