Omri van Zyl, head of the Agri SA union, which represents mainly white farmers, said: “The mood among our members is very solemn. They are confused about the lack of any apparent strategy from the government and many are panicking. So many farms are up for sale, more than we’ve ever had, but no one is buying.”
Investors in South Africa are worried that the economy would contract the way it did in Zimbabwe under President Robert Mugabe, who also seized land from whites. The country’s economy hasn’t recovered since then, with inflation reaching 89.7 sextillion percent during the peak of the crisis, according to some estimates.
“Markets are sensitive to anything perceived to be ‘Zimbabwe-fication’ on the land-reform front,” Henrik Gullberg, executive director of emerging-market strategy at Nomura, told Bloomberg.
Last week, South Africa’s governing party ANC chairman Gwede Mantashe fueled the farmers’ panic by announcing upcoming seizures. “You shouldn’t own more than 12,000 hectares of land and therefore if you own more, it should be taken without compensation,” Mantashe told News24. Minority rights group AfriForum has warned the move would be “catastrophic.”
The South African government says it wants to settle the land issue, a major point of contention in the predominantly black country, and wants to take the land into state ownership and rent it to the black population of the country, after taking it away from several thousand white commercial farmers without compensating them. Whether the government will take over the mortgages and loans is unclear.
“There is no historic ‘land ownership’ that was taken away in the winelands area. But if the constitution is amended, it might as well happen. It can go both ways. For now we believe in the law as is, and continue investing,” Josef Dreyer, winemaker at RAKA wines said.
However, there is uncertainty looming over the vineyards, and it hardly adds to confidence in this business, said Dreyer. If land expropriation hits winemakers, the effect would be ‘disastrous’ for the industry, he warns.
“I think it will result in a drop in production, and negatively impact the export of our valued product. We might end up where the government own all land and we must rent it from them… Remember: the possible beneficiaries are unschooled, uneducated, how must they run a business,” Dreyer said.
According to Dreyer, land expropriation is hardly a solution to South Africa’s economic problem, where only a tiny fraction of the population pays income taxes, and more than a third are unemployed.
“We are one of the countries with a wide gap between the rich and the poor, where 13 percent of the South African population of 56 million people are the ones paying income taxes! Yes, 13 percent make the country run! 18 million of the 56 million is reliant on social grants, and unemployment is at 37.5 percent, so yes it is much easier to hand out land as the money is drying up,” he said.
The winemaker notes that his company employs 44 people. “Why would I work hard and create jobs if it is to be shared among all,” Dreyer says. “It is the government’s job to create a corruption-free environment that is favourable for investment,” he added.