Ruth HallProgramme for Land & Agrarian Studies, UWC

Presentation to the Portfolio Committee on Agriculture and Land Affairs

Parliament11 March 2008

Financing Land ReformBudget Trends and

Priorities for the Future

Land Affairs budget 2008/09

• Restitution funding is slightly down for the second year in a row – by 7% from last year.

• In contrast, funds for ‘land reform’ have leapt up 70%.

• DLA budget as a whole rose to R6.66 billion, up 19% from last year.

• Note: – This analysis compares actual allocations over time,

as well as comparing these with adjusted allocations (estimates with expenditure).

Land Affairs budget 1995 - 2008not inflation adjusted

0

500

1000

1500

2000

2500

3000

3500

4000

1995

/96

1996

/97

1997

/98

1998

/99

1999

/00

2000

/01

2001

/02

2002

/03

2003

/04

2004

/05

2005

/06

2006

/07

2007

/08

2008

/09

Financial year

Mill

ion

Ran

ds

Land Reform

Restitution

Restitution• Restitution has not got the windfall the

Commission asked for – just over R3 bill.– absolute decline– but R1 billion increase over MTEF

• The extension of budgets to 2012 confirms that restitution remains a long-term process:– the (shifting) deadlines have been unrealistic and early closure of

the Commission would have probably further delayed the process – with less than ½ the claims on farmland settled, the extension

seems sensible.

• This suggests a continuation of the lifespan of the Commission.

The future of restitution

• The approx 5,000 remaining claims are expected to involve substantial cost and time – complex and large rural claims.– no official estimates of what they will cost.– initial analysis suggests rural community claims have

cost in the region of R11.1 million, on average, each.

• Existing commitments for restitution exceed the budget provision by several billion– future budgets will have to cover this, as well as new

commitments.

Land reform

• Under-expenditure on capital budget for land acquisition last year– adjusted downwards - dramatically– just 37.5% of allocation!

• Yet the allocation has risen this year– 94% growth in capital budget for land acquisition – now more than 5 times what was spent last year.

Land reform• The substantial shift in funds, from

household grants to direct purchase of land by the state continues:– R853 million for DLA to buy land itself – Funds for applicants to buy land are rising more

slowly, to R1.7 billion.

• This suggests that the state itself is planning to become a bigger player in the land market.

• It also begs the question about how resources will be rationed – a question of equity.

Land reform• This budget funds 2 programmes.

– competition for limited resources between vastly different purposes and unequal actors

– LRAD has received the lion’s share– little to municipal commonage for small livestock owners

• Stagnant allocation for CLaRA– suggests implementation will start in the MTEF – but not be scaled up.

• This is the only dedicated budget for tenure reform. – protecting and securing farm tenure rights requires skilled and

dedicated staff– yet ESTA posts have been phased out.

Reality check

1. What can this budget buy?

2. What does this mean for LARP?

3. Can this budget be spent?

4. Do the Land Affairs & Agriculture budgets tally?

What can this budget buy?

• The potential to scale up land acquisition– but not to meet targets in Strategic Plan 2008 – 2011.

• Target of 2.5 million hectares this year– about 1 mill through restitution– 1.5 mill through redistribution / tenure reform

• Over R5.5 billion available, in total– 1.7 million hectares @ R3,294 / hectare

• It cannot be expected that state land can make up the shortfall between budgets provided and targets.

What does this mean for LARP?

• Do the numbers of LARP add up?– 5 million hectares for 10,000 new farmers– 500 ha each @ R 1.647 million (in 2008 Rands) initial

capital cost each (excluding support)– A cost of about R16 billion in the next two years. – Is this really going to happen?

• LARP involves giving more public funds to fewer people– More restrictive than the track record to date– If targets were met, this would make a limited

contribution to absorbing the livelihoods being shed from commercial agriculture through job losses and evictions.

Can this budget be spent?

• Across the board, there is much less money to do the job of land reform.

• Current budgets to staff and run the institutions responsible have fallen in absolute terms by– 38% for restitution and – 22% for the rest of land reform.

• A matter of “spend more with less”?• As DLA is known to suffer from weak capacity,

vacant posts and high turnover, this is a major concern.

Current budget as % of total allocation 1999-2008

05

10152025303540

1999

/00

2000

/01

2001

/02

2002

/03

2003

/04

2004

/05

2005

/06

2006

/07

2007

/08

2008

/09

Financial year

Perc

ent

Land ReformRestitution

Do the Land Affairs & Agriculture budgets tally?

• The rise in funds for land acquisition is not matched by concomitant growth of agriculture budgets

• Key budget lines are static or in decline over the MTEF, while others are is rising slowly.– While CASP budgets have been rising sharply, this is now to slow

down – a plateau.– MAFISA is in decline – and only funded over the coming 2 years of

the MTEF– Livelihoods Development Support fell to nearly half of last year’s

budget – after recapitalisation of the Land Bank.

• Good news: extra 670 agricultural extension officers by 2011.

Shortfalls• The most urgent gap now:

– the warm bodies (and skilled minds) to do the work

• The long term gap: – the capital cost of buying nearly a third of the country! – The fungibility of the budgets – especially the competing interests in

farm tenure and redistribution programmes.

• But the cost of acquiring and developing land is contingent on policy choices.– Shaping the market: promoting availability and limiting the cost

through market interventions (land tax, land ceilings, etc)– Overriding the market: through expropriation. If experience to date is

indicative, expropriation will not bring down costs, though pending amendment to the Expropriation Act could change this.

Conclusions

• This year’s land budget shows a continuation of the chronic mismatch between the ambitious goals of land reform and the funds and institutional capacity devoted to it. – but there is more money to spend. – who will spend it? – if they did, it would not meet targets for land delivery– so it seems this longstanding problem remains.

• This budget problem masks a more fundamental blockage – demonstrated impact: – is more money the answer right now? Money for what?– can one demonstrate impact and a reasonable cost-per-livelihood?

Political oversight should focus on…

1. Ringfencing resources for dedicated purposes, particularly farm tenure.

2. Investing in M&E to determine impact, and in the long-term justify larger commitments to this purpose.

3. Attracting and retaining skilled staff.

4. Changing the ratio of capital to current budgets.

Thank you for your attention