The South African government’s Expropriation Act of 2024, signed into law by President Cyril Ramaphosa on January 23, 2025, has profoundly impacted the agricultural sector, leading to a significant decline in farmland prices, widespread skepticism among buyers, and reluctance from banks to finance land purchases.
Johann Bornman, an economist and chairman of Agri Development Solutions, has highlighted the economic fallout from the legislation, which allows the state to expropriate land for public purposes or in the public interest, including land reform, with provisions for “nil compensation” in certain cases. This article explores the act’s effects on farmland markets, drawing on Bornman’s insights and broader economic trends.
The Expropriation Act has triggered a sharp drop in farmland prices, driven by uncertainty over property rights. According to Johann Bornman, data from the South African Deeds Office shows that the average price of agricultural land fell from R13,700 per hectare in December 2017 to R9,318 per hectare by July 2018, a decline of approximately 32%. This trend began when the African National Congress (ANC) adopted a policy to amend the Constitution to facilitate expropriation without compensation, a precursor to the 2024 Act. Bornman noted that prices were expected to drop further due to the “opaqueness of government’s reform plan,” a sentiment that persists with the new legislation.
The act’s provision for nil compensation, outlined in Section 12(3), applies to specific cases such as abandoned, underutilized, or speculatively held land. While the government insists that expropriation follows a legal process with judicial oversight, the perception of weakened property rights has created a buyer’s market. Posts on X reflect this concern, with some users claiming that farm prices have dropped by a third since the ANC’s policy shift, compounded by falling commodity prices due to bumper harvests. Bornman emphasized that the total value of farmland transactions plummeted by 57% from December 2017 to R826 million by mid-2018, underscoring the market’s contraction.
Real buyers are increasingly skeptical about investing in farmland due to the risks posed by the Expropriation Act. The legislation’s potential to undermine property rights has fueled fears that land could be expropriated without adequate compensation, devaluing investments. Bornman noted in 2019 that “unless you are under financial pressure, it would be silly to just sell farmland, especially with prices being lower at the moment in several areas affected by drought.” He described the market as a “buyer’s market,” where larger commercial farmers are acquiring smaller farms at significant discounts, but overall demand remains low due to uncertainty.
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The historical context of South Africa’s land reform adds to buyer caution. The government’s slow progress—redistributing only 9.7% of commercial farmland by 2018 despite a 1994 pledge to transfer 30% within five years—has raised doubts about the state’s ability to implement expropriation without disrupting agricultural productivity. Comparisons to Zimbabwe’s failed land reforms, which led to economic collapse, further erode confidence. Posts on X amplify these fears, with some users warning of a “Zimbabwe 2.0” scenario where expropriated farms become unproductive. Bornman acknowledged that while farmers support land redistribution in principle, the lack of a clear government plan exacerbates unease, deterring potential buyers.
Banks, with significant exposure to the agricultural sector—R160 billion in loans as of 2018—are wary of financing farmland purchases due to the risks of expropriation. Bornman highlighted that land serves as collateral for agricultural loans, and any erosion of property rights threatens the banking sector’s stability. The Banking Association of South Africa (BASA) has warned that poorly executed expropriation could trigger defaults, potentially costing the government R41 billion if the Land Bank, which funds nearly a third of commercial farming, faces a crisis. A standard clause in loan agreements treats expropriation as an event of default, allowing banks to demand immediate repayment if land is seized without protecting creditors’ rights.
The Cato Institute has noted that banks are vulnerable to any process undermining property rights, as farmland collateralizes much of their agricultural lending. BASA has called for “crisp and clear” policy frameworks to reduce uncertainty, but the Expropriation Act’s ambiguity has left banks hesitant. Bornman’s data supports this, showing a decline in new mortgages granted for farms, with sales dropping from 4,331 in 2017 to 3,757 in the first 11 months of 2018. Despite President Ramaphosa’s assurances that land reform will not harm economic stability, banks remain cautious, with some exploring alternative land transfer mechanisms to mitigate risks.
The Expropriation Act aims to address land disparities rooted in colonial and apartheid-era policies, such as the 1913 Natives Land Act, which restricted Black South Africans to 13% of the land. A 2017 government audit revealed that white South Africans, less than 11% of the population, owned 72% of farmland. The government frames the act as a constitutional tool to ensure equitable land access, not arbitrary confiscation. However, critics, including U.S. President Donald Trump and Elon Musk, have misrepresented it as targeting white farmers, fueling international controversy and local market fears.
AgriSA, a leading agricultural organization, has clarified that no land has been confiscated under the act, and isolated land grabs have been addressed. Yet, the perception of risk persists, with some farmers considering emigration, believing they have no future in South Africa. Bornman emphasized that while farmers are willing to engage constructively in land reform, the lack of transparency and policy clarity hinders progress. The act’s economic impact extends beyond farmland, potentially affecting investor confidence and South Africa’s agricultural GDP, which relies on private property for stability.
The Expropriation Act of 2024 has significantly depressed South African farmland prices, with Johann Bornman’s data illustrating a 32% drop since the ANC’s policy shift in 2017. Buyer skepticism, driven by fears of expropriation without compensation, has created a buyer’s market with limited demand. Banks, wary of default risks and weakened collateral, are reluctant to finance agricultural investments, as Bornman’s statistics on declining farm sales and mortgages confirm. While the government seeks to address historical land inequalities, the act’s implementation must balance reform with economic stability to restore confidence in the agricultural sector. Clear policy communication and robust legal safeguards are essential to mitigate the act’s adverse effects on farmland markets.
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