Quantifying the Economic Effects of Land Reform Policy in South Africa: A Computable General Equilibrium Analysis

Khumbuzile Mosoma (), Heinrich Bohlmann (), Sifiso Ntombela and Renee van Eyden ()
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Khumbuzile Mosoma: Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa
Heinrich Bohlmann: Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa
Sifiso Ntombela: National Agricultural Marketing Council

No 202307, Working Papers from University of Pretoria, Department of Economics

Abstract: Although South Africa has implemented several land reform policies and farmer development support programmes, little progress has been achieved in bridging the inequality gap between mainly black emerging and mainly white established farmers. This study seeks to quantify the effects of land reform policy in South Africa using a dynamic computable general equilibrium (CGE) model. The study simulates two policy scenarios. The first policy scenario assumes that the current land reform approach will continue where government transfers land, but without transitional farmer support to improve the productivity of new farmers. The second policy scenario assumes that the state will additionally allocate transitional farmer support to new farmers, including those operating on land-reform farms and in the former homeland areas. The results reveal that the effects of land reform policy are minimal but positive at the aggregate economic level across the two scenarios. Achieving a land reform target of 30 percent will benefit the real GDP by R242.4 million under scenario 1 and R608.6 million under scenario 2 by the end of the simulation period. There is also a positive effect on selected macroeconomic indicators such as imports, employment, and investment, notably when comprehensive support services are provided. Primary industries like field crops, horticulture, and livestock experience significant output gains. Similar to industrial output, exports for the primary agricultural industries are impacted positively in the long term as new land is made available, making more output available for the export market. Although the implementation of land reform might be a costly exercise initially, it can be achieved at a lower cost than what is assumed or expected. Simulation results suggest that land redistribution will not harm the economy if accompanied by comprehensive farmer support. The study recommends that the government and the private sector work together to create a just and inclusive agricultural landscape.

Keywords: Productivity; Land reform policy; Computable General Equilibrium modelling (search for similar items in EconPapers)
JEL-codes: C68 Q15 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2023-03
New Economics Papers: this item is included in nep-agr and nep-cmp
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