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Cape Town - The costs of government’s land reform drive must be reduced through a multi-tier pricing regime that should include options like scrapping the willing-buyer-willing-seller concept, introducing a land tax as well as a new system of valuing land, according to the final draft of government’s green paper on land reform.
Fin24.com has seen a copy of the green paper, which blames the willing-buyer-willing-seller concept for the slow pace and increasing cost of land reform. It stresses that the current price of land makes government’s aim of redistributing 30% of all agricultural farmland by 2014 an impossible task.
“Given that approximately 7 million hectares has been transferred to date, over 14 million hectares would need to be delivered over three years...”
“In other words, delivery would need to leap from 1 million hectares per year to over 4.6 million hectares, which is not feasible given the current willing-buyer-willing-seller approach,” reads the document, which will be released for public comment if and when approved by cabinet.
“Supposedly willing sellers” are slated for their “latitude to determine the price of land that suits them regardless of the buyers’ ability”.
The green paper offers three options to ensure that a “below-market compensation standard” is achieved.
Firstly, a more forceful expropriation policy, which the paper says is being “actively discussed” in the department of rural development and land reform, is proposed.
A “land-reform discount” - an across-the-board discount of compensation for land acquired for land reform purposes – is also under consideration.
The third option would be the use of a “productive value” as opposed to “market value” to determine compensation.
“Whatever approach is taken would need to comply with the overriding “just and equitable” criteria stated up front in 25(3) (of the Constitution),” reads the document.
Progressive land tax
A land tax proposal is also highlighted as one of the “most direct ways of affecting (reducing) prices” because it would increase the cost of holding under-utilised and unutilised land.
“A progressive land tax would potentially push additional land onto the market, though how much of that land could be accessed for land reform purposes is unclear. It would of course also produce a new revenue stream for government.
“If possible, that stream should be legally tied to use in funding land reform. It is suggested that such a land tax should be levied only on very large holdings (the same holdings that might be affected by a ceilings provision), rather than subjecting all holdings to a land tax over and above existing rates.
“This would avoid incurring administrative costs of collecting small amounts on many small holdings. This targeting would also reduce any general negative impacts on tenure security and investor confidence,” states the document.
According to the paper, this would not make all agriculture less profitable, just agriculture on very large holdings (where productive land is unused).
The green paper, however, does concede that a land tax will be problematic.
“Any tax that is politically acceptable would have only a marginal downward impact on land prices; in order to compel land prices to drop by, say, 30%, it would have to be so large as to create uncertainty in the commercial farming sector.”
It is also conceded that there would be little appetite to introduce a land tax so soon after municipal property rates started applying to farmland as well.
Multi-tier pricing regime
When it comes to the new valuation regime, it is proposed that the state create a valuation body that would standardise land valuations.
“The creation of a proactive role for the state in relation to valuation in essence gives effect to a multi-tier pricing regime. This model of valuation is successfully used in countries such as Malaysia, Australia and New Zealand.
“The proposed intervention of the state will create an equal and market for both private land transactions and land reform transactions,” reads the document. This would require the creation of a Valuer General (similar to the Surveyor-General).
In his foreword to the green paper, Rural Development and Land Reform Minister Gugile Nkwinti says that land reform and redressing the cruel consequences of apartheid need to be a collective effort if the “anger and bitterness” are to be “toned down”.
But, he also warns that the goodwill and patience that black South Africans have shown in this regard is not “inexhaustible”.
- Fin24.com
Fin24.com has seen a copy of the green paper, which blames the willing-buyer-willing-seller concept for the slow pace and increasing cost of land reform. It stresses that the current price of land makes government’s aim of redistributing 30% of all agricultural farmland by 2014 an impossible task.
“Given that approximately 7 million hectares has been transferred to date, over 14 million hectares would need to be delivered over three years...”
“In other words, delivery would need to leap from 1 million hectares per year to over 4.6 million hectares, which is not feasible given the current willing-buyer-willing-seller approach,” reads the document, which will be released for public comment if and when approved by cabinet.
“Supposedly willing sellers” are slated for their “latitude to determine the price of land that suits them regardless of the buyers’ ability”.
The green paper offers three options to ensure that a “below-market compensation standard” is achieved.
Firstly, a more forceful expropriation policy, which the paper says is being “actively discussed” in the department of rural development and land reform, is proposed.
A “land-reform discount” - an across-the-board discount of compensation for land acquired for land reform purposes – is also under consideration.
The third option would be the use of a “productive value” as opposed to “market value” to determine compensation.
“Whatever approach is taken would need to comply with the overriding “just and equitable” criteria stated up front in 25(3) (of the Constitution),” reads the document.
Progressive land tax
A land tax proposal is also highlighted as one of the “most direct ways of affecting (reducing) prices” because it would increase the cost of holding under-utilised and unutilised land.
“A progressive land tax would potentially push additional land onto the market, though how much of that land could be accessed for land reform purposes is unclear. It would of course also produce a new revenue stream for government.
“If possible, that stream should be legally tied to use in funding land reform. It is suggested that such a land tax should be levied only on very large holdings (the same holdings that might be affected by a ceilings provision), rather than subjecting all holdings to a land tax over and above existing rates.
“This would avoid incurring administrative costs of collecting small amounts on many small holdings. This targeting would also reduce any general negative impacts on tenure security and investor confidence,” states the document.
According to the paper, this would not make all agriculture less profitable, just agriculture on very large holdings (where productive land is unused).
The green paper, however, does concede that a land tax will be problematic.
“Any tax that is politically acceptable would have only a marginal downward impact on land prices; in order to compel land prices to drop by, say, 30%, it would have to be so large as to create uncertainty in the commercial farming sector.”
It is also conceded that there would be little appetite to introduce a land tax so soon after municipal property rates started applying to farmland as well.
Multi-tier pricing regime
When it comes to the new valuation regime, it is proposed that the state create a valuation body that would standardise land valuations.
“The creation of a proactive role for the state in relation to valuation in essence gives effect to a multi-tier pricing regime. This model of valuation is successfully used in countries such as Malaysia, Australia and New Zealand.
“The proposed intervention of the state will create an equal and market for both private land transactions and land reform transactions,” reads the document. This would require the creation of a Valuer General (similar to the Surveyor-General).
In his foreword to the green paper, Rural Development and Land Reform Minister Gugile Nkwinti says that land reform and redressing the cruel consequences of apartheid need to be a collective effort if the “anger and bitterness” are to be “toned down”.
But, he also warns that the goodwill and patience that black South Africans have shown in this regard is not “inexhaustible”.
- Fin24.com
