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South
Africa: Land Reform: From 'willing seller/willing buyer' to a people-driven
land reform
Dr.
Edward Lahiff
September
17, 2005
http://www.uwc.ac.za/plaas/
The concept
of ‘willing seller, willing buyer’ has dominated the discourse on
land reform in South Africa since 1994. Now, following the national
Land Summit of July 2005, it appears that government is willing
to abandon this approach, but there is little indication of what
this might mean in practice. This paper explores the origins and
meaning of the concept of ‘willing seller, willing buyer’ and the
alternatives that might take its place.
Introduction
The
concept of ‘willing seller, willing buyer’ (WSWB) has dominated
the discourse on land reform in South Africa since 1994 – indeed,
it can be described as one of the defining characteristics of the
programme, distinguishing if from most other land reforms around
the world. This simple-sounding concept has not just been central
to government thinking on land reform, but has also become a key
ideological battleground, assuming the status of a ‘non-negotiable’
among landowners and an object of contempt for landless people and
their supporters. Yet, despite its prominence, this so-called principle
has received remarkably little critical analysis, from either its
supporters or its critics.
The concept
of WSWB is widely attributed to the influence of the World Bank,
but this is inaccurate in a number of respects. Since the early
1990s, the World Bank has indeed advocated what it calls market-assisted
(or market-led, or market-based, or, more recently, ‘negotiated’)
land reform in countries around the world, and was a key influence
on the thinking of the African National Congress (ANC) during the
transition to democracy. The approach advocated by the World Bank,
however, has generally been part of a wider strategy that includes
selective expropriation, land taxes, subdivision of landholdings,
and negotiated ‘exit strategies’ for current landowners. Such an
approach was set out in the key 1994 World Bank document, South
African agriculture: Structure, performance and options for the
future.
In practice,
the South African model has diverged considerably from the World
Bank prescriptions, particularly in its reliance upon WSWB mechanisms.
WSWB in southern
Africa
The term WSWB has some history of usage in South Africa, particularly
around the operation of the Expropriation Act of 1975, under which
the price paid for expropriated property is determined by reference
to the price that would be paid for the property were it to be exchanged
between a willing seller and a willing buyer. In this context, WSWB
refers to an imaginary ideal, rather than an actual practice.
The concept
of WSWB also appears to have been influenced by the course of land
reform in Zimbabwe, where it had a very particular meaning rooted
in the Lancaster House The concept of ‘willing seller, willing buyer’
has dominated the discourse on land reform in South Africa since
1994. Now, following the National Land Summit of July 2005, it appears
that government is willing to abandon this approach, but there is
little indication of what this might mean in practice. This paper
explores the origins and meaning of the concept of ‘willing seller,
willing buyer’ and the alternatives that might take its place, and
the willingness of the state to approve their application and provide
the necessary funding.
While the state
has (in theory) the power and the resources to enter the land market
on behalf of beneficiaries, it has chosen not to do so. Rather,
it provides grants to would-be beneficiaries who themselves must
enter the market, identify a ‘willing seller’ (that is, a property
for sale) and secure an agreement from the owner to sell at an agreed
price. If a ‘willing buyer’ is said to exist, it may refer neither
to the state (which does not buy land on its own behalf or own initiative)
nor to the intended beneficiaries (who only become effective buyers
once they secure state approval and funding). Rather, it represents
an abstract concept, a hybrid of state and would be beneficiaries,
supposedly acting in unison.
‘Willing seller’
accurately denotes the lack of compulsion on landowners, but ‘willing
buyer’ offers no guarantees to the landless that they will acquire
the land they want, or indeed any land at all. The concept of ‘willing
seller’ (and the payment of market prices) fully protects the interests
of existing landowners, as it neither compels them to sell against
their will nor at a price with which they are not fully satisfied.
No such guarantees or protections are offered to would-be beneficiaries,
who continue to depend on state approval of their grant applications
and the willingness of owners to transact with them.
We can, therefore,
conclude that the South African land reform programme can best be
described as a ‘willing seller’ programme; it would appear that
the element of ‘willing buyer’ was added in a frivolous attempt
at rhetorical symmetry, suggesting (spuriously) that the interests
of buyers and sellers are equally protected, and perhaps symbolising
a (non-existent) harmony at the heart of our land reform policy.
Moving beyond
the market
WSWB,
as applied in South Africa, has three main elements – the discretionary
powers of landowners (the landowner veto), - the price (compensation)
paid to landowners, and - the role of the state in assisting would-be
beneficiaries to acquire land.
Debates to date
have tended to focus largely around the first two, with landless
people and their supporters calling for the state to take a more
interventionist approach, both in terms of identification of suitable
land and the level of compensation paid to owners. Implicit in this
demand is a new relationship between the state and the landless,
whereby the state would still be guided by the demands expressed
by landless people (that is, the call is not for a ‘supply-led’
approach) but would intervene more decisively on their behalf in
order to acquire the land they need. This suggests a radical overhaul
not only of the concept of ‘willing seller’, but also of ‘willing
buyer’.
WSWB has granted
enormous discretionary power to landowners to influence the pace
and direction of land reform in South Africa, tantamount to a veto
over the land reform process. Under the redistribution programme
– but also, to a considerable extent under restitution and tenure
reform – landowners may choose whether to sell or not sell their
property, to whom they will sell, and at what price. If a landowner
is not interested in selling, there is effectively nothing that
can be done within the WBWS framework to change the situation.
If landowners
want to sell their land, but not to land reform beneficiaries, they
are within their rights to do so. If landowners do not accept the
prices offered by government/beneficiaries (who exactly drives the
negotiation with the landowner is a matter of debate), they are
free to refuse to sell or to withdraw from the transaction; they
are fully within their rights to choose their own preferred buyer,
even if this is not the highest bidder. In a worst case scenario,
a coordinated effort by landowners to refuse to sell to any land
reform beneficiary could bring the entire land redistribution programme
to a halt. Such is the power that has been granted to landowners
under the WSWB policy.
Closely related
to the discretionary power of landowners to sell or not to sell
is the matter of price. WSWB has been interpreted to mean that ‘full
market value’ will be paid by the state for all land reform transactions.
Full market value is variously interpreted as the asking price of
the seller or the estimate of market value made by an independent
valuer. In theory, the latter should provide a reliable indication
as to what price the land in question would fetch if it was offered
for sale on ‘the open market’. In many cases, however, this is a
purely notional amount, as the state may be the only interested
buyer, as in restitution cases or in cases where owners cannot find
another buyer due to encroachment of informal settlements.
Thus, the current
policy can best be described as the payment of ‘market equivalent
price’, regardless of what the land might realistically fetch on
the open market. Land reform in South Africa is widely claimed to
be ‘demand-led’, but under WSWB this has been interpreted to mean
a minimal role for the state, no matter what the level of ‘demand’
expressed by landless people within a particular area. In practice,
the state’s role has been limited to processing grant applications
from those capable of following the approved procedure, and releasing
funds, subject to the reaching of agreements with landowners and
the availability of funds within the specific year (not always a
certainty). The state does not accept responsibility for the identification
or acquisition of land for the landless, or for overcoming landowner
resistance.
A departure
from WSWB could mean changes in all three of the above areas, but
it does not necessarily mean a complete departure from ‘the market’,
or ‘market-based’ land reform, as some commentators have suggested.
How this might work in practice is considered next.
Ending the
landowner veto
The
choice of whether or not to make land available for land reform
currently rests almost entirely with landowners. This power – effectively
a veto over land reform – needs to be addressed, both to increase
the supply of land for land reform purposes, and to ensure that
sufficient land is made available in areas where it is most needed.
This could be achieved by means of selective expropriations in areas
where sufficient would- land is not coming onto the market, or where
negotiations with landowners are not fruitful, or where excessive
prices are being demanded. Such expropriations (with compensation)
are adequately provided for in the Constitution.
There does not
appear to be a compelling argument for widespread expropriation
at this stage. Rather, selective expropriations as part of a concerted
land acquisition strategy (still based largely on market purchases
and negotiated sales), should be sufficient to increase the overall
supply of land and to ensure that land is available in areas of
acute need. The key requirement is a credible threat of expropriation,
which in turn requires that expropriation is actually used from
time to time.
An additional
step would be to grant the state the right of first refusal on all
land sales. This would be a major undertaking, as it would involve
the state in every land transaction in the country, the majority
of which would probably not result in land reform purchases.
Furthermore,
it would not, on its own, ensure that sufficient land would be made
available, or that the right land (that is, land of adequate quantity
and quality in areas of high demand) would be made available. There
is also no guarantee that the price of land would be reduced as
a result of such an approach, and disagreement over price would
again raise the need for expropriation. Moreover, the bureaucratic
complexity and potential disruption to the land market resulting
from the right of first refusal could be much greater than selective
expropriation as outlined above.
Another option
that has been discussed since before 1994 is a land tax. This would
not remove the landowner veto over sales, but it would be expected
to increase pressure on landowners to release land onto the market,
and could also serve to dampen land prices. Arguments for and against
land tax extend well beyond land reform, but it is generally held
to be anomalous that South Africa, with a high concentration of
land ownership in the hands of a small minority, and a stated policy
of land redistribution, does not have such a tax in place. A land
tax could, of course, be used in combination with the other options
outlined above.
Just and
equitable compensation
Compensation
for landowners is arguably the core issue in the WSWB debate. Representatives
of landowners have indicated that they might tolerate some restrictions
on the free market in land as long as they were compensated in line
with market values. Among the landless, the payment of sub-market
prices has become almost an article of faith, with some voices calling
for minimal or no compensation for landowners.
The Constitution
is clear when it comes to payment for land acquired by means of
expropriation. Compensation must be ‘just and equitable’, striking
a balance between the interests of all affected parties. Market
value is just one factor that must be taken into consideration when
calculating compensation, the others being the current use of the
property, the history of acquisition and use, past state subsidies
and the purpose of the expropriation. Compensation based on such
a formula is likely to be considerably below the prices currently
being paid, but would meet the constitutional requirement of ‘just
and equitable compensation’.
An alternative
would be to pay productive value rather than market value. Productive
value is based on the estimated productivity of the land when used
for agricultural purposes, and is typically somewhat below the prevailing
market value. Productive value is widely used by the commercial
banks as a basis for calculating the collateral value of a farm,
and has been used internationally as a basis for compensation in
land reform.
It is likely
that the use of productive values would be resisted by landowners,
and be seen as a form of expropriation, but it provides a well-established
basis (perhaps as one of a range of factors) that could be used
in the calculation of compensation that is ‘just and equitable’.
Here and elsewhere a distinction would have to be made between payment
for the land itself and the fixed improvements that have been added
by the landowner.
Empowering
the landless
Whatever
the method of land acquisition, or the form of compensation paid,
major questions remain as how the supply of land can be matched
to the demand for land from the landless and land hungry. Currently,
this is left to the ‘invisible hand’ of the market which, in practice,
makes it the responsibility of the landless themselves to identify
land that is for sale and enter into negotiations with the landowner.
This is a fundamental weakness of current land reform policy, based
as it is on major inequalities of power and resources between potential
buyers (typically first-time buyers) and sellers (typically experienced
landowners and market operators).
Despite its
key role in funding the land reform process, under WSWB the state
has not taken responsibility for identifying land on behalf of the
landless nor for initiating negotiations with landowners. Nor does
it accept land that is offered to it by landowners, regardless of
the price, on the basis that land can only be acquired on behalf
of identified, and approved, beneficiaries. Experience of land reform
since 1994 suggests there is a need for the state to play a much
more active intermediary role in order to better match supply and
demand. This does not necessarily mean a departure from market principles
(or market prices), but rather that the state shifts from being
a passive to an active participant in land transactions.
For example,
the state could take responsibility for acquiring land once a clear
demand has been identified in a particular area. Similarly, the
state could proactively enter negotiations with landowners in order
to assess the potential supply of land and the cost implications.
In such scenarios, there would be no need for direct negotiations
(or even contact) between sellers and beneficiaries. The conventional
argument that the state must under no circumstances become the owner
of land, even temporarily, is a major obstacle to effective land
reform and must be challenged.
More indirect
methods that do not require direct negotiation with landowners should
also be used to acquire land. Much agricultural land is currently
sold by means of public auction but, due to the complex approval
process for land reform grants, would-be beneficiaries are incapable
of participating in such sales.
The state should,
therefore, find a means by which it can participate on behalf of
the landless, Another source of land, which has not been adequately
utilized to date, is property repossessed by the state-owned Land
Bank and other commercial bank. Government should develop agreements
with all the banks to enable it to secure such properties, perhaps
through a right of first refusal, guided, as always, by clearly
identified needs in particular areas. Considerable cost savings
can be expected through this route, as repossessed farms are often
sold at below ‘market value’.
A proactive
land redistribution programme with an actively engaged Department
of Land Affairs (DLA) in the driving seat presupposes clear strategies
based on detailed assessment of land needs in particular areas and
for acquiring land by various means. This requires that planning
for land reform needs to be done for every municipal area in the
country, and that DLA needs to build close working relationships
with both landowners and the landless. It also points to a much
greater role for municipalities in developing land reform plans
for their respective areas (ideally, as part of their integrated
development plans – IDPs) and facilitating dialogue between the
various stakeholders.
Formal responsibility
for land reform would still rest with national government, as stipulated
in the Constitution, but identification of land needs and solutions
should be driven by local participatory processes at the municipality
level.
Conclusion
This
paper has sketched some of the challenges associated with the transition
from a ‘willing seller, willing buyer’ model of land reform to a
more proactive and people-driven approach that can better match
land supply and demand and meet the needs of radical agrarian transformation.
A realistic alternative to WSWB requires that all key elements are
addressed:
- abolishing
the landowner veto,
- drawing up
practical guidelines for ‘just and equitable’ compensation, and
- proactive
engagement by national government (through DLA) with landowners,
the landless, and the range of state and non-state agencies capable
of playing a supporting role in land reform.
An important
first step would be an unambiguous message from government that
it is committed to reaching the land reform targets that it has
set, and that it will make use of a range of instruments to bring
this about. In other words, it must serve notice on landowners that
the veto powers they have enjoyed over land reform up to now have
been revoked and that it is in their interest to find a negotiated
solution to large-scale land redistribution. For this to be convincing,
and effective, government must address the question of resources,
both human and financial.
It is unlikely
that the current staff complement of DLA – in terms of numbers and
skills – is sufficient to manage a largescale, proactive programme
of land reform. In addition, the budget for redistribution has been
allowed to stagnate and, regardless of the methods of land acquisition
to be used in future, will need to be increased.
Furthermore,
government must make a realistic assessment of the legal instruments
at its disposal, and develop procedures to allow these to be used
effectively (with legislative amendments where necessary). Policies
and procedures that cause lengthy delays in the processing of land
reform applications, and release of funds, and that discriminate
against very poor applicants requiring small areas of land for ‘subsistence’
purposes, will also require review. In other words, the state must
equip itself with the resources and policies necessary to be an
effective agent of pro-poor land reform.
The lessons
of the past eleven years show that the free market and a laissez-faire
state cannot deal effectively with all these elements. The Constitution
places clear responsibility on the state to bring about land reform,
and no other institution in South Africa can possibly play this
role. The challenge, therefore, is not to abandon ‘the market’ entirely,
but: a. to end the market fundamentalism that has characterized
land policy since 1994; b to bring the state back in to land reform,
to play the central role that most stakeholder believe it should,
and of which only it is capable.
Endnote
*Dr
Edward Lahiff is a researcher at the Programme for Land and Agrarian
Studies
Selected
reading
- Boras, SM.
2003, Questioning market-led agrarian reform: Experiences from
Brazil, Colombia and South Africa.
- Journal of
Agrarian Change, 3(3). Hall, R. 2004. Land and agrarian reform
in South Africa: A status report 2004. Cape Town: PLAAS.
- Moyo, S.
1995. The land question in Zimbabwe. Harare: SAPES Books. World
Bank. 1994. South African agriculture: Structure, performance
and options for the future. Washington DC: World Bank. either
directly or through an agent.
Programme for
Land and Agrarian Studies
School of Government,
University of the Western Cape
Private Bag X17,
Bellville 7535,
Cape Town,
South Africa
Tel: +27 21
959 3733;
Fax: +27 21 959 3732
E-mail: plaas@uwc.ac.za
Web address:
www.uwc.ac.za/plaas
*PLAAS engages
in research, policy support, postgraduate teaching, training and
advisory and evaluation services in relation to land and agrarian
reform, community-based natural resource management and rural development.
Please credit www.kubatana.net if you make use of material from this website.
This work is licensed under a Creative Commons License unless stated otherwise.
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