SA’s commercial farmers are angry about the water & sanitation department’s plans to introduce black shareholding requirements of up to 75% for water licences, saying this threatens farmers’ access to finance as well as the country’s food security.
Water & sanitation minister Senzo Mchunu published draft regulations to the Water Act last month, which would require farmers to have a minimum black shareholding of 25%-75% to get a water licence, depending on how much water is extracted or stored.
The proposed regulations also apply to the commercial forestry sector, with black-shareholding requirements determined by the area under cultivation. Interested parties have until July 18 to submit comments.
SA’s biggest industry association for commercial farmers, Agri SA, said the government’s plans created a climate of uncertainty for a sector hit hard by rising interest rates, soaring input costs and load-shedding.
“SA produces its food on the back of debt: we owe financial institutions in the region of R220bn, and that kind of money obviously needs collateral. If you suddenly de-collateralise farmers in respect of their water rights it will make it increasingly difficult for them to access financing, which is key to the agriculture sector,” said Agri SA CEO Christo van der Rheede.
Agri SA recognised the need for transformation in the agricultural sector, but this was not a viable way to achieve it, he said in an interview with Business Day on Sunday.
“Our biggest fear is the impact this will have on continuous investment (in the sector) ... It will lead to a situation where farmers will be very uncertain — should they expand their business or rather not invest because they will be subjected to these draconian measures.”
South Africa and its water crises
Agri SA said the department’s plans threaten SA’s food security because focusing solely on ownership to the exclusion of all other factors would mean many viable commercial farming enterprises losing water resources.
The regulations appear to be focused on the agricultural and forestry sectors, as the mining industry and state-owned enterprises have been exempted from the black ownership requirements.
Agricultural Business Chamber of SA’s (Agbiz) legal intelligence head, Annelize Crosby, said that if proposed regulations are implemented in their present form it would affect commercial farmers’ ability to supply local consumers and export markets, and would have a knock-on effect on businesses throughout the agriculture value chain.
She said the plans flighted by the department are at odds with a Supreme Court of Appeal ruling in 2012, which confirmed that transformation must be applied within the context of all the requirements set out in section 27 of the Water Actand not just black economic empowerment.
These include factors such as efficient and beneficial use of water in the public interest, socioeconomic impact and investments already made by a water user.
The department had not responded to Business Day’s questions at the time of publication.
Agricultural economist Johann Kirsten, director of the Bureau for Economic Research at Stellenbosch University, said the draft regulations displayed lack of understanding of the constitution, the law, water rights and the role and dynamics of water in agriculture and food security.
‘Employment’
“Many farmers have offered to donate land and distribute their excess water to black farmers, but officials in the department of water & sanitation and the department of agriculture, land & rural development continuously block these private reform initiatives. Now they want to use regulations as a stick, which is likely to cause havoc,” he said.
“Most of (SA’s) 880,000 farm workers are employed on irrigated farms that are capital and labour intensive. Have the drafters considered the employment crisis emanating from this proposed set of actions?”
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