LAND REFORM SEMINAR

SPEAKERS

> Bulelwa Mabasa | Facilitator

> Please click here for profile

> Anele Khumalo | Regulation of Agricultural Land Holding Bill B-2017

> Please click here for profile

> Theo Boshoff | Recent Developments

> Please click here for profile

> Thami Mdontswa | Expropriation of Agricultural Land WithoutCompensation

> Please click here for profile

2

REGULATION OF AGRICULTURAL LAND

HOLDINGS BILL B-2017

ANELE KHUMALO

THE RIGHT TO PROPERTY

SECTION 25 OF THE CONSTITUTION OF SOUTH

AFRICA, 1996

Restitution of Land Rights Act No. 22 of

1994

Expropriation Act No. 63 of

1975

Land Reform

(Labour) Tenants Act

No. 3 of 1996

Extension of Security of Tenure Act No. 62 of

1997

Spatial Planning and

Land Use Management Act No. 16 of

2013

Alienation of Land Act No. 68 of

1981

Restitution of Land

Expropriation ofland for public

purposes

Provide security oftenure of

land tenants

Regulates the

conditions of residents on certain

land

Framework for spatial

planning and land use

management

Regulates the

alienation of land

LAND HOLDINGS BILL

➢ Published on 17 March 2017

➢ Differs from initial draft Bill

➢ Bill aims to progress land reform within the agriculturalsector

IMPORTANT OBJECTIVES

➢ The establishment of a public register

➢ Limitations on the acquisition of agricultural land byforeigners

➢ Introduces long term leasing

➢ Limitations on the sale and the “right of first refusal”

➢ Establishes the Land Commission

WHO DOES THE BILL APPLY TO:

➢ All owners of “agricultural land” which is defined in section 1 as –

“all land, excluding land –

(a) in a proclaimed township: Provided that all land which, immediately prior to the date ofcommencement of this Act, was formally zoned for agricultural purposes by any sphere ofgovernment of any public entity, is excluded from the provisions of this paragraph;

(b) with regard to which an application for declaration as a township had been submitted inaccordance with applicable township establishment legislation prior to the date ofcommencement of this Act: Provided that such application is approved within a period to bedetermined by the Minister;

(c) which, immediately prior to the date of commencement of this Act, was formally zoned for non-agricultural purposes by any sphere of government or any public entity;

(d) which has been excluded from the provisions of this Act by the Minister by notice in theGazette; or

(e) which has been determined as non-agricultural land use in accordance with the provisions ofthe Spatial Planning and Land Use Management Act, 2013 (Act No. 16 of 2013)

➢ In particular foreign persons, both natural and juristic

WHAT DOES THE BILL SEEK TO ACHIEVE?

1. Register of Public and Private Agricultural Land

➢ Land owners will be required to make disclosures of presentownership and disclosures of acquisition of ownershipagricultural land

➢ State will also be required to make disclosures

2. Prohibition on the Acquisition of Agricultural Land byForeign Persons

➢ Foreign persons will not be permitted to acquire ownership ofland once the Act comes into force

➢ Foreign persons may conclude long term leases of agriculturalland

WHAT DOES THE BILL SEEK TO ACHIEVE?

3. Regulates the Disposal of Agricultural Land byForeign Persons

➢ A foreign person disposing of ownership of an agricultural landholding, must/shall offer the Minister, in the prescribedmanner, the right of first refusal to acquire ownership of suchagricultural land holdings

➢ The foreign person must thereafter “make the land available foracquisition to the citizens”.

WHAT DOES THE BILL SEEK TO ACHIEVE?

4. Land Ceilings

➢ The Minister must, by notice in the Gazette, and afterconsultation with the Commission and the Minister responsiblefor agriculture, determine the categories of ceilings foragricultural land holdings in each district

5. Redistribution Agricultural Land

➢ Owners of agricultural land must notify the Commission “of theidentity of the portion of such agricultural land holdings whichconstitutes redistribution agricultural land in terms of theprovisions of the Act

WHAT NOW?

Bill is still undergoing the Parliamentary process and is

yet to be finalised.

11

WHAT NOW?

Challenges should the Bill be promulgated in

its current form

12

Is this the solution to land distribution?

13

14

© 2017 - 2017 Zapiro (All Rights Reserved)

Printed/Used with permission from

www.zapiro.com

3 AugustBy Theo Boshoff

Werksman’s Land Reform Seminar

SA Land Reform:

Some recent

developments…

www.members.agbiz.co.za

• Agbiz represents the agricultural

value chain;

• This includes;

• Input providers such as

seed, fertilizer and

machinery manufacturers;

• Financial institutions and

insurance companies;

• Logistics;

• Off-takers, Agro-processors;

and

• Market linkages.

• Agriculture contributes 2-3% of

GDP but together with the value

chain, it is closer to 14%.

• Significant employer

in rural areas (Primary

Agriculture - 6% of total labour

market).

17

Agbiz and land reform

• Agriculture and Agribusiness are inextricably linked;

• The prosperity of agriculture is vital to agribusiness and successful land reform is an integral part of that.

• Agribusiness relies on primary production for its business; and

• Our members are heavily invested in the sector.

• Aside from the moral obligation to advance transformation, land reform poses opportunities to attract new entrants to the sector;

• However, also vital to retain value of land as an asset class;

• Financial institutions have approximately R160 billion invested in the sector, the majority of which is secured by mortgage bonds.

“enable a more rapid transfer of agricultural land to black beneficiaries without distorting land markets or business confidence in the sector”

-Chapter 6 of the NDP

Agbiz/IDC Agribusiness Confidence Indexand Agriculture GDP

60 100

90

80

70

60

50

40

30

20

10

0

40

20

0

-20

-40

-60

GDP (Agriculture) (LHS) Agbiz/IDC Agribusiness Confidence Index (RHS)

Source: Stats SA, Agbiz Research

%q

/qsa

ar

Ind

ex

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Profitability is improving but investment is lagging

Ratio of investment to debt has steadily declined since 2007

From 2004 to 2013, investment in the sector increased by 5.9% compared to 19.8% and

11.9% for net farm income and total farming debt respectively

Source: Statistics South Africa (2015).

140 000 0.30

120 000 0.25

100 0000.20

80 000

0.15

60 000

0.1040 000

20 000 0.05

0 0.00

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Gross capital formation (agriculture) Total farming debt Net farm income Ratio of capital formation to debt (RHS)

RESTITUTION OF LAND RIGHTS AMENDMENT BILL

> Broadly supportive of the restitution programme, but must takeplace quickly and efficiently to prevent prolonged uncertainty;

> As far as Agbiz’s membership is concerned –

> Compensation received for land more relevant than the purpose of landreform (restitution v redistribution);

> NB that the owners are compensated fairly to maintain integrity of landmarket, collateral value and property rights.

> Focus on sound models for settlement to enable beneficiaries toenter a competitive agricultural sector;

> Ownership of land key to access finance for new entrants withlimited assets;

> Governance structures streamlined and suitable for business.

COMMUNAL LAND TENURE BILL

Content:

> Provides for title deeds to be transferred to communities;

> Communities can decide on nature of individual rights within communal land (userights, lease or title);

> Communities can opt for CPAs, Trusts or Traditional Authorities as a governancestructure.

Analysis:

> Transfer of title deeds a positive step for agricultural development;

> However; Minister has sole discretion to decide on existence of rights, extentthereof, and whether or not to transfer title;

> Potential constitutional difficulties – existing, informal rights to be effected.

> Governance will continue to be critical – CPA Amendment Bill should assist butcommitment to good governance will be key.

21

REGULATION OF AGRICULTURAL LAND HOLDINGS BILLLand Commission

> Can be enabling as a source of information if commission is credible;

> Autonomous, suitably qualified & integrated database.

> Currently no private sector land reform or private sales counted.

Prohibition of foreign ownership

> Not based on sound data – hence the need for a land commission;

> Limitations not unprecedented, but prefer a model similar to Australiawhere transactions over a threshold require consent

- dealt with on the merits of each transaction.

REGULATION OF AGRICULTURAL LAND BILL

Land ceilings:

Cost v Benefit?

> Mortgage bonds will have to be deregistered and reconsidered (still a viable unit?);

> Huge costs associated with subdivision – why not buy existing land parcel?;

> Some producers may be denied economies of scale;

> SA producers use scale to remain competitive in a climate of high input costs (weak Rand) and highly subsidized international competition.

> Can have a negative impact on investor confidence and bond financing;

> International examples not necessarily relevant;

> China, Taiwan, S Korea, India have different resource base; and

REGULATION OF AGRICULTURAL LAND BILL

Land ceilings:

Will it benefit beneficiaries?

> Beneficiaries will receive ‘off cuts’;

> economically viable?

> Access to resources (water, good soil etc..)

> Access to roads or municipal services?;

> Conflicts with NDP, DLRCs and government’s own demand-led redistribution policies (strategically located land);

> Beneficiaries will have to deal with whatever off-cut they get – why not look for land suited to beneficiary’s needs and asperations?

PROPERTY VALUATION REGULATIONSWhat its all about:

> Office of the Valuer General (OVG) mandated to value landidentified for land reform at ‘just and equitable’ rate as in s25of the Constitution;

> Regulations codifies ‘just and equitable’ into set a formula tobe applied by valuers:

‘value’ = (current use value + market value) –subsidies

2

Historical acquisition benefits and subsidies

PROPERTY VALUATION REGULATIONS

Complex interface between economic principles, technical valuation practice and legal/constitutional principles;

> Rigid formula not in line with section 25 of the Constitution;

> s25 a flexible mechanism that must be applied to the circumstances of each case.

> S25 looks at ‘fairness’, not a simple formula.

> Rigid formula can overcompensate some and undercut others

> Impossible to apply all factors rigidly as a court would weigh factors in s25 and apply them accordingto their relevance in the given circumstances;

> To treat all land owners the same using a formula could be out of line with the court’s approach tointerpreting s25 of the constitution.

PROPERTY VALUATION REGULATIONSPractical effects:

> ‘current use value’ is not the same as ‘productive value’!

> Only looks at net income for year.

> Will result in an under-valuation as it does not take the potential of the land into consideration but rather the current income generated.

> Presumably aimed at ‘punishing’ underutilized or ‘lifestyle farms’; but

> Will have negative side-effects on long term investments; and

> Ecology – disincentive to exploit resources;

> Can have severe effects on financing of agriculture and long term investments;

> ‘return on investment’ (capitalisation rate) not factored into equation;

> Therefore a disincentive to invest in capital improvement of property.

> Formulation not aligned with any recognised methods for valuing agricultural properties.

> If the value of land acquired for land reform is pushed down, will lower the value of the land - not fully empowered or compensated.

PROPERTY VALUATION REGULATIONS

NB! – perspective required;

> valuation never binding;

> OVG cannot ‘set’ the price when the state purchases land for reform – selleronly bound to what he agreed on.

> Nor can OVG ‘set’ compensation upon expropriation

– Compensation must be agreed upon or decided by a court. OVG can simplyinform the state’s offer.

But – if no consensus reached, role of OVG can become redundant.

Ultimately what matters is that the compensation must be ‘just andequitable’, reflecting an equitable balance between the interests of the stateand those affected, taking into consideration all the relevant circumstances.

ALTERNATIVE APPROACHES

Unlock private sector capital

> Consider public-private partnership financing ‘packages’ for landreform beneficiaries:

> Interest rate subsidies, co-financing, credit guarantees;

> Falls within constitutional mandate to ‘foster conditions which enable citizens togain access to land on an equitable basis’;

> Enable us to achieve more with less funds.

> Joint ventures v mentors

> partner’s own finances also at stake = accountability;

> Look at a compulsory right of first refusal over agricultural land,subject to strict conditions;

> Namibia used same to achieve 22% land reform with far smaller fiscus.

29

THANK YOU!

www.agbiz.co.zawww.thegreenkeeper.co.za

LAND QUESTION PANEL

DISCUSSION

Expropriation of Agricultural Land Without Compensation

3 August 2017

The Land Shall Be Shared Among Those Who Work it.

Freedom Charter, 1955

No political democracy can survive and flourish if the masses of our people remain in poverty, without land, without tangible

prospects for a better life.

Reconstruction and Development Programme, 1994

We, the People of South Africa… Believe that South Africa belongs to all who live in it, united in our diversity

Constitution of the Republic of South Africa, 1996

A delicate balance

32

▪ Non-inclusive economy and high unemployment rate

▪ Structural challenges within the economy – which perpetuate inequality and joblessness

▪ Declining share of agriculture to the GDP

▪ Declining share of agriculture in employment

▪ Dramatic rural-urban migration without employment

▪ Growth of urban services and the manufacturing sectors (leaving rural area without industry)

▪ Poor economic demographic transition

▪ Racially biased access to land, credit, financial & the rural food industry is not functioning

▪ 14.3 million have food access challenges

Context

33

▪ Land Reform is a Constitutional and moral imperative.

▪ The ambitious target of redistributing 30% of white-ownedagricultural land by 2014 was not met.

▪ Some of the blame for the slow pace has been on the so-called “willing buyer, willing seller” principle.

▪ The NDP set a target of redistributing 20% (16.4m ha) ofagricultural land by 2030.

▪ The Property Valuation Act, 2014 established the Office ofthe Valuer General who must determine just and equitablecompensation payable in land reform transactions.

▪ Land Reform laws are being revamped, and implementationimproved.

Context

34

Phase 1 of the Land Audit:

• 14% of land is registered State land

• 7 % is recently surveyed state land (but not yet registered) and

• 79 % privately owned

Phase 2 of the Land Audit

• Cabinet is considering the report

• We are expecting strong decisions to address all these institutional challenges

• Regulation of Agricultural Land Holdings Bill will enforce disclosure of ownership ofland and landed property.

Who owns South Africa?

35

70%

5%

15%

6%4%

Race

White African

Coloured Indian_Asian

Other

78%

3%

19%

Country of origin

South Africans Non South Africans

Unknown

63%

19%

18%

Gender

Male Female Unknown

PRELIMINARY PHASE 2 INFORMATION

LAND ACQUISITION SUMMARY (HECTARES)

544 824

411 836

59 548

576 516

171 403

461 946

1 505 737

479 480

552 812

0

200 000

400 000

600 000

800 000

1 000 000

1 200 000

1 400 000

1 600 000

EC FS GP KZN LP MP NC NW WC

NUMBER OF HECTARES ACQUIRED AND REDISTRIBUTED PER PROVINCE 1994 - 2016

EC11% FS

9% GP1%

KZN12%

LP3%MP

10%

NC32%

NW10%

WC12%

PERCENTAGE OF HECTARES ACQUIRED AND REDISTRIBUTED PER PROVINCE 1994 -2016

LAND DELIVERY PER YEAR – CUMULATIVE DATA

8 679 9 221

42 788

102 335

202 351

153 492

29 627

135 850

195 298

250 723

176 702

207 412

220 766

355 327

506 048

467 790

242 050

331 793

392 858

157 556

153 586

210 396

140 670

149 928

0

100 000

200 000

300 000

400 000

500 000

600 000

Trend of Hectares Acquired Per Year/FY

BUDGET ALLOCATION/TARGETS TREND (2009/2010

– 2016/2017)

39

R1 748 956

R1 394 751

R2 168 575

R1 509 568

R1 227 717 R1 234 278

R1 007 394

R691 486

239 990328 039

392 849

157 556 153 586210 396

140 67080 526

R² = 0.7732

R² = 0.3849R0

R500 000

R1 000 000

R1 500 000

R2 000 000

R2 500 000

2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17

Axi

s Ti

tle

Trends 2009/10 – 2016/2017

B/Allocations "000 Expenditures Targets

Redistribution Expon. (B/Allocations "000) Expon. (Targets)

40

1 825 835 000

1 382 243 761

1 666 600 000

1 724 279 000

1 196 655 648

1 138 474 000

850 765 000

930 770 000

0

200 000 000

400 000 000

600 000 000

800 000 000

1 000 000 000

1 200 000 000

1 400 000 000

1 600 000 000

1 800 000 000

2 000 000 000

2009/2010 2010/2011 2011/2012 2012/13 2013/14 2014/15 2015/16 2016/17

State Funding for Land Acquisition: Budget Allocation 2009 to 2016

BUDGET EXPENDITURE TRENDS (2009/2010 –

2016/2017)

41

R1 748 956

R1 394 751

R2 168 575

R1 509 568

R1 227 717 R1 234 278

R1 007 394

R691 486

R0

R500 000

R1 000 000

R1 500 000

R2 000 000

R2 500 000

2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17

Axi

s Ti

tle

Trends 2009/10 – 2016/2017

Expenditures

HECTARES ACQUIRED (2009/2010 – 2016/2017)

42

239 990

328 039

392 849

157 556153 586

210 396

140 670

80 526

0

50 000

100 000

150 000

200 000

250 000

300 000

350 000

400 000

450 000

2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17

Axi

s Ti

tle

Price Per Ha 2009/10 – 2016/2017

Redistribution Ha

PRICE PER HECTARE TRENDS @ THE AVG OF R 6 966

(2009/2010 – 2016/2017)

43

R 7 288

R 4 252

R 5 520

R 9 581

R 7 994

R 5 866

R 7 161

R 8 587

R 0

R 2 000

R 4 000

R 6 000

R 8 000

R 10 000

R 12 000

2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17

Axi

s Ti

tle

Price Per Ha 2009/10 – 2016/2017

Price per hectare

PRICE PER HECTARE V HA ACQUIRED TRENDS (2009/2010 –

2016/2017)

R 7 288

R 4 252

R 5 520

R 9 581

R 7 994

R 5 866

R 7 161

R 8 587

2 400

3 280

3 928

1 576

1 536

2 104

1 407 805

R 0

R 2 000

R 4 000

R 6 000

R 8 000

R 10 000

R 12 000

2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17

Axi

s Ti

tle

Price Per Ha 2009/10 – 2016/2017

Price per hectare

Redistribution Ha "00

R54 Billion - NDP

Indicative Budget against what is required

R4 Billion - MTSF

Change…. Please.

46

> Defined as a fundamental change in the structure, systems andpatterns of ownership and control of the economy; the elements to betransformed being:

> Structure

> Systems

> Ownership

> Control; and

> Institutions

• There is also a proposal for the Amendment of the Constitution toremove the right to just and equitable compensation when agriculturalland is expropriated for redistribution – the so called Expropriation ofland without compensation.

Radical Socio-Economic Transformation

47

> The Constitution requires, and facilitates, extensive andprogressive programmes of land reform.

> The process must be law-governed.

> Expropriation in the public interest or for a publicpurpose is permitted, subject to payment of just andequitable compensation – which permits amounts wellbelow market value (not tested in ConCourt).

> It does not impose a willing seller, willing buyer test forcompensation for land expropriated for redistribution.

> It gives the State considerable latitude in how to effectredress.

The RSA Constitution

48

Rycroft, Hlomendlini & Makgolane articles

> What will happen to the farm debt of R160bn, excludinggrower loans & subsidies?

> What will be the impact on food production and farmingunits?

> What about food sovereignty?

> What will the impact on capital investment on agriculture?

> What will be the impact on the rest of the economy?

> What, if any, will be the damage the agri-sector?

> Will this not lead to economic collapse?

Possible Impact of Expropriation w/o Comp

49

What alternatives can you and I place on the table for consideration?

Active Citizenry

50

Ndzi hela kwala!

51

THANK YOU

Legal notice: Nothing in this presentation should be construed asformal legal advice from any lawyer or this firm. Readers areadvised to consult professional legal advisors for guidance onlegislation which may affect their businesses.

© 2017 Werksmans Incorporated trading as Werksmans Attorneys. All rights reserved.