Identifier
Created
Classification
Origin
09WINDHOEK156
2009-05-08 10:52:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Windhoek
Cable title:  

NAMIBIA: THE POLITICS AND ECONOMICS OF COMMERCIAL

Tags:  PGOV ECON EAGR WA 
pdf how-to read a cable
VZCZCXRO9542
PP RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHWD #0156/01 1281052
ZNR UUUUU ZZH
P 081052Z MAY 09
FM AMEMBASSY WINDHOEK
TO RUEHC/SECSTATE WASHDC PRIORITY 0488
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
UNCLAS SECTION 01 OF 05 WINDHOEK 000156 

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PGOV ECON EAGR WA
SUBJECT: NAMIBIA: THE POLITICS AND ECONOMICS OF COMMERCIAL
LAND REFORM

REF: A. WINDHOEK 69

B. 08 WINDHOEK 254

C. 08 WINDHOEK 249

D. 07 WINDHOEK 587

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Summary
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UNCLAS SECTION 01 OF 05 WINDHOEK 000156

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PGOV ECON EAGR WA
SUBJECT: NAMIBIA: THE POLITICS AND ECONOMICS OF COMMERCIAL
LAND REFORM

REF: A. WINDHOEK 69

B. 08 WINDHOEK 254

C. 08 WINDHOEK 249

D. 07 WINDHOEK 587

--------------
Summary
--------------


1. (SBU) Nineteen years after independence from South
Africa, white Namibians still own the vast majority of
commercial farm land. The Namibian government's (GRN) land
reform efforts have helped resettle more than 3000 black
Namibian families on previously white owned farms, but the
program still is not considered a political success.
Independent economists view land reform, to date, as an
economic failure. Few if any black Namibians have been
lifted out of poverty through resettlement, but land reform
remains popular with the majority of Namibians. With a
national election eight months away, politicians have started
singing a more populist tune about land reform much as they
did during the last (2004) election. Following the 2004
election, the GRN maintained its "willing-buyer
willing-seller" approach but dabbled for the first time with
expropriation (eminent domain). While some senior ruling
SWAPO party officials have claimed admiration for Zimbabwe's
land redistribution efforts, most prefer to argue that white
farmers are unfairly inflating property prices. Economists
generally believe the rise in farm prices is due to high
demand, but note that GRN policies have also inadvertently
contributed to rapidly increasing property prices. Despite
some hot rhetoric on land reform, most analysts do not expect
a radicalization of the Namibian program. In fact, the view
from the Ministry of Lands and Resettlement indicates that
pragmatism is prevailing. End Summary.

--------------
Commercial vs. Communal Farm Land
--------------


2. (SBU) At Namibia's independence in 1990, significantly
less than five percent of the population (some 4200 white
Namibian families) owned 95 percent of all commercial farms,
which represented 52 percent of the total land available for
agriculture. Meanwhile, 70 percent of Namibians (mostly
black) lived on communal farms on the remaining 48 percent of
agricultural land. Of the 6,292 commercial farms registered
in 1990, black Namibians owned 181. Commercial farm owners
hold titles to their land; and they can use their land as

collateral and sell their land for profit. Most products
from commercial farms are exported to South Africa and the
EU. On the other hand, communal farmers have rights to use
land, but do not have title to their land, and cannot sell or
use their land for collateral. Products from these farms are
mainly used for subsistence purposes, local markets, and
South Africa.

--------------
The Objectives of Commercial Land Reform
--------------


3. (SBU) The GRN's land reform program has both political
and economic objectives. Politically, land reform is viewed
as a tool to bring about social justice, as a mechanism to
reverse the colonial policies that allowed prior governments
to seize land from black Namibians and distribute it to
German settlers and later white South Africans. Access to
"land" has always been a key issue in the ruling SWAPO
party's platform since the liberation struggle against
apartheid South Africa. As an economic policy tool, the GRN
has sought to use land reform as a means to raise poor
(predominately black) Namibians out of poverty and reduce the
nation's devastatingly high level of income disparity. The
GRN also asserts that land reform can boost agricultural
output and help Namibia achieve sustainable
economic growth.

--------------
Willing-buyer Willing-seller
--------------


4. (SBU) The GRN's commercial land redistribution program
has followed a "willing-buyer willing-seller" model, using
two different but complementary approaches. Under its
National Resettlement Policy (NRP) the state directly buys
commercial land from interested sellers. Under the
GRN-sponsored Affirmative Action Loan Scheme (AALS),
previously disadvantaged Namibians can purchase commercial
land at subsidized interest rates through the Agricultural
Bank of Namibia (AgriBank).


WINDHOEK 00000156 002 OF 005


--------------
The National Resettlement Policy (NRP)
--------------


5. (SBU) The Agricultural (Commercial) Land Act of 1995
codified the GRN's National Resettlement Policy (NRP). Under
the NRP, the GRN has the right of first refusal to purchase
any commercial farm that comes on the market. If the
government refuses to purchase a commercial farm, the farm
owner can sell his/her property to any buyer, except
non-resident foreigners. The GRN also waives its right of
first refusal when an AALS buyer indicates intent to buy a
commercial farm. This allows AALS buyers the opportunity to
buy the best land on the market, which leaves NRP farmers
with more marginal commercial land. After purchasing a
commercial farm, the government redistributes the farm to
multiple previously disadvantaged Namibian families. The
resettled families are generally given a 99-year lease to
their parcel of land, but the government retains ownership.
Usually, one large commercial farm is broken up into several
parcels of 1,000 hectares for higher potential areas and
3,000 hectares for lower potential areas, which the families
are then allowed to farm individually. Many of these parcels
often are not economically viable because they lack water or
other infrastructure, and/or are too small to sustain
commercial numbers of livestock.


6. (SBU) Local economist Robin Sherbourne, who often
advises government on economic policy, has stated that the
NRP has "utterly failed to reduce poverty and help create
sustainable new farmers in a cost-effective manner." The
Legal Assistance Center's Willem Odendaal, a respected
Namibian land reform expert, told econoff that there is not
one example of a truly successful NRP resettled farmer.
Government research has confirmed that NRP farms are not
economically viable. According to a November 2005 report
issued by the GRN's sponsored Permanent Technical Team (PTT)
on Land Reform, "the average (resettled farmer) beneficiary
cannot survive on the income generated by his or her farm
without supplementary income." Over 70 percent of
beneficiaries told the PTT that off-farm income provides the
main source of their overall income. The PTT report also
revealed that government employees comprised one-third of all
beneficiaries. This contributes to the widely- held
perception that the GRN lacks clear criteria for selecting
resettlement beneficiaries as government workers are
certainly not the most needy. Resettled families also
displace the farm hands that worked for the former white
commercial farmer. Economists argue this is "poverty
transfer" rather than "poverty alleviation."


7. (SBU) The GRN states NRP resettled farmers should be
self-sufficient within five years of receiving land.
However, GRN and donor assistance provided to resettled
farmers in their first four years has not been enough to
properly prepare them to operate and manage a commercial
farm. As resettled farmers cannot use their land as
collateral, they often lack credit to purchase equipment and
other farming necessities. To address this issue, the GRN
and AgriBank announced in February the establishment of a USD
$6 million loan facility to help resettled farmers buy
equipment and inputs at subsidized rates. The Ministry of
Agriculture, Water and Forestry (MAWF) also assists resettled
farmers through its extension services and farming subsidies.
However, communal farmers, not resettled farmers, have been
the primary target of these MAWF programs. The PTT report
noted that only 62 percent of resettlement beneficiaries had
had some contact with agricultural extension officers. The
2009/2010 budgets indicates that there will be a significant
increase in spending on extension services. Included in the
budget is an increase in the number of extension officers,
from 44 to 56; and an increase in the number of extension
technicians from 191 to 213. However, the budget shows a
substantial decrease in seed and plowing subsidies from 24.4
million Namibian dollars (USD $ 2.92M) to 4.5 million
Namibian dollars (USD $.53M).

--------------
Affirmative Action Loan Scheme (AALS)
--------------


8. (SBU) The Affirmative Action Loan Scheme (AALS),started
in 1992, was designed to encourage communal farmers with
sizeable herds to move to commercial land. The AALS was also
meant to create more space for small-scale farmers in
communal areas. Originally, AALS was designed to cater to
full-time farmers, but by 1997 the program was expanded to
part-time farmers. Many full-time AALS farmers have
struggled because they have been saddled with very high
loans. In December 2003, the Institute for Public Policy
Research (IPPR) noted that prices for commercial farmland

WINDHOEK 00000156 003 OF 005


were unsustainable for people seeking to buy farmland solely
for agricultural reasons. IPPR noted that AALS buyers paid
"much higher (prices) than other buyers of commercial
farmland." By March 2004, it was revealed that some 37
percent of the AALS farmers had defaulted on loans. The GRN
briefly suspended its loan guarantees to the bank in 2004,
and AgriBank temporarily stopped supporting the AALS.
AgriBank, though, may have helped drive up farm prices by
over-stimulating demand through poor lending practices. A
March 2005 AgriBank audit acknowledged that the bank had made
imprudent loans -- loans that were "unsustainable" and
exceeded the "fair agricultural value" of the properties it
underwrote. AgriBank is said to have offered larger loans to
its AALS clients than it would have if the bank had not
received the government's 35 percent loan guarantee.


9. (SBU) Unhappy AALS farmers still occasionally argue they
have been unfairly overcharged for land. Nevertheless, there
remains substantial demand for farm properties. Commercial
farm owners have several incentives to sell to AALS buyers
rather than via the NRP. AALS buyers can close a deal much
faster than the GRN (NRP). Sellers have greater flexibility
to negotiate price with AALS buyers. Finally, farmers can
withdraw an offer to sell to an AALS buyer (which is
forbidden under the NRP).

--------------
Public Perceptions of Land Reform
--------------


10. (SBU) Despite the data that cast doubt on the economic
effectiveness of the GRN's land reform initiatives, land
redistribution still appears to enjoy broad support.
Fifty-three percent of the 1200 Namibians asked about land
reform in the most recent AfroBarometer survey (conducted in
November 2008) stated that the policy has improved economic
equality either somewhat (33 percent) or a lot (20 percent).
Only eight percent said it had had no impact at all, while 29
percent said land reform had helped a little bit. (Comment:
The survey did not investigate specific aspects of commercial
land reform. Given that land reform is both a political and
economic issue, respondents may have been reacting to the
political aspects of the program. End Comment).

--------------
The Pace of Commercial Land Reform
--------------


11. (SBU) According to news reports some 1300 farms,
approximately six million hectares (18 percent) of the nearly
36 million hectares owned by white farmers in 1990 have been
redistributed under the NRP and AALS programs. According to
the Ministry of Lands and Resettlement, the GRN has resettled
some 3000 families on previously commercial lands. According
to the Ministry of Finance's 2007/2008 Government
Accountability Report, in the last fiscal year the government
only reached 41 percent (or 114,617 hectares) of its target
to acquire 273,333 hectares under the NRP. Only 125 families
were resettled, as compared to the government's plan to
resettle 136 families in fiscal year 2007/2008.
--------------
Frustration Leads to Expropriation?
--------------


12. (SBU) For years senior members of government and
opposition party legislators have argued the pace of land
redistribution is too slow. In February 2004, then Prime
Minister Theo-Ben Gurirab asserted on national TV that "The
process has become too slow because of arbitrarily inflated
land prices and the unavailability of productive land."
Gurirab then said Cabinet had endorsed a proposal to begin
expropriating land (roughly the equivalent of eminent domain
in the U.S.). Prior to 2005, the government had never
exercised its constitutional right to expropriate commercial
land. Since 2005, the GRN has only expropriated four farms.
Two expropriations were challenged in a landmark case
(Kessl),which the government lost. In March 2007, the
Namibian High Court ruled that the GRN had violated its
constitutional responsibility to carry out its work (the
expropriations) through fair and equitable administrative
processing.


13. (SBU) Since the Kessl decision no expropriations have
moved forward, but frustration over the pace of land reform
has not subsided. In a March 10 parliamentary debate, Prime
Minister Nahas Angula argued that many commercial farms are
owned by absentee foreigners, that white farmers are
"greedy," and many seek to artificially inflate farm prices.
During the debate, a member of the opposition Congress of
Democrats (CoD) called on the GRN to regulate farm prices to
prevent continued price inflation. Minister of Justice

WINDHOEK 00000156 004 OF 005


Pendukeni Iivula-Ithana offered the most heated rhetoric of
the debate, arguing that when she was Minister of Lands and
Resettlement, she had "read the minds" of white farmers and
learned that many were "dishonest." Iivula-Ithana remarked
that white farmers often quote higher prices to black buyers
than they do to white buyers. She went on to praise
Zimbabwe's land reform program stating "the people of
Zimbabwe are well off today."

-------------- --------------
The View from the Ministry of Lands and Resettlement
-------------- --------------


14. (SBU) Despite the heated political rhetoric, the Ministry
of Lands and Resettlement appears to be taking a pragmatic
approach, conducting a number of reviews of the government's
land reform initiatives. Dr. Nashilongo Shivute,
Undersecretary for Land Management and Administration,
acknowledged "failures" with the government's program and
said the public has "a right to criticize." Shivute noted
that communal and resettled farmers lack access to capital
because they cannot leverage their farms as collateral to
purchase inputs, but stated the ministry was working on
crafting policy to rectify this problem. Shivute called the
Kessl decision "a necessary test" to refine the government's
approach to expropriation.


15. (SBU) Shivute also accepted the criticism that resettled
farmers often receive a parcel of land from government
without the necessary resources to productively exploit their
allotment. The ministry, with assistance from Germany's GTZ,
is conducting a full audit of all resettled farms to
determine what new measures could help those farmers better
utilize their land, Shivute told emboff. At an April 23
parliamentary debate, Alpheus !Naruseb, the Minister of Lands
and Resettlement, noted that government would be providing
new loan guarantees to the AgriBank to help resettled farmers
purchase agricultural inputs (seed, fertilizer, farming
implements, etc.).


16. (SBU) According to Shivute, the ministry has contracted
an external auditing firm to conduct an investigation into
whether a parallel land market has emerged due to the
government's programs. The ministry is concerned that land
owners attempt to sell their properties to government at
higher prices than to commercial buyers.

--------------
Land Reform as Election Year Politics
--------------


17. (SBU) The longing for land by dispossessed black
communities is deeply ingrained and reinforced by the
political leadership. Other than the statements by Minister
Iivula-Ithana who may genuinely admire the Zimbabwean
program, the recent rhetoric on land reform by other senior
GRN officials is largely seen as election year posturing.
Former Prime Minister Theo-Ben Gurirab's televised
announcement on expropriation was made nine months prior to
the 2004 national election. Prime Minister Angula delivered
his comments eight months before this year's planned national
election. The LAC's Odendaal told econoff that this year's
rhetorical focus on land reform is "exactly like" that of

2004. It appears the pragmatists are in charge of the land
reform process for now, and we expect that to continue.

--------------
Comment
--------------


18. (SBU) Having a house in a town or the city is not
sufficient to achieve the Namibian dream; a farm in the
country is the Namibian ideal. Many middle-class urban
Namibians, white and black alike, either own a farm or want
to own a farm. However, farming in Namibia is extremely
difficult and in many cases a money losing proposition.
During the apartheid regime, white farmers received
considerable government subsidies. Today many white farmers
are struggling, even with their many economic advantages.
Economist Sherbourne remarked that "profitability is only
really possible if the farm is inherited and the land does
not need to be purchased." Ironically, government's land
reform policies may stimulate demand for a product that makes
poor black Namibians emotionally richer, but financially
poorer.


19. (SBU) While prices for commercial farm land are "hot"
today, government's slow pace of land reform might in the end
be a good solution. Older white farmers acknowledge many of
their children do not wish to continue as full-time
commercial farmers. In a generation's time, the supply of

WINDHOEK 00000156 005 OF 005


commercial farm land for sale will likely increase which
should lead to a natural decline in prices. Rather than
promote land redistribution as a means of reducing poverty,
land reform analysts argue that the GRN should simply ensure
that buyers (AALS buyers especially) fully appreciate the
full costs associated with land ownership. This, however,
would be a fairly radical shift in GRN policy. It would
require an acknowledgment that only middle class and wealthy
blacks can really afford to make commercial farm land
productive. For a successful policy, the GRN needs to decide
whether it wants to profit from commercial agricultural land
in terms of tax revenues, or whether it simply wants to
satisfy the desire of Namibians to own a parcel of land,
regardless of lost economic benefits to the state.
MATHIEU