Redividing land can boost output
Success depends on reversing policy bias against African smallholders
Some of those who argue against the redistribution of land from large commercial farmers to smallholders in both Namibia and Zimbabwe maintain that agricultural production would be adversely affected and the environment degraded. But experience in other parts of Africa and elsewhere shows that distribution could in fact increase productivity and ease environmental pressures. Redistribution also would be socially and politically beneficial.
Increased productivity, however, is not straightforward. Average costs per unit of output generally are not very different on small and large farms, since economies of scale are generally insignificant at the farm level. This is because land can be tilled by hand and hoe or with a tractor and plow, while most inputs, such as land, livestock, fertilizers, seeds and pesticides, can be easily divided up. Very few inputs cannot be divided, or have large fixed costs which reduce the average cost per unit of output when overall output is larger.
Meanwhile, the costs of supervising labourers increases with the size of the farm. Such costs are particularly important in agriculture because tasks on farms are spaced out over area and time. So family farms, where the operator is also the owner, are often the most productive.
Inputs of labour are often high on family farms, since family members have high incentives to work hard. They are not paid by the hour and have few alternative opportunities, given the frequent lack of off-farm wage employment. They are, therefore, likely to work long hours. In many parts of the world, the combination of the lack of economies of scale, low supervision costs and high labour input on family farms means that productivity actually may be higher on smaller farms.
This relation, however, can be disturbed by imperfect markets, policies that favour large farms, or by economies of scale in processing or agricultural support services, such as distribution, extension, and storage. For example, it is often easier for owners of large farms to get credit because they have more land to use as collateral. Moreover, governments all over the world have favoured larger farms through subsidies, taxes and interventions in land, output, and labour markets, or in the provision of transportation, extension, research and other services. Such policy measures have greatly increased the profitability of large farms. In South Africa, the profitability of large farms was aided by the elimination of African tenancy through the Land Act of 1913, restrictions on African labour movements through the pass laws and subsidies for mechanization.
Partly as a result of such imperfect markets and policy distortions, in some countries in Africa the evidence of an inverse relationship between farm size and land productivity is more mixed than elsewhere in the world. Large farms often have been more profitable, particularly in eastern and southern Africa. Large farms frequently occupy land of higher quality, have better access to credit and extension services and use more non-labour inputs, such as fertilizer, pesticides, high-yield seed varieties, and irrigation, thanks to subsidies and institutions favouring large farms.
Indeed, some argue that discrimination against smallholders in Africa has been the most severe in the world. Output by smallholders therefore should increase when the policy bias against them declines, as has happened in Kenya, for example.
Equity and environmental concerns
Another argument in favour of land redistribution is based on equity considerations. Economists often maintain there is a trade-off between efficiency and equity. But as the evidence on the productivity of small farms shows, this tradeoff usually does not exist in the case of land redistribution. There is little dispute about the fairness of land redistribution, since the existing distribution of land is usually the result of violence, coercive actions, and/or discriminatory policies. As the unequal distribution of land in many countries was often secured by force, it also has frequently led to long and violent strife. Land redistribution therefore can contribute to social and political stability, as it has in some Asian countries. This is important in African countries such as South Africa, Namibia and Zimbabwe.
In addition, land redistribution in some countries is also important for environmental reasons, since the overuse of land, as in the crowded communal areas of Zimbabwe and Namibia, needs to be reduced. Environmental degradation is a particular problem in areas where poverty is combined with high population growth and land scarcity. In high-risk situations, where short-term subsistence is at stake and the ecological balance is fragile, individual producers may choose — or feel obliged to choose — cultivation or grazing practices that are environmentally damaging, regardless of tenure arrangements and population pressure. Yet, high population growth rates exacerbate the process, since they bring larger livestock herds and higher demands for land and fuelwood. If, on top of that, land is scarce, farms will become smaller, fallow periods will become shorter, use of marginal land will increase, and improper irrigation methods will become more widespread.
Countries such as Cameroon, Kenya, Malawi, Nigeria, and Senegal have seen an increasing fragmentation of land holdings, with the average smallholder farm size declining as a result of higher population density. Land redistribution and measures to raise productivity on small farms can break this severe problem.
Redistribution alone is not enough
Policies biased against smallholders have been widespread in Africa. Research, extension services, seed and fertilizer delivery systems, marketing and transportation often are focused disproportionally on large farms. This bias may have economic reasons. Financial institutions are less likely to provide credit to smallholders because of the inadequate collateral and high administrative and transaction costs compared to loan size.
Moreover, poor farmers are reluctant to take risks because they are preoccupied with short-term subsistence, partly explaining why they often adopt new technologies, such as hybrid seeds, only slowly. This preoccupation with survival is heightened if farmers have difficulty obtaining credit that could help them bridge a period with a poor harvest. Poor farmers will adopt new technologies if they are clearly superior to the traditional ones, that is, cheaper, with less variance in yields and with a lower risk of failure. But so far national and international research institutes have focused too much on export crops and too little on the development of drought-resistant, low-risk and low-cost innovations for rainfed food agriculture that do not need many external inputs.
The success of land redistribution depends critically on the availability of credit, marketing, roads, water, extension services and improved technologies such as hybrid seeds. Governments are likely to be involved in creating the institutions that deliver these services to smallholders yet the farmers themselves can also be involved, for example, in the construction of infrastructure. Without credit, farmers might not be able to buy inputs such as seeds and fertilizer and might be forced to sell the land at times of poor weather. Extension services are crucial to teach farmers about farming techniques and new technologies they might not be familiar with. This played an important role in the success of the land reforms that Kenya started in the 1950s.
However, there have been cases in which public marketing institutions have been dismantled, while a private-sector marketing capacity has been lagging or while private traders have used their power to profit unfairly from smallholders, particularly in remote areas.
Taxes, subsidies and other biases in favour of large farms need to be dismantled before land redistribution begins, as South Africa has done by reducing capital subsidies for large farmers. If this is not done, land prices are likely to be higher than the profits smallholders can expect, despite the higher productivity on smaller farms. With such distortions still in place, resettled farmers are likely to go bankrupt, possibly leading to a reconcentration of land holdings.
Resettlement
Land redistribution is much more difficult when it also involves resettlement. Land reforms in Asia often involved the transfer of ownership to tenants who were already farming on their land and had the necessary skills and knowledge. In Africa, however, resettlement is more common and the selection of farmers therefore becomes a crucial issue.
Evidence shows that farmers who are married and under 45 years of age, have larger families, are better educated, and who have farming experience and skills are more likely to be successful as settlers. Surprisingly, the amount of capital does not appear to be an important factor in predicting success. The involvement of local communities and local governments also contributes to the success of land redistribution.
Another indicator of success is the willingness of farmers to pay for the land. However, poor farmers without equity are unlikely to be able to pay market value, even if they have access to credit, since they have to pay a risk premium if they have no collateral. Grants therefore are needed to cover at least the risk premium to allow farmers to purchase land. Yet the larger the grant, the fewer the number of farmers who can be assisted.
Overall, land redistribution can yield positive results because of the higher productivity on smaller farms and the benefits to equity and the environment. But it needs to be combined with additional institutions and policies that ensure the availability of credit, marketing, extension services and new technology for the newly settled smallholders.
* Henk-Jan Brinkman is Economic Affairs Officer in the Development Policy Analysis Division of the UN Department of Economic and Social Affairs. The views expressed are the author's and do not necessarily reflect those of the UN.
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