Populist politics doesn’t need to make sense. Not to people with a bit of sense, that is. Buried in the oration by Julius Malema at the weekend was a threat to farmers which one can only describe as truly bizarre – with no basis in logical thought.
“The Afrikaner farmers who are not owning their farms… they are going back to the banks to put their farms on mortgage. They are now taking (the) money. And giving the banks their farms… so that when we come to take the land, it is owned by the bank(s).”
They – the farmers – “started this from December, they are working with South African banks to cheat the process of land expropriation without compensation,” Malema, the leader of the Economic Freedom Fighters, said.
On a roll – at his party’s kick-start of its 2019 national election campaign – Malema warned the South African banking industry. “Any farm that is put in mortgage (sic) after December 2017 … such mortgage will not be paid by our government.” It was a prediction that he expected the EFF to be in government – if not in control of government – from next year.
Anyone with even a modicum of sense about South African agriculture will know that Malema is talking utter codswallop. Even the most successful commercial farmers will be highly indebted – it is the nature of the business anywhere in agriculture just about anywhere in the world that farmers run their business debt-geared.
The mark of a good farmer is he – or she – can successfully service that debt and not allow it to go out of control.
Political and economic analyst Stef Terblanche rightly points out that a worst-case scenario of large-scale agricultural land expropriation – without compensation – could trigger a major banking crisis. So an agriculture crisis could turn into a banking crisis. Terblanche quotes Ian Matthews, head of business development at Bravura that it would be hard to imagine how the banking and finance sector would be able to overcome large-scale loan losses that could arise from expropriation without compensation.
Indeed, as Terblanche points out, we don’t know about the practical modalities of the land expropriation – without compensation – policy yet, so we are entering the real of speculation. But Malema’s warnings could already be doing untold damage to the agriculture sector.
Malema has chosen an arbitrary date of December 2017. He has chosen this because the African National Congress conference opted for this policy at this point. To claim that farmers have especially gone out to mortgage their farms may have a grain of truth – but frankly this approach would not be any different to the behaviour of the farming sector in the past.
Malema is a dangerous man. This has been masked by his legitimate campaign to remove President Jacob Zuma from office. Even his shenanigans in parliament – where sessions turned into chaos because of the crypto-violent behaviour of his Members of Parliament – were rendered legitimate in the eyes of the public because the greater good was arguably being achieved.
But now Malema’s populism – coupled with his arbitrary racism of targeting a white mayor Athol Trollip for toppling in Nelson Mandela Bay simply because he is a white man – is exposed for what it is. It is a combination of deeply entrenched racism – against whites – and a populist revolutionary zeal, where the rules of the political game shift constantly.
Terblanche makes this point: Also at risk of the uncertainty is the financial sector – the EFF’s next target, and a sector already drawn into the fray by the land decision last week. Jumping onto the EFF’s land-grab bandwagon in a competition for votes, few if any of the governing party the African National Congress’s recently converted advocates of expropriation without compensation probably considered the potentially disastrous consequences for the banking sector, the one pillar of the South African economy that has so far largely, but not always, withstood the political turmoil of the past.
Terblanche notes that, according to Bloomberg, farmers are indebted to South African banks to the tune of more than R125 billion. Some 56% of this debt is held by commercial banks, while the Land Bank holds 30%. The 2017 Land Bank Annual Financial Report stated the Land Bank holds a gross loan amount of R43.3 billion, even more than the amount calculated by Bloomberg. None of the banks probably ever factored possible land seizures by the state into the original loan applications.
The commercial farming sector itself will respond negatively to the political uncertainty around its future, predicts Terblanche. There is likely, he says, to be a renewed rush to sell farms while it still can be done, even at sub-market values. And farmers themselves, threatened by bankruptcy due to the political moves, will seek to protect themselves and their estates against the cost of expropriation to them, to the detriment of their creditors, their investments in their farms, and therefore to the continued viability of their farms as commercial enterprises.
Terblanche reports: “They are not likely to invest any more money in their uncertain future, and no-one else is likely to invest in or finance any new agricultural or land ventures. It is hard to see how the commercial viability of the sector and a continuation of current agricultural production as well as food security will not be negatively impacted.
“Farmers have already had to cut back on costs and employment due to the severe effects of drought in many parts of the country, and job losses were reported for the first three quarters last year. But even so, the sector has continued to show resilience both in terms of its contribution to GDP and employment. Now however, with so much uncertainty prevailing, many of the jobs of the just under 900,000 workers employed in the sector, will be in the balance.”
Malema may be right to sing the song that his supporters must get ready to go farming. But judging from the success of the existing farms that have been transferred to new South African black farmers – which government itself says is a project which has largely failed – that promise may just mean dumping people on an economic wasteland.