The Principles of Justice and Rural Land Reform in South Africa [1992 SAJE v60(2)p205]

R.A.A. SABER and W.L. NIEUWOUDT *(1)AS SOUTH AFRICA MOVES towards becoming a non-racial democracy, Black*(2) leaders across the political spectrum regard aredressing of the inequitable distribution of agricultural land as a sine qua non for progress towards a wider political settlement inthe country. This article uses a property rights approach to explore the injustice of land policy in the past, and the prospects andimplications of possible rural land reform alternatives in the future. For the purpose of the study rural land refers to commercialagriculture, land expropriated for resettlement and residential land in agricultural labour villages.

1. The Property Rights Approach and the Need for an Ethical PremiseProperty rights are the particular characteristics of property institutions, a subset of all social institutions, and relate to thesanctioned behavioural relations among individuals that arise from the existence of property and pertain to its use (Furubotn andPejovich, 1972: 1139). Property rights channel the net benefits arising from economic activity to particular agents, and theirdelimination largely determines the initial distribution of social and economic advantages, and consequently the resultantdistribution of wealth and income. Neo-classical economics, having rejected interpersonal utility comparisons as normative, relieson the Pareto criterion to evaluate different social states (Sen, 1987: 31). The Pareto criterion does not, however, escape makingvalue judgements. It takes the existing distribution of income, wealth and power as morally acceptable. This follows from the factthat there is no unique Pareto optimum, but an infinite number of Pareto optima which reflect alternative initial positions.Furthermore, Pareto optimality can exist before and after any non-Pareto optimal change, such as a redistribution of wealth(Samuels, 1981: 18-23). A Pareto optimum cannot therefore be value free because the Pareto criterion sanctions the status quo.

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2. The Principles of JusticeAn ethical premise is necessary to establish the criteria, external to the market, whereby the justice of prevailing or proposedproperty rights structures are to be evaluated. The ethical premise proposed here is de-rived from the theory of justice advanced byJohn Rawls. In order to find universally accepted principles of justice, Rawls (1971: 136-141) assumes that in choosing theseprinciples, agents are situated behind a veil of ignorance concerning their own future circumstances. He postulates that two broadprinciples of justice will be universally accepted.The first principle is that each person should have an equal right to the most extensive total system of equal basic libertiescompatible with a similar system of liberty for all. Basic liberties relate to the liberties of citizenship, including political liberty. Whileit is clear that all decision rules other than unanimity violate ex post political equality, decision rules which do not explicitly denysome persons or groups ex ante access to the political process, such as majority rule, will satisfy this principle. Buchanan (1986:240-247) makes a clear distinction, however, between collective action within the law, and action taken to change the law, andcontends that the decision rule for the latter should be more inclusive than for the former. This infers that fundamental institutionalchange, as a change to the law, should be subject to a high degree of consensus and not imposed on a non-accepting populace,including a minority.The second principle relates more directly to assessing the justice of established or proposed property rights structures. For theoperation of the market to be seen as just, and not merely efficient, it must take place against the background of both a just initialdistribution of social and economic advantages, and an impartial administration of legitimate property rights. It is only when theseconditions are met that the outcome of the market procedure, i.e. the distribution of wealth and income resulting from paymentaccording to marginal productivity, can be regarded as correct or fair, regardless of what it is. Rawls' second principle answers thequestion of what constitutes a "just initial distribution of social and economic advantages" and can be divided into threecomponents.(a) The principle of fair equality of opportunityThe principle of fair equality of opportunity implies unrestricted freedom of opportunity to enter into, or exit from, any legallysanctioned economic position. Given that the first principle is not violated, this rules out all discrimination.

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Whereas the attainment of efficiency through the market mechanism assumes equality of economic opportunity, or the absence ofartificial barriers to economic activity (Pasour, 1980: 174), fair equality of opportunity requires, in addition, that positions are notonly open in a formal sense, but that all agents should have a fair chance to attain them. Those with the same level of talent and

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ability, and the same willingness to use these qualities, should have the same prospects of success, regardless of their initialposition in the social system. Economic institutions should therefore moderate the influence which natural and socialcontingencies play upon the initial distribution of wealth and income.Although it is possible to define the concept of fair equality of opportunity in these abstract terms, measuring it is far more difficult(see Klappholz, 1972: 247-257). Explicit racial or sexual discrimination is clearly identifiable, however, and warrants remedial socialaction. While action of this nature will ostensibly enhance both equality of income and productivity simultaneously, it may requirethe diversion of resources or property rights. This implies that improving equality of opportunity may entail active redistribution oraffirmative action, and if this is the case, economic incentives will be affected (Meade, 1976: 189-190).The possibility of embracing redistributionist policies becomes particularly relevant when it is considered that inequality ofopportunity in one time period creates inequality in subsequent periods (Okun, 1975: 77). This is apparent in the case of theagrarian economy in South Africa where structural imbalances in the access to land and public support have been built up overyears, and have placed today's Black farmers at a disadvantage. The need to consider the negative impact which eliminating theseserious imbalances may have on economic incentives leads to the following principle.(b) The difference principleThis principle postulates that differences in opportunity are just if, but only if, they work as part of a scheme which improves theexpectations of the least advantaged members of society. According to Rawls this principle also applies to absolute levels ofwealth and income. Once this condition is met, further reductions in the expectations of those with better opportunities will alsodiminish the prospects of those with the least opportunities. Changes in the structure of property institutions or level of publicsupport at this point will simply result in all becoming worse off simultaneously. This principle is further qualified, however, by thefollowing.

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(c) The principle of justice between generationsThe assumed veil of ignorance in choosing principles of justice extends to the individual's awareness of which generation he is tobelong to. The principle of justice therefore includes justice between generations, and this necessitates: (1) a suitable level of realcapital accumulation in each time period, and (2) that the amount of irremediable damage suffered by the natural environment in anyone time period is held to a reasonable level.

3. The Injustice of Past Land Policies in South AfricaGiven the legally sanctioned set of property rights to land in South Africa, arid the principles of justice set out above as a basis ofjudgement, we can make the normative judgement that land policy in this country has been, and continues to be, both unjust andmorally reprehensible.The root cause of this injustice lies in the fundamental violation of the principle of equal basic liberties which has persisted inSouth Africa following the ascendency of the whites. In the face of military defeat Blacks did not become subjects living under theconqueror's protection, as was the norm after inter-state wars at that time, but were rather considered as aliens whose rights wereexpendable (Davenport, 1990: 431). The state divested them of large areas of land, and designed property institutions which werediscriminatory.A policy of racially-based territorial segregation violates the principle of fair equality of opportunity. By denying Blacks access to85,6 per cent of the land (McKenzie et al., 1989: 3), this policy not only severely limited the opportunity for Blacks to enter intodesired economic positions with respect to land, but was also one of the fundamental causes of the failure of the agrarian economywithin the Black areas. The population pressure which was evident in these areas as early as the close of the nineteenth century,and which has been exacerbated in the interim by population growth, diminised the available area of arable land to such an extentthat today it stands at less than 0,2 hectares per capita. This has reduced the potential of agricultural production to provide forhousehold needs: agricultural production in these areas is estimated to meet only 16 per cent of the population's food requirements(Huntley et al., 1989: 54), and between 10 and 20 per cent of household income (Bembridge, 1987: 285). The small area of land percapita has created a disincentive to enter into intensive agricultural production.The stagnation of the agrarian economy in the Black areas has been reinforced

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by other state policies which have violated the principles of justice. Firstly, the differential level of public support provided to theseareas has decreased the potential returns per unit of agricultural production relative to those in the White areas. Public supportrelates both to extension services and agricultural research, and to physical and institutional infrastructure. According to Huntleyet al. (1989: 55), for example, the ratio of total financial and advisory services to commercial versus subsistence agriculture was asgreat as 197:1 in the period 1910 - 1936. Although this ratio improved to 2:1 in the 1980s, state support remains inequitable when

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taken on a per capita basis.Secondly, state attempts at controlling property rights in the Black areas have largely prevented Black land tenures from adjustingto changing economic and social circumstances, thereby inhibiting agricultural development. These controls, such as bettermentplanning, have on the most part been forcibly imposed on rural communities (see Yawitch, 1981), thereby violating the principlethat institutional change should follow widespread consensus and support.Land policy in South Africa has also violated the principles of justice by facilitating exercises in social engineering. The mostextreme form of this violation is represented by the forced removal of Black communities in possession of legal title to freehold landin the White areas. These actions effectively meant that Black communities received unequal treatment before the law, representinga further breach of the principle of equal basic liberties. A further breach of justice, was the forced removal of Black tenants offWhite-owned farms, some of which had been occupied by the tenants for generations.The unequal distribution of social and economic advantages enabled the White community to develop an extremely modern andproductive farming sector based on private property rights. This sector is presently in a position to provide food to the entirepopulation at reasonable prices and has made a significant contribution to the growth of the economy (see Van Zyl and VanRooyen, 1990; Brand, 1969; Van Zyl et al., 1988). Although it is ludicrous to suggest that Blacks needed. to be discriminatedagainst in order for such a sector to emerge, the difficulties of integrating the traditional communal tenure system with a moderneconomy were avoided by creating segregated areas.

4. Alternative Rural Land ReformsGiven the injustice of the currently enforced system of property rights to rural land in South Africa, coupled to the existingdemands for land reform in the country, it is clear that the status quo in property rights is unlikely to

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continue into the future. However, in considering the relative justice of the various rural land reform options which may beadopted, we must understand that a society is most often forced to choose between several unjust, or second best, arrangements.The process of land reform must be seen in the context of the currently enforced property institutions. The existing distribution ofrights and endowments among individual economic agents, along with the historically determined structure of property rights, are areality. This reality will define the constraints to, and consequences of, any future land policy. Considerations of justice must becouched in terms of possible changes from the status quo, and not purely in terms of normative considerations of the desireddistribution of rights and claims among individuals. This means that calls for the complete and fundamental restructuring of thecommercial agricultural sector are unrealistic and will not be considered. We cannot simply jump out of our history and commenceagain.This in no way detracts from the importance of establishing the justice of the existing structure of property rights, and thenormative reasons for this judgement. On the contrary, any involuntary redistribution of established property rights can only belegitimized by establishing that the existing institutional structure is, indeed, unjust. What is important, however, is that future landpolicies do not exacerbate the mistakes of the past by pursuing reforms which decrease the welfare of all South Africans, includingthe least advantaged, in the quest for restitution.Any restructuring of property rights to rural land in South Africa is assumed to take place against the background of a justconstitution having been negotiated. It is assumed that such a constitution would secure the basic liberties of equal citizenship forall South Africans. This is necessary because the resultant structure of property rights in South Africa will only bring about asense of justice, and hence an effective desire to act within the rules, if it is broadly accepted as legitimate and fair by those whoare affected. It is also assumed that changes to the property rights structure are drafted in such a way that the provisions of the laware precise and en-forceable, and that the state then remains bound to the law. If this does not occur a danger exists that theimplementation of land policy will be considered to be arbitrary, leading to great uncertainty. Given this background, three broadtypes of reform can be distinguished.

5. Land Reforms that are Pareto OptimalLand reforms which satisfy the condition of Pareto optimality are easy to justify from a normative view point, since it is clearly inthe interests of

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any society to implement reforms which increase the welfare of at least one economic agent without jeopardizing the welfare of atleast one other agent, including the unborn agents of future generations.(a) Opening the land market in White commercial agricultural areas to all racesThe recent opening of the land market in the White areas to all races required the abolition of the Natives Land Act of 1913, the

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Natives Trust and Land Act of 1936, and the Group Areas Act of 1966. The abolishment of this racially discriminatory legislationcould be justified as satisfying the condition of Pareto optimality. While this reform is expected to increase the efficiency of themarket mechanism, it only partially satisfies the principle of fair equality of opportunity. While economic positions in the Whiteareas are now legally open to all, not all agents have a fair chance to attain them. In this regard three categories of Black farmerswith an interest in rural land are distinguishable.First are emergent farmers who possess the motivation to farm commercially, and consequently wish to purchase a relatively largearea of land in order to expand their resource base to a level that would support full-time production, but who face capitalconstraints. The barrier to entry into commercial agriculture is reinforced by the Subdivision of Agricultural Land Act of 1970 whichoutlaws the subdivision of existing farms, thereby preventing the purchase of a small area of land to be used as a bottom rung ofthe commercial farming ladder. Although these constraints apply in equal measure to aspirant White farmers without a capital base,the nature of past apartheid laws has meant that those Black individuals with the necessary expertise and drive have beenprevented from acquiring and developing a sufficiently large area of agricultural land for commercial production.Second are the Black subsistence farmers who are able to produce only intermittent surpluses, and lack both the financial meansand the motivation to purchase a large area of land on which to farm in a full-time capacity. Also of particular relevance are thelandless and those who are without an adequate source of off-farm income.Finally, communities who were forcibly removed off Black-owned free-hold land in the White areas, and who did not receive faircompensation for their land, also do not have a fair opportunity to repurchase their original holdings on an open land market in theWhite areas.

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(b) Abolishing discriminatory levels of public supportAchieving parity in the level of public support in the White and Black areas would on the one hand entail opening the institutionalinfrastructure presently serving commercial farmers and, on the other hand, improving the physical and institutional infrastructurein the Black areas. According to Norman (1990: 3), Zimbabwe achieved success in increasing the level of agricultural production incommunal areas by improving the availability of essential inputs, education and the access to commercial agricultural markets afterindependence. These services increase the returns per unit of agricultural production, thereby increasing the incentive to investtime and capital in intensive cultivation. Although the supply response in South Africa is expected to be far less than in Zimbabwe(greater off-farm employment opportunities in South Africa mean that the opportunity cost of farm labour is higher), the principle offair equality of opportunity would be advanced by such a reform.(c) Improving public support to workers on commercial farmsFarm workers and their families, who constitute the great majority of the 5,4 million people residing in the White areas, haverelatively poor access to public services, including educational facilities (Robertson, 1988: 100-108), and are prevented fromacquiring property rights to residential land in the area of their employment. Alleviating these disadvantages would be a requisitestep to fulfilling the principle of fair equality of opportunity. In this regard Ardington's (1991: 14) suggestion that the state developrural villages where farm labourers could acquire formal private rights to residential land, and which could act as distribution pointsfor state services, has considerable merit.

6. Land Reforms that Involve RedistributionThe second category of reform involves the active redistribution of specific property rights and includes the completenationalization of agricultural land, and partial nationalization through the imposition of an agricultural land tax.(a) The complete nationalization of agricultural landThe complete nationalization of agricultural land would involve the transfer of all rural land titles to the state, or "the people",thereby invalidating

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all existing private property rights. This would represent both a fundamental restructuring of property rights, and a massiveredistribution of wealth away from current landowners in the White areas. The state would also be nationalizing the existing debtburden relating to agricultural land.It would be ethically inconsistent to confiscate the wealth of only those who had invested in agriculture: if private property per sewas considered to be morally objectionable, it would be consistent to nationalize all wealth. The world-wide collapse of strictsocialism suggests, however, that instituting this type of socio-economic system in South Africa would fail on all counts to satisfythe principles of justice. The reasons are as follows.Firstly, given the information and incentive problems surrounding state ownership of the factors of production, even whenfunctioning in conjunction with the market mechanism (see Buchanan, 1985), it is reasonable to assume that the complete

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nationalization of agricultural land would violate the difference principle. The uncertainty caused by placing land allocationdecisions in the ambit of the political process is likely to precipitate an immediate withdrawal of human and other capital from theagricultural sector. Apart from the negative impact this would have on the production of food - management is probably the mostlimiting factor in agriculture -there is a serious risk that international support to a post-apartheid South Africa would be underminedby such a strategy following the increasing move towards capitalist models. These factors together are likely to place the leastadvantaged in a worse-off position than before.Secondly, it is not even clear that a policy of nationalization would satisfy the principle of fair equality of opportunity. If it isassumed that the idea of a centrally-directed allocation of land is so discredited as to be rendered infeasible, the only alternativewould be to assign individual user-rights to economic agents, and allow agricultural land to be allocated amongst potential usersthrough a process of open bidding on a state rental market. If this was the case, existing commercial farmers with private propertyrights would become leaseholders, possibly on a highly conditional basis. Aspirant farmers without a capital base would still facethe capital constraints presently preventing access into commercial farming through - the private rental market. Although the statewould have much greater discretion to reallocate property rights to those who had been dis-advantaged under apartheid, to do soit would have to intervene in the market process.Finally, even in the most decentralized situation where individual agents are assigned exclusive and autonomous user-rights tostate property, productivity-enhancing investments in land will only be made if the individual

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investor is assured that he will reap a sufficiently high proportion of the resultant benefits. This can only be accomplished throughsecure, long-term and possibly inheritable tenancies, such as a 99-year lease, and these rights often run counter to the aims ofinstituting state property in the first place. If the state embarks on a centrally-planned investment strategy, it faces the sameincentive and information problems intimated above.(b) Partial nationalization through a land taxPartial nationalization could be accomplished by instituting a tax on the economic rent accruing to agricultural land. Such a taxwould be capitalized into lower real land values (see Pasour, 1975), causing a once-off redistribution of wealth away from existinglandowners in the White areas. A land tax which taxed away the entire rental income would eliminate land values and have the sameeffect as complete nationalization. Data from the United States of America, where land taxes are of long standing, show that rates oftaxation for the various states range from 0,25 to 2,50 per cent of land values (Pasour, 1975: 541).Newcomers to the land market after the tax had been implemented would be no better or worse off as the lower land values wouldbe a reflection of reduced after-tax rental incomes. The reduction in land values would mean, however, that the cost to the state ofexpropriating land with compensation would be decreased, and, together with the proceeds from the tax, this could facilitateaffirmative action programmes. A land tax would also have the advantage of not being easily avoidable, but it would be logical toremove all state subsidies to commercial agriculture, which are also capitalized into higher land values, before instituting such a tax.A land tax would have a possibly negative impact on agricultural production and development for two reasons: firstly, the savingsnecessary to sustain increasing efficiency in agricultural production would not be possible if the rate of taxation was too high; andsecondly, the difficulty of excluding all capital investments in fixed improvements from the tax would create a disincentive to makesuch investments in the future. The correct or just maximum rate of taxation according to the principles of justice would thereforebe reached when the appropriate level of investment in productivity-enhancing improvements could no longer be made. Althougha land tax is often cited as a way to increase agricultural productivity by drawing un- and under-utilized land into production, thiswould not be

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the case if the existing farmers were profit maximizers. Reasonably efficient land and rental markets are presently in operation in theWhite areas, and the rental value of land must consequently be taken into account by landowners when evaluating the opportunitycost of utilizing land in a less than productive manner. A land tax will not increase this opportunity cost.

7. Affirmative ActionThe final category of reform, namely affirmative action, does not involve a change in the property rights structure, but rather anassistance programme to a specifically targeted group of economic agents within the established institutional "rules of the game".It entails supporting rural Blacks who have been placed in a disadvantaged position with regard to their ability to compete fordesired economic positions. Political and social stability is desirable for an efficient market which may not be possible if people arehungry, unemployed and disposessed. Due to the interdependency in benefits from social stability a free rider situation arises andmore than a Pareto optimum solution is required.A rejection of the allocative function of the market will only serve to restore justice or correct for market failures if the sole

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alternative, namely the political market, is more fair or efficient (Buchanan, 1985: 25). "The relevant comparison is betweenreal-world markets and the real-world political process" (Pasour, 1977). Without the economic market the difficult questions ofexactly which resources to allocate, to what uses, and precisely who is to benefit and who is to lose, have to be addressed in thisimperfect political setting.Any programme of affirmative action will divert scarce resources from the compelling tasks of providing better education, healthcare and housing to the Black community. If the state, in an attempt to meet all these competing demands, resorted to financingincreases in expenditure by pursuing fiscal and monetary policies which inhibited the level of economic growth, and this reducedthe expectations of the least advantaged, the difference principle would be violated and justice frustrated. It is also true thatchannelling funds to assist a restricted number of economic agents, while excluding others who are in an equally disadvantagedposition, fails to satisfy the condition of fair equality of opportunity. Finally, an evaluation must be made of the employmentopportunities which might be destroyed by policies which sacrifice efficiency in order to enhance equity.

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(a) A resettlement programmeThe first non-market method which could be used to reassign property rights to the disadvantaged is a programme of resettlementon land acquired by the state for this purpose. The relative justice of such a reform would depend on the following factors: (1) themethod whereby the land was acquired; (2) the basis upon which settlers were chosen; and (3) the property rights structure,including the level of public support, instituted in the resettlement areas.The least contentious supply of land for resettlement is from the South African Development Trust, currently in possession of landwhich has as yet not been used by Black farmers. A substantial area of additional land will most likely have to be acquired fromlandowners in the White areas, however, as occurred in both Kenya and Zimbabwe.There are two ways in which this could be done: either through "willing-buyer, willing-seller" purchases at market rates, or throughexpropriation with or without full compensation. While certain categories of land could be targeted for expropriation, such as landwhich is supposedly under-utilized, land owned either by absentee farmers or multinational corporations, or land occupied for anextended period of time by labour tenants (De Klerk, 1990: 36), the exact parameters of such a policy would have to be explicitlystated and strictly upheld by the courts if a large negative impact on current agricultural production was to be avoided.The basis of - choosing settlers could correspond to the three groups of farmers mentioned above who do not have a fair chance ofattaining desired economic positions on an open land market. The qualification of emergent farmers could be on the basis of theircommitment to agriculture, farming ability, potential productivity, and provision of capital. This screening could be undertaken bycommercial banks who would for instance favourably consider management skills of Black foremen on commercial farms. Due to thelimited supply of land for resettlement it would be practical to use factor markets to identify the recipients of the programme. Thestate could, for example, make land available to be leased or purchased by disadvantaged agents at less than market values, whilefinancial institutions could use their credit rating procedures to identify those individuals who were in the best position to begranted financial assistance (i.e. those expected to succeed). An operational land market could then ensure that the land move towhere it was most highly valued amongst those qualifying for the programme.There exists a trade-off in justice when assisting emergent farmers, however.

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While these individuals would be receiving necessary assistance to compete with existing commercial farmers, the already skeweddistribution of opportunities would be exacerbated. Resettling subsistence producers, the landless poor, and those completelydependent upon agriculture for their livelihood could consequently be justified on the basis of need and effort.These agents would require a far greater level of assistance in gaining access to land, implying a greater level of interference inopened factor markets. Given the low priority that subsistence producers afford to agriculture, it is unlikely that increasing theamount of available arable land would engender a large supply response unless the increase was extremely large. This seemsinfeasible due to the large number of subsistence producers and the constraints on obtaining that quantity of land in a just manner.The implication is that agricultural production is likely to continue to constitute a small proportion of household income for theseproducers, and withdrawing land from commercial production for this type of resettlement would reduce the national level ofagricultural production without leading to a large increase in the welfare of the beneficiaries. Resettling the landless poor, andthose who are without off-farm income, on the other hand, would go further in meeting the conditions of justice, despite theinevitable reduction in production, because of the greater im-pact which this would have on these agent's welfare.The final group of economic agents which could be targeted for an affirmative action programme is communities who have beenblatantly dis-possessed of their legitimate property rights. A well known example of this type of community is the Magopa tribewho were forcibly removed from freehold land near Ventersdorp in 1984 (Weinberg, 1991: 32). If it is accepted that compensation forthe ensuing economic and social dislocation is an entitlement, the immediate problem would be to establish how far into the

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past such a policy of redress should go, with some claims stretching into the previous century, and, in the extreme case, relating tothe historical dispossession of Blacks as a whole. In many ways this forms the crux of the land question in South Africa, and theanswer must therefore lie in the normative principles of justice that have been established.Consistent with these principles restitution should neither destroy the productive potential of the agricultural sector, nor the abilityof the economy to grow. This places a definite limit on the number of possible claims for restitution which could be justly met. Thedifficulty of adjudicating such claims necessitates the formation of an independent body, such as the Land Claims Courtssuggested by the African National Congress (ANC Land Commission, 1991: 9). A cut-off point for evaluating the legitimacy of

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claims would also be necessary: 1948, as the start of "Grand apartheid", has been suggested by Ardington (1991: 6), but an equallyfeasible framework could be the existing institutional structure, i.e. all claims of violations to registered private property rightsshould receive a hearing.Finally, any resettlement programme which takes land out of commercial production under formal private tenure, and redistributes itunder a land tenure system which does not facilitate either the same level of economic interaction, or of internalization ofexternalities, will reduce the level of agricultural production, productivity-enhancing investment and conservation on that land.justice will consequently require a limit to such transfers, firstly because of the negative impact on the supply of food, andsecondly because of the injustice to future generations due to the degradation of the natural resource base. This point willobviously be reached sooner in situations where the land tenure constraints to agricultural production and conservation aregreater.This indicates that while land tenure reforms might fail to address fundamental Black grievances about land inequality, justicerequires that measures should be pursued which reduce the transaction costs surrounding the use and transfer of land underexisting black tenure systems, in order to facilitate the productive and sustainable use of the limited area of agricultural landavailable in South Africa.(b) Subsidized interest rates to emergent Black farmersA corollary to harnessing factor markets while assisting a particular sector of farmers would be a programme of subsidizing interestrates in order to facilitate land purchases by emergent Black farmers. Once again this need not take place on a racial basis, butrather on the basis of having been discriminated against in the past. Such a programme would be justified according to the principleof fair equality of opportunity, particularly when it is considered that many of the existing farmers in the White areas acquired theirland with the assistance of subsidized loans. There exists the danger that like all subsidies and price supports, interest subsidieswould be capitalized into higher land values. However, the market price of land would only increase to the extent to which therecipients of such a subsidy entered the land market, thereby increasing the effective demand for land, and although this increasewould imply that the subsidy was partly counterproductive, it would clearly favour the recipients of the programme. Such asubsidy would also have to be phased out after a fixed time period, such as ten years.

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8. ConclusionRural land reforms which not only abolish discriminatory legislation, but are seen to redress the injustices of the past, will serve tore-establish the legitimacy of the entire property rights structure. In the absence of such reforms it will be impossible to generatesupport for the market, and hence for the resultant distribution of wealth and income, and this will cause continuing socialinstability. At the same time reforms should avoid threatening the current productivity of commercial agriculture to such an extentthat the welfare of the poorest declines as a result of increases in the real price of food. Likewise, reforms which impede economicgrowth by placing fiscal, monetary or political constraints on the economy will fail to promote justice.

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Endnotes1Graduate student and Professor of Agricultural Economics, respectively, University of Natal, Pietermaritzburg. Research wascarried out in the Agricultural Policy Research Unit of the University. The Unit is financially supported by the Human SciencesResearch Council. Opinions expressed are those of the authors only.

2 References to race when analyzing land policy in South Africa are unfortunately unavoidable, as the delimitation of property rightshas taken place on a purely racial basis. This in no way denotes a condonation of the racial classification of people.

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