The Republic of South Africa

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In 1994, South African general elections with universal franchise were the culmination of the democratization of political and other institutions from the old apartheid system. South Africa's return to the community of nations is a major event not only for the country itself, but for the entire southern Africa subregion. It will mean the transition from a climate of conflict, enmity and mutual suspicion to one of peace, political stability and economic cooperation and will benefit all countries in the region.

South Africa's annual per caput income of US$2 800 places it in the upper-middle income group of nations. In addition, the country has a number of developed country characteristics such as good infrastructure, technologically advanced industry and a wellestablished financial system. The relatively high average income and other characteristics can be misleading, however, as they mask large disparities in income distribution and in access to infrastructure and amenities between the white minority and an impoverished black population whose living standards are more characteristic of poor developing countries. This report analyses the agricultural and rural development issues currently faced by policy-makers in the new South Africa as the country becomes a full member of the world community.

Topology, population and climate

The Republic of South Africa spans 3 000 km from the South Atlantic to the Indian Ocean and covers an area of 1.221 million kmē. The major part of the country has an elevation of between 1 200 and 1 800 m. South Africa is situated within the temperate zone. It has an average rainfall of 511 mm per annum, but has wide interyear and interregional differences with rainfall diminishing towards the west. This diversity of local climates limits the negative effects of severe droughts and offers some protection against general crop failures.

In 1993, total population was estimated at 39.8 million, of which 50 percent is located in rural areas. About 12.8 percent of the economically active population was employed in agriculture. This percentage has been declining continuously from a peak of 33.3 percent in 1969. Before the abolition of the apartheid or "separate development" system, about 8 million people were resident in one of the four "independent" homelands of Transkei, Bophuthatswana, Venda and the Ciskei (otherwise known as TBVC states).

Agriculture: general characteristics

South Africa's agricultural sector is characterized by extreme dualism. The white-dominated commercial sector, consisting of large, capital-intensive farms, coexists with an impoverished black-dominated smallholder sector which produces mainly for subsistence.

Agriculture's share of GDP was about 5 percent in the early 1 990s having followed a declining trend (albeit with some variations) from 12.4 percent in 1960 to 7 percent in 1980. Agricultural growth has been variable. Growth was slow in the 1 960s and 1 980s (1.6 and 1.4 percent average annual growth respectively) and high in the 1970s (5.8 percent). With a population growth of 2.6 percent, per caput agricultural GDP was negative during the 1 960s and 1 980s. Agriculture is highly important as a source of employment and subsistence and as a supplier to a vibrant processing sector.

South Africa is self-sufficient or nearly so in all major agricultural commodity categories, with the exception of meat and oilseeds. Thus, the self-sufficiency index is 134 for field crops, 152 for horticultural crops and 97 for animal products.

About 95 percent of the total gross value of agricultural production is generated in the white-controlled commercial sector. Field crops dominate total agricultural production value although their share has diminished from 47 percent in 1970 and 1980 to less than 35 percent in 1990. Horticultural crops have been growing by 2.8 percent per annum in value terms between 1960 and 1990 and reached 21 percent of the total in the early 1 990s. The share of animal products in total gross value has also increased from 36 percent and 37 percent in 1970 and 1980 respectively to 45 percent in 1990. Maize is the main field crop (64 percent of the total value of field crops); it occupies more land than any other crop in South Africa (44 percent of the total land devoted to field crops) and constitutes 75 percent of total grain production. Wheat (22 percent of total field crop area), oats (10 percent), sorghum and barley are the other major field crops. The growth in volume of horticultural products over the last two decades is partly the result of the growth in exports that followed the lifting of international sanctions in 1989 and the devaluation of the rend. The large increase in the volume of livestock products (50 percent between the 1 970s and the 1 990s) is caused mainly by the spectacular performance of the poultry sector.

It is estimated that in 1990, 28.9 percent of the total gross value of agricultural production in the homelands (or 3.1 percent of total GDP of the homelands) was marketed, the rest being produced for subsistence. Field crops and livestock dominate the value of production in roughly equal shares. Remittances from migrants and pensions constitute a higher share of total income in the homelands than do income earnings derived from agriculture.

Agriculture in South Africa's development strategy

The duality that prevails in agriculture in South Africa reflects the contrast in the socio-economic conditions in the country and is a result of past political, economic and social policies within the country's overall development strategy.

Policies directed towards the agricultural sector have to be seen in the light of the strategic objectives of the state at particular periods of time. Before the Second World War, the main objective of agricultural assistance was to bring the incomes of white farmers into line with incomes of other sectors of the economy. For the period after the Second World War, agricultural policy was part of the overall self-sufficiency strategy and aid to the agricultural sector was intensified. The self-sufficiency objective was further strengthened during the 1 970s and 1 980s as a result of sanctions and boycotts (or threats) imposed on the country by the international community.

The dual nature of South Africa's development status was also reflected in its past policies towards and treatment of the agricultural sector. While many developed countries subsidize agriculture, most developing countries have a history of direct and indirect taxation of agriculture through macroeconomic (fiscal, monetary, exchange rate) and sectoral policies. Agriculture was viewed as a "resource reservoir" - in developing countries its role was to provide surplus food, savings and foreign exchange to support industrialization strategies. In South Africa, both elements (taxation and subsidization) have been present at the same time.

Historical evidence demonstrates that there has been a policy of squeezing (in terms of opportunities for growth) the African smallholder sector with the aim of channelling labour from agriculture to the mines, factories and white settler farms. At the same time, policies provided heavy subsidization of the predominantly white large-scale agricultural sector with the dual objective of achieving self-sufficiency in the major commodity groups and of supporting the incomes of white farmers. A brief overview of the role of agriculture in the development process is necessary in order to understand better the present situation and the problems faced by policy-makers in the country.

Historical evidence at the end of the nineteenth century shows a dynamic, viable African agricultural sector dominated by family farms, open to the adoption of new technologies and meeting the increasing demand for agricultural goods from mining, manufacturing and urban centres. African family farming had the support of land companies and large landowners who were extracting rents from tenant farmers. These family farms were successfully competing with settler farmers in both domestic and foreign markets.

The evolution in the twentieth century of the present structure of the South African agricultural sector can be divided into three broad periods: the period between 1913 and 1948 when the basic elements of the present dualistic structure were established; the period between 1948 and the mid-1980s during which, as a result of policy choices and incentives, the large commercial sector became increasingly capital intensive; and the current period starting in 1985 when a number of reforms in the sector were initiated.

The period between 1913 and 1948.

With the establishment of the Union of South Africa in 1910, a series of policies were put into place in support of white commercial farming and against black agriculture. A number of land-allocation laws created a segregation of white and black farmers. The Natives' Land Act of 1913 (effective from 1916) segregated Africans and Europeans on a territorial basis restricting Africans to native reserves. The reserves were allocated about 7.8 percent of the total land area increasing to 13.7 percent with the Native Trust and Land Act of 1936. For Africans no land acquisitions or other land transactions were permitted outside the reserves. Several related government acts restricted the ability of farm workers to change employment and prevented African farmers from joining marketing cooperatives or farmers' unions. These measures severely curtailed African farmers' access to markets, credit and farm services.

As a result of the measures, Africans could practice subsistence farming in the homelands only while various pre-existing forms of tenancy (e.g. sharecropping) diminished drastically over time. Participating in the labour markets became increasingly the only way for African farmers to earn an income. At the same time, a number of policies and provisions aided the establishment of white farms and allocated lands to white farmers. Favourable procedures were established for leasing and purchasing land; institutions were set up (a land bank and agricultural cooperatives) to facilitate access to credit and other services for white commercial farmers; and the Agricultural Marketing Act of 1947 created marketing schemes and the boards to control them.

The period from 1948 to 1985. The race-based geographical segregation policy was intensified after 1948. Legislation in 1951 and 1959 established eight national units (self-governing homelands or bantustans). Their boundaries coincided with the reserve boundaries created by the land acts. The area of the homelands was set at 17 million hectares in 1954. Controls were imposed on the migration of Africans into the white-controlled areas. Between 1960 and the early 1 980s, about 3.5 million people (predominantly Africans) were resettled (through such measures as the eviction of black tenants and redundant workers from white farms, intracity removals, homeland consolidation and urban relocation from white areas to the homelands). The concern about increasing poverty and land degradation in the homelands resulted in the establishment of "betterment schemes" aimed at improving conditions. In the 1970s and early 1980s, such schemes were supplemented by large centrally managed agricultural development projects. The latter often experienced financial losses while failing to promote viable smallholder farming. Projects have had only limited success in achieving broad-based rural development in the homelands while their welfare objectives have been restricted to employment generation in rural areas.

While the options and opportunities of black agriculture in the homelands were being curtailed, white agriculture was promoted. Up until the 1 960s, the incentives given to white farmers (especially in terms of assistance in acquiring and enlarging landholdings) favoured an expansive mode of agricultural production in which land, machinery and labour inputs were largely complementary. Over the period, farmers responded to the low cost of both land and labour by acquiring more land and hiring more labour.

A shift towards mechanization, especially the mechanical harvesting of field crops, began in the 1 960s and intensified in the 1 970s, as a result of policy-induced incentives (mainly subsidized interest rates) making a capital intensive mode of production more profitable. During that period, mechanization and labour inputs were substitutes and the typical farm model in South Africa was established: large farms using capital-intensive technology and great amounts of intermediate inputs.

The substitution of capital for labour seems paradoxical in view of the strong labour market segmentation that caused agricultural wages to be as low as 30 percent of the wages in manufacturing and mining. The segmentation of labour markets was the result of several "Pass Laws" that made the movement of black labour between farms and from agriculture to other sectors either impossible or extremely costly. This apparent paradox is explained by looking at the policy-induced incentives for capital-intensive farming. Real interest rates (ex post) on loans to farmers by the land bank and farm cooperatives remained largely negative for most of the decade of the 1 970s. Preferential tax treatment included the introduction in 1970 of a 100 percent capital write-off in the year of purchase. Agriculture was also assisted by input subsidies, including subsidies on fertilizers and chemicals, subsidies for irrigation investment and subsidized water provision for irrigation.

The marketing system and its role in shaping the structure of agriculture: the prereform period

South Africa's marketing system is a product of the 1937 and 1968 Marketing Acts that established marketing schemes and boards. Marketing schemes, on the basis of the type of market control they can exercise, are of four major categories:

While the boards had a number of powers at their disposal they used only a few: the imposition of special levies to finance operations and administrative costs; the authority to buy a product at an approved price; the enforcement of single-channel marketing (i.e. solely through the board and its agents); power to fix the product price; and control of imports and exports.

Before the latest reforms (see section on Current issues and future prospects, p. 97) almost two-thirds of the gross value of agricultural production was subject to marketing schemes with varying levels of intervention while an additional 10 percent was marketed under "special legislation", which provided conditions similar to those of marketing boards. Quantitative controls were applied to most agricultural imports while the beef and wine industries were subjected to production quotas to control supply.

Similar marketing arrangements (i.e. marketing boards with statutory powers) were followed by the semi-independent bantustans although lack of information makes it difficult to assess how effective these marketing arrangements were in controlling trade and providing appropriate marketing services. A major difference between the marketing systems in the Republic of South Africa (RSA) and in the bantustans was that, while in the former producers played a major role in the institutions that controlled and implemented the various schemes, in the latter small-scale producers had very limited power to intervene in the management of control institutions.

For major crops, such as maize, wheat and winter cereals, the marketing structure had a big impact on prices. Prices set by the board at producer and consumer levels usually exceeded the world price, resulting in welfare transfers from consumers and/or taxpayers to producers. A panterritorial price scheme for producers aggravated the negative effects on price efficiency. Occasional surpluses of maize were exported at a loss, but losses were covered by stabilization levies. For wheat, domestic prices were set above world prices (between 11 and 46 percent higher in the 1980 to 1987 period) and imports were subjected to strict controls on quantity to protect the domestic price.

The complicated marketing regulations and controls and the extensive use of tariffs and quantitative restrictions resulted in a predominantly inward looking agricultural sector largely isolated from foreign market competition. The enforcement of single-channel marketing deterred entry and competition in the sector, while a system of licences (such as the meat scheme's quota control scheme) promoted concentration on processing and distribution systems.

Prereform policies and their economic and social effects

A review of the performance of the agricultural sector in South Africa up to the mid-1980s shows that, despite the country's limited agricultural resource base, agriculture had achieved an impressive production performance in almost all major products and was producing surpluses in some. Thus, the long-standing objective of self-sufficiency was largely met. The diversity of the country's resource endowment, which allows the production of a variety of commodities, contributed to this success, as did the high level of technological sophistication and managerial skills of South African farmers.

In spite of these achievements in agricultural production and self-sufficiency, the structure and pattern of growth of the sector, which was to a large extent shaped by policy action, turned out to be unsustainable from both the strict economic and the social efficiency viewpoints.

A major problem has been the inequality of access to resources and support services between large commercial farmers and those in the homelands. Land distribution data show that 86 percent of agricultural land is held by 55 000 predominantly white large-scale commercial farmers and supports a rural population of 5.3 million. On the other hand, 13.1 million black residents in the homelands live on the remaining 14 percent of agricultural land. Likewise, the ratio of government spending in the modern sector to the homeland sector was 4:1 in the 1 980s, down from 14:1 in the 1 950s and 179:1 before the Second World War. Large commercial farmers obtained 96.7 percent of the transfer payments in the budget.

Inequalities in the distribution of resources have been caused by policies, regulations and restrictions rather than by a natural outcome of a market-based process in which land concentration would result from economies of scale in production. Certainly, for some South African agricultural activities extensive operations are efficient (for instance, for livestock raising in dry areas) even in the absence of policy, but this is not the case for a number of others.

Apart from the serious social implications of past policies, their cost in terms of economic efficiency, although difficult to calculate precisely, has probably been substantial. Such policies hampered the dynamism that African farming had at the beginning of the century. Restrictions on free exchange in the land and labour markets eliminated the possibility of mutually beneficial, profit-maximizing arrangements between landlords and potential tenants or labourers. In combination with policies on interest rates and the tax treatment of capital, restrictions in market activity pushed the agricultural sector towards a capital-intensive structure and away from labour, the abundant resource in the country.

The high capital intensity of production in the presence of high unemployment is found not only in agriculture but is a characteristic of the whole economic structure, resulting from the inward-looking import-substitution policies of the country. Some of those policies towards non-agricultural sectors (such as tariffs and quotas) were detrimental not only to overall productivity in the country but also to the profitability of farming as they restricted agriculture to high-cost domestic sources of input supply.

Eventually, inefficiencies in resource allocation led to stagnating productivity in agriculture. Substantial transfers of resources from consumers, directly in the form of higher prices or as taxpayers in the form of transfers of public funds, were needed to keep parts of the commercial agricultural sector alive in the face of declining profitability in the 1 970s.

The post-1985 period: policy reforms and their impact.

While policy reforms aimed directly at agriculture did not start until the early and mid-1 980s, the reforms in the financial/banking sector of the late 1 970s and the devaluation of the rend had a significant impact on the agricultural sector. The imposition of more stringent reserve requirements on the commercial banks and the concomitant increase in the interest rate made it impossible for the land bank to continue subsidizing the interest rate on farm loans. The devaluation of the rend increased the cost of agricultural inputs, which have a large import component, while the increase in interest rates increased the debt burden of an already overextended commercial farm sector.

Policy reforms affecting the agricultural sector (in the wider sense) were initiated in the early 1 980s within a climate of fiscal austerity and economic liberalization which, in turn, was the result of budgetary considerations and the realization that the inward-looking development model was counterproductive for overall factor productivity, economic growth and employment generation. For agriculture, in addition to fiscal considerations (a significant motive underlying the reforms), a number of other factors created pressure for policy change: the realization that overall productivity (total factor productivity) for controlled major subsectors (such as maize) was growing only slightly or remained stagnant while that of uncontrolled sectors (horticulture, poultry meat) was increasing; pressures from commercial farmers and industrial interests that were not served by the controlled system as well as some successful legal cases against the control boards; the flourishing of parallel trade in some commodities that undermined the effectiveness of controls; and, last but not least, pressures and agreements during the GATT negotiations for tariffication and abolition of quantitative controls on imports. The main objectives of agricultural policy have made a major shift from food self-sufficiency to household-level food security.

As a result of fiscal pressures, budgetary allocations in support of farmers were reduced by more than 50 percent in real terms after 1987. Direct producer price subsidies (e.g. to maize producers) were eliminated. Government subsidies to several sectors, including wheat, maize and the dairy industry, were halted. Price controls on bread and flour were abolished in 1991. There was a reduction in administered prices to producers and a move away from cost-plus to more market-determined prices. Since 1987, there has been a marked decline in real producer prices of key commodities such as maize and wheat. The tax code has also been reformed and capital equipment now has a three-year write off period rather than only one year.

The South African marketing system has been substantially changed. The Kassier Committee of Inquiry into the Marketing Act, appointed by the Minister of Agriculture in June 1992, produced a report strongly opposed to the system of statutory controls. The reform of marketing schemes, some of which had begun in the early and mid-1980s, intensified after the publication of the report which recommended widespread deregulation of the marketing system. Thus, six out of a total of 21 marketing schemes have been abolished (bananas, chicory, rooibos tea, eggs, potatoes and dry beans) while others have been reformed away from single-channel marketing (e.g. Ieaf tobacco, ostrich products, maize and lucerne hay). For the main cereals, the ban on erecting silos and the registration of millers and confectioners have been repealed. Grain sorghum and groundnut marketing schemes were reformed by surplus-removal schemes. For red meat, in addition to the abolition of movement limitations, the restrictive registration of producers, abattoirs, butchers, dealers, processors and importers was also repealed.

In the homelands, the "top-down" rural development policy favouring estate farms was abolished in favour of an approach that emphasized service provision to farmers (infrastructure, extension and research services and improved credit access). In 1991, the Land Acts were abolished.

The short-term effects of the change in policies are difficult to disentangle from the effects of the general economic trends in the country and from the effects of other exogenous factors. During the 1 980s and early 1 990s, apart from over the period 1986 to 1988, growth rates of real GDP declined in South Africa. A continuous decline in overall productivity growth (total factor productivity growth was -0.5 percent per year between 1973 and 1984 and -1.1 percent between 1981 and 1988), despite an increasing investment: GDP ratio, contributed to a negative per caput GDP growth after 1982. The situation deteriorated with the imposition of financial sanctions in 1985 and the political turmoil and uncertainty in the country. GDP growth was -0.6 percent in 1990 and 1991 and -2.1 in 1992 caused, in part, by the severe drought in the country.

The policy changes in agriculture accelerated a cost-price squeeze that had started in the early 1 970s. While the liberalization of output markets caused declines in real output prices, there was no commensurate decline in the prices of agricultural inputs. This was partly the result of high import protection for farm machinery and implement manufacturing and monopolies within those industries.

The fall in profitability of the farm sector has had severe implications on many farmers' ability to repay debts while the real costs of borrowing increase. Several years of negative real interest rates for the farm sector provided a strong incentive for debt accumulation. Real farm debt reached its highest level in 1985 and has decreased since as the conditions for borrowing have deteriorated and the borrowing ability of a number of farmers has declined along with profitability. Short-term borrowing has been substituted for long-term indebtedness and the ratio of short- to long-term debt has increased substantially. A survey on the financial situation of farmers, published in 1985 by the South African Agricultural Union, showed that 49 percent of the farmers were financially sound at the end of 1983, but the percentage was expected to fall to below 39 percent at the end of 1984. In addition, 22.4 percent of farmers had debt burdens at "critical" levels in 1983 and this percentage was expected to have grown to 33 percent in 1984. Debt difficulties were not uniformly distributed among agricultural subsectors. Summer crops were affected the most (52 percent of farms were beyond the critical level) while winter crops were less affected (22.6 percent of farms).

Despite declining farm profitability, unsustainable debt problems and sharp reductions in farm incomes, massive farm failures have been avoided thanks to a number of government programmes providing substantial amounts of aid to farmers under financial assistance schemes. Substantial financial help was provided to the sector to help farmers face the consequences of the 1991/92 catastrophic drought. Financial assistance schemes have kept farm insolvencies at low levels in relation to the number that would otherwise have occurred. Nevertheless, an increase in insolvencies was observed, from an average of 80 in the 1960s and 1970s to 141 in 1985,317 in 1987 and 267 in 1990. The expectation of continuing public financial assistance to prevent insolvencies along with the fear of collapsing land prices encouraged the financial sector to continue its provision of short-term credit to farmers to keep them on their farms. While public financial assistance was successful in keeping farmers (especially grain farmers who had the majority of arrears) on the land by preventing foreclosures, it slowed down necessary adjustments in the structure of the farm sector, input mix and possible relocations in production. In that sense, such assistance had the opposite effects to the "structural adjustment" measures taken since the 1 980s.

There are signs of some improvements in efficiency that resulted from the shift in policies. The capital intensity of production fell and employment in agriculture rose. Cropping patterns shifted away from maize, for which the area planted decreased by 12.5 percent between 1981 and 1988. Similar trends have been observed for wheat, grain sorghum, sunflower seed, soybeans and cotton. Increases have been observed in the production and export of more profitable (and more labour-intensive) horticultural products. There is also evidence of an increasing number of input substitutions in response to price signals. Studies reveal that between 1983 and 1991 total factor productivity (TFP) in agriculture grew by 4.63 percent a year outpacing a 3.11 percent decline in the terms of trade. This is a significant improvement over the period 1973 to 1983 for which TFP increased by only 0.27 percent annually. Improved capacity utilization (e.g. a longer replacement period for tractors) may account for much of the difference.

South African agriculture: current issues and future prospects

The changes in policy towards the agricultural sector that were implemented mainly during the 1 980s and early 1 990s are a step towards establishing a more flexible and efficient sector. Pricing and marketing reforms, supplemented by reforms that reduce the concentration in input markets, processing and distribution, reduce the gap between producer and consumer prices of food and have widespread benefits.

Although the evidence shows that the structure of an agricultural sector that is dependent on large, heavily capitalized farms practicing monoculture may be unsustainable without government support for some crops and in some agroclimatic conditions, sweeping generalizations regarding the efficiency of large-scale farms cannot be made. The diversity of agroclimatic conditions in South Africa can support enterprises with varying optimal scales of operations, degrees of capitalization, etc. Freer input and output markets and the abolition of restrictive policy measures will be the major determinants of an efficient farm structure for different commodities and enterprises. Where largescale, capital-intensive farms prove unviable, policies and programmes can be put in place to speed up the market process of land redistribution and help poor rural people acquire land. In such cases, policy interventions in favour of land redistribution will promote both efficiency and equity objectives.

Land redistribution options

Land reform in South Africa is necessary for reasons that go beyond improved efficiency, and its implementation (or lack thereof) will have important social and political consequences with significant implications for economic development. The demise of the black farming sector in the homelands and its low productivity is, to a large extent, the result of land allocation decisions and a lack of access to credit, adequate infrastructure and other agricultural services. International experience shows that failure to address effectively inequities in access to resources and the concomitant poverty and marginalization of disenfranchised social groups may result in social unrest, capital flight and economic decline.

There are two parts to the process of land reform currently being discussed in South Africa. First, land restoration, i.e. the administrative or adjudicative process by which land is allocated to individuals or communities unjustly evicted as a result of racially based land legislation policies and, second, land redistribution, i.e. the process through which selected groups of individuals are provided with access to land and the necessary means for its effective use. The extent to which land is redistributed, the criteria by which beneficiaries are selected, the means of acquiring the land for redistribution and the provision of the support services necessary for effective land-use are at the centre of the rural restructuring debate in South Africa.

To the extent that a land reform programme will address welfare objectives, policy-makers face the task of reconciling the historical claims of black farmers for access to land while at the same time maintaining a dynamic agricultural sector and expanding the benefits of agricultural growth to rural communities and nonagricultural sectors. Welfare and efficiency objectives will have to be reconciled in cases of individuals who qualify for land or assistance under welfare criteria but do not have adequate farming or other land-use experience.

For a successful land reform programme, the actual transfer of land to beneficiaries is considered only the first step towards a rural restructuring effort. Communities should have access to the financial, physical and human capital necessary to make effective and productive use of the reallocated land. The type and amount of assistance to be provided to the emerging farmers and farming communities and the administrative modalities for doing so are important policy issues to be resolved in designing the land redistribution scheme. Thus, the problem of rural restructuring is one of access to and redistribution of resources of which land is the most important but certainly not the only one.

Recent policy reforms that reduce support to the large commercial sector may aid the land reform process to the extent that they will result in land sales on the part of those large-scale farms unable to survive in an unprotected environment. Relying on only such measures will not be sufficient to achieve the objectives of the land reform programme. In an uncertain political-economic environment such as the one currently in South Africa, land is valued more highly than its productive worth so large landowners will be reluctant to sell land even though they may be receiving lower policy-related support. In addition, the financial position of disenfranchised groups will not permit them to participate actively in the land market and, as a result, the welfare and equity objectives of the land reform programme will only be partially met.

Experience shows that for land-reform-based rural development to be successful, it is imperative that land tenure rights and arrangements be protected by law or constitutional act. Such legislative acts secure private ownership and sanction various forms of tenure, such as private titles and communal arrangements, which are the prevalent form of landownership in the homelands. Local communities are given ample powers to manage their internal land affairs while at the same time guaranteeing a minimum set of democratic rights to their members. A clear legal framework for land rights will remove uncertainty about landownership and, as such, promote investment and environmental conservation.

From the above discussion it becomes clear that rural restructuring and revival goes beyond land redistribution to encompass a series of supportive policies and programmes. although the extent and precise form of the redistribution programme are still under discussion, there is a consensus that, given international experience, a market-based reform that takes into account the realities in South Africa, rather than a state-controlled land reform, is the most appropriate form of land redistribution. Past experiences with the Trust Land Transfer programme in South Africa and with the resettlement programme in Zimbabwe show that such state-controlled land transfers can be lengthy, costly and unproductive, tend to increase land prices and can be the source of land degradation if carried out before proper farming systems can be adopted. Innovative approaches to a market-based land reform need to be explored. For instance, funding can be provided to employees in large white commercial farms so that they can acquire equity and associated ownership and decision-making powers in such enterprises.

For the welfare objectives of the land reform programme to be met, a basic grant element could be incorporated to aid eligible groups or individuals to acquire a core land component (e.g. a housing site). A matching grant scheme will attract individuals or groups who are likely to make the most productive use of the purchased land.

The country's relatively limited agricultural resource base limits the options for and the extent of land redistribution. Thus, given land restoration, the potential of land allocation by opening new lands or redistributing existing ones under state control is limited. As a result, land redistribution by and in itself cannot fully address the rural (and urban) poverty problem in South Africa even if the problem of the provision of access to credit and other services is successfully solved. Improved access to services (including credit) and infrastructure in the homelands is expected to cause significant agricultural expansion. Given small-scale agriculture's strong linkages to other non-farming sectors (i.e. upstream and downstream agroindustry) such an expansion will stimulate employment. The limited resource base and its fragility pose an effective limit on such growth, however, and may have negative environmental impacts. Thus it is necessary that land redistribution be accompanied by programmes to provide rural (and urban) safety nets and access to social and economic infrastructure.

Concluding remarks

The prospects for the resumption of economic growth in South Africa are positive. A positive per caput GDP growth in 1994 reverses the negative trend that started in 1982. The recent unification of the exchange rate and partial liberalization of the capital account proved to be a success, and demonstrated the confidence of international investors in the country's economy and the credibility of the government's prudent macroeconomic management policies. At the same time, the country is strengthening cooperation with its neighbours by becoming a member of the Southern African Development Community (SADC) and by renegotiating the treaty on the Southern Africa Customs Union (SACU) towards establishing a more democratic decision-making process and a fairer distribution of benefits.

A number of difficult obstacles still lie ahead. The government is seeking to balance the demands of the previously disenfranchised black majority for better living conditions and employment opportunities with the need for fiscal austerity and increased liberalization of the economy so that productivity can be increased. Short-term measures to alleviate poverty are needed. The data show that the demand for such policies is more acute in rural areas. It has been estimated that 16.4 million South Africans (45 percent of the total population) had incomes below the minimum subsistence level in 1989, 93 percent of these people were black and approximately 80 percent lived in rural areas. Around 2.3 million South Africans (87 percent of them black), including children under 12 and pregnant and lactating mothers, can be defined as malnourished. Hence the urgency for an agriculture-based rural development, including land redistribution and the abolition of policies that inhibit the increased use of labour.

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