Ramaphosa's proposal for state-owned land to be used for agricultural production is welcomed but questions remain on issues of expropriation without compensation, drought, the economy, climate and security risks
Commercial property owners were pleased with many of the commitments made by President Cyril Ramaphosa in his recent State of the Nation address but there is still some concern over the clarity of land expropriation, especially for the agricultural sector.
The president’s announcement that 700000 hectares of state-owned land would be given for agricultural production was welcomed by property owners but many felt that the contentious Land Expropriation Without Compensation (LEWC) issue still had not been unpacked.
This, combined with the recent drought, economic climate and security risks, has made the tough times even tougher for the agricultural property industry.
“There has definitely been a downswing in the demand for agricultural properties in Riebeek Valley and surrounding areas,” says Gerhard Agenbag of Re/Max Valley Properties.
“The drought certainly had a big impact, as well as the political situation.
“Buyers who previously would have invested in agricultural properties are hesitant and would rather look elsewhere (as in other African countries) to invest their money.”
He adds that the number of enquiries from overseas buyers is far smaller than it was about 15 months ago.
The past three years have seen the general Boland “lifestyle” farm market under pressure from four main influences: the drought, subdued economy, perceived personal security risks and lack of clear government policy surrounding land redistribution and expropriation, echoes James Visser of Harcourts Winelands.
“The agricultural water availability situation has since improved but the other three influencing factors remain and no change is expected in the marketplace in 2020. “It remains a strong buyer’s market, with only farms priced below market value selling.”
While Agenbag says prices of well-managed export farms are faring “very well” due to the weak rand, there has been a decline in the demand for lifestyle farms. This could lead to lower prices per hectare in the near future, he cautions.
Some agricultural property owners have also sold and emigrated owing to the LEWC issues but this is not the norm as farmers are still positive about the future. The land expropriation issue is, however, being closely followed.
“There might be a bit of uneasiness about the whole issue. Luckily, it doesn’t seem to have a definite impact on why farms are coming onto the market. The recent drought probably had a bigger impact on the reasons for selling, particularly in our area.”
Visser says drought, water availability and water security play a significant role in determining the value and desirability of a farm and properties without a sufficient and secure water supply do not attain pre-drought prices. LEWC too is “certainly having an impact” on the agricultural market in that the smaller farmers are losing confidence in future property security.
As a result, they are not spending the ongoing capital investment required to maintain the farms in a good productive state.
“Big, corporate commercial entities, who are constantly needing to increase the size of their operations (to remain viable and competitive) are buyers in this sector but only the best, profitable farms attract their interest, while marginal farms fall by the wayside.”
Visser adds there has been a slight drop in prices of large commercial farms of late. In the Riebeek Valley and the surrounding areas, Agenbag says, export fruit farms are the best performers. “Profitable farms with good average rainfall are also in good demand.”
Harcourts SA chief executive Richard Gray says the threat to property ownership “is a sensitive topic and undoubtedly influences the temperature of the market, both residential and agricultural”.
However, he adds: “We have not been able to identify a frequency in the hesitancy to purchase agricultural property directly related to LEWC. “The resurfacing of this issue in recent months has not allowed us enough time to gather sufficient data… It is difficult to make a prediction on the rate of the market going forward as we are not entirely sure of the implementation and details surrounding LEWC.”
The deadline to make written submissions on the Draft Constitution Eighteenth Amendment Bill, which seeks to amend section 25 of the Constitution to provide for expropriation of land without compensation, was the end of last month.