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

Author

Listed:
  • Khumbuzile C. Mosoma

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

  • Heinrich R. Bohlmann

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

  • Sifiso M. Ntombela

    (National Agricultural Marketing Council)

  • Renee van Eyden

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

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.

Suggested Citation

  • Khumbuzile C. Mosoma & Heinrich R. Bohlmann & Sifiso M. Ntombela & Renee van Eyden, 2023. "Quantifying the Economic Effects of Land Reform Policy in South Africa: A Computable General Equilibrium Analysis," Working Papers 202307, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202307
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    References listed on IDEAS

    as
    1. Liebenberg, Frikkie & Pardey, Philip & Beddow, Jason & Kirsten, Johann, 2016. "Re-Estimating South African Agricultural Output Value, Quantity And Price Aggregates, 1910–2010," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 54(4), March.
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    3. Sifiso M. Ntombela & Heinrich R. Bohlmann & Mmatlou W. Kalaba, 2019. "Greening the South Africa’s Economy Could Benefit the Food Sector: Evidence from a Carbon Tax Policy Assessment," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(2), pages 891-910, October.
    4. Khumbuzile C. Mosoma & Renee van Eyden & Heinrich R. Bohlmann, 2023. "Measuring Total Factor Productivity in the South African Agricultural Sector Using a Growth Accounting Framework," Working Papers 202306, University of Pretoria, Department of Economics.
    5. Bohlmann, H.R. & Van Heerden, J.H. & Dixon, P.B. & Rimmer, M.T., 2015. "The impact of the 2014 platinum mining strike in South Africa: An economy-wide analysis," Economic Modelling, Elsevier, vol. 51(C), pages 403-411.
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    More about this item

    Keywords

    Productivity; Land reform policy; Computable General Equilibrium modelling;
    All these keywords.

    JEL classification:

    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models

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