Land access alone doesn’t unleash productivity 

Home National Land access alone doesn’t unleash productivity 

WINDHOEK – From an economic perspective, the success of land reform in Namibia depends on the degree to which reform leads to increased flow of net economic benefits in terms of per capita income, jobs, profitability and increased productivity and social welfare.

This is according to Penda Ithindi, economist in the Ministry of Finance, who suggested at the ongoing land conference that multiple funding options can be considered and a case for some form of a targeted wealth tax can be made.

“Land is a productive asset. Almost everyone aspires to have land. But access alone does not unleash land productivity. When acquired and put to productive use such land can contribute to wealth creation and social development and transformation,” Ithindi said.

He stated that access to land is a necessary condition for inclusive growth, shared prosperity and making a dent on the triple challenges of unemployment which stands at 34 percent, poverty at 17.2 percent and inequalities at 0.56 Gini coefficient.

He maintained that it is the labour, investments, skills and specialisation which, when applied correctly, unlocks land productivity and leads to the flow of net economic gains.

He advised that the land reform agenda should seek to achieve a balance across the dimensions of sustainable development – economic, social and environmental –  with intergenerational equity. 

As an upper middle-income country, Namibia has spare capacity to do better in terms of public expenditure towards the land reform program by prioritising better within available resources, said Ithindi, who also suggested that multiple funding options can be considered and a case for some form of a targeted wealth tax can be made.

About N$1.89 billion in public expenditure was made to acquire at least 549 commercial farms or some 3.2 million hectares of land under the willing buyer-willing seller principle, which has been described by many as a failure.  
“This is 0.1 percent of GDP [Gross Domestic Product], or some N$70 million annually over the past 27 years,” Ithindi said.
He said affirmative loan extensions for the same purpose were about N$1.4 billion for a total of 442 farms (6 million hectare) purchased.

In total, he noted, this is N$3.2 billion in direct public spending over the past 27 years on the National Resettlement Programme and the Affirmative Action Loan Scheme, averaging 0.2 percent of GDP or N$120 million annually. 
The government at independence negotiated and introduced the policy of willing-buyer-willing-seller, as a tool for redistribution of land, which was and still largely remains in the hands of the white minority.

The acquisition of commercial agricultural land on the principle of willing-buyer-willing-seller depends on the willingness of commercial farmers to offer their farms to government for sale.

However, it has been evident over the years that many farmers, especially absentee landlords were reluctant to sell and those who offered their farms inflated prices, making it difficult for government to acquire adequate land for resettlement purposes.

In respect to urban land, he said the binding constraints are mainly the supply and affordability of serviced land. 
“This supply side constraint is exacerbated by high unemployment and low-income levels at the bottom of the pyramid. Strategies for inclusive growth, private sector jobs and skills development are important,” he indicated. 

He suggests a land reform program which results in diminishing or dissipation of net economic gains such that aggregate output, income and productivity fall in the long-term is bad economics.

Therefore, he cautioned Namibia should avoid to enact popular reforms with unpopular long-term economic outcomes. 
Ithindi said a reform should provide a conducive environment on how realised investment can continue to earn a return and an attractive environment for potential investment. 

“It is perhaps this consideration which informed the willing buyer, willing seller principle and expropriation with just compensation,” he said.

According to him, no doubt, the systematic and phased approach to land reform in Namibia has provided market certainty and investor confidence and predictability. 

Hence Namibia should keep in mind these trade-offs as a small open economy, highly vulnerable to shocks and needing to improve its competitiveness as part of its growth strategy.