BEE requirements for exports will have disastrous consequences for family farms

Black Economic Empowerment requirements for farmers who want to export farm products are morally unjustifiable and can have disastrous consequences for the viability of family farms and for the rural economy.

As if the racial obsession of the ANC had not already caused enough damage to the South African economy, the requirement of BEE targets will cripple our farmers’ competitiveness in the short term and in the medium term have devastating consequences for agricultural exports.

Farmers’ objections to the new regulations lie on three levels: problems of principle, business problems and practical problems.

 Problems of principle

How does one apply BEE on a family farm? It can be hard enough for a father and son to farm together, or for cousins, let alone a black partner who is forced onto a farmer?

If the regulations were applied in this way, it would mean that individuals and families would have to pick up the bill for a national imperative, while the state had failed miserably in doing so.

So many millions that the state has invested for decades through the Agri-BEE Fund in the development of black farmers, have not yet resulted in them making a significant contribution to the turnover on local or international markets. The inefficiency of 29 years of agricultural development programs of the state and the destructive impact of BEE in the public sector and in the state owned enterprises cannot be tolerated in our food system.

Business problems

Land reform was intended to create equal opportunities for all farmers. 25 Years after the final date for the filing of land claims, the state has not even compiled a list of them, while they should have created a class of profitable black farmers by now. Now they transfer the responsibility to family farmers who already have to compete against the best producers in the world for shelf space in a poor policy environment which is very hostile to family farming.

In provinces such as Limpopo, Mpumalanga and KwaZulu-Natal, unresolved land claims have been hanging over farms like a sword for decades and are putting a hold on further investments. It was already agreed with the state in 2010 that farms with pending land claims should be exempted from all BEE requirements because no investor will be interested in a farm if he is not sure whether it will perhaps be transferred in a year or two. Government didn’t honour this agreement.

The government has repeatedly lost the legal battle over its “new apartheid-style” racial obsession against Solidarity, and the new measures fall far outside the framework of internationally acceptable protocols.

South Africa cannot in the 2020’s have regulations where individual entrepreneurs of one race are prohibited from going beyond certain boundaries in their turnover.

The profit margins in farming are under pressure. A farmer cannot afford to pay inflated input prices to BEE companies when he can get better quality at cheaper prices from well-established input suppliers. Small and medium farms do not have the luxury of hiring managers based on their skin colour – they must also consider ability, experience, qualifications and diligence.

For our farming operations to comply on ownership requirements, black investors must be willing to buy into family farms. This must happen quickly before the export season starts. But the state has not put in place any special financing scheme for would-be investors, and the expectation is that those shares should be given away for free or at massive discounts. In too many cases where the value of shares in agricultural companies was diluted to get black faces in the ownership structures, BEE did not bring any benefit and the shares were sold by the beneficiaries at a fraction of the value to foreign or white investors. Then such a company is again without its BEE status but with diluted values.

Practical problems

Saai is involved in numerous lawsuits on behalf of their black members, where bona-fide black farmers are kicked off state farms to be replaced with well-connected cadres. The ANC has already proven that they are not interested in the general development of black farmers, but instead want to create another trough from which cadres can feed.

Agricultural organisations that get their income, right to exist or mandates mainly from agricultural businesses are more apt to support the ANC’s racial ideology. They can afford the burden of BEE requirements, and are happy to be free at the benevolence of the government. They do not care much for the survival of family farms.

Their argument that BEE requirements have been coming for years, that these export restrictions apply only for quotas for favourable rates on juice and pickled products to the EU and UK, and that they are not properly applied in any case, is fallacious reasoning. This does not make BEE requirements on family businesses any less absurd, and it does not make BEE’s damage to the economy any less disastrous, but it undermines the principle that trade restrictions based on race represent a fundamental injustice.

Agricultural organisations that support the BEE regulations for exports are mostly those that have signed up for the Agricultural Master Plan, while those who feel that profitability, sustainability and efficiency are more important than transformation also reject the BEE regulations.

BEE requirements for the exports of agricultural products will not have good outcomes. This puts agriculture on the same trajectory as Denel, SAA, SABC and public healthcare. The damage soon becomes too extensive to repair. Saai will fight against it in every local and international forum, in courts and multilateral agencies of the UN and the African Union.