Who Can Buy Agricultural Land In South Africa & How To?

Introduction to who can buy agricultural land in South Africa and how to buy agricultural land in South Africa: Agriculture is the foundation of developing economies. South Africa needs to ensure a healthy agro-industry that contributes to the country’s gross domestic product (GDP), food security, social welfare, job creation, and eco-tourism while increasing the value of raw materials. Therefore, farming methods should not only protect the long-term productivity of the land but also ensure profitable production and welfare of farmers and farm workers.

A guide to who can who can buy agricultural land in South Africa and how to buy agricultural land in South Africa, can foreigners buy the the agricultural land in South Africa, and the cost of agricultural land in South Africa

South Africa is divided into several farming areas according to climate, natural vegetation, soil type, and farming methods. Agricultural activities range from rapid crop production and mixed farming in areas with high rainfall in winter and summer to livestock rearing in bush welds and sheep farming in more barren areas. In South Africa, agriculture contributes about 5% to formal employment, which is relatively low compared to other parts of Africa, and the number is still declining, as well as providing employment to casual laborers and the country’s GDP contributes about 2.6%. Only 13.5% can be used for crop production, and only 3% is considered high potential land due to the aridity of the land.

Things to remember before buying agricultural land in South Africa

Before buying agricultural land;

• Be clear about what to expect from owning a farm.
• Make sure there is a clear title to the agricultural land being purchased.
• Check the seller’s background.
• Ask the Revenue and Registration Departments and Local Body Authority about the title of the land.
• Make sure, Encumbrance certificate is verified to know about previous owners and land registration.
• Must know the laws of the state about agriculture.

Agriculture plays an important role in the process of economic development and can play an important role in domestic food security. Compared to the rest of Africa, South Africa has the most modern, productive, and diverse agricultural economy to date. South Africa’s agricultural sector is well developed, which will put the country in a good position in the face of constant economic and climatic uncertainties.

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South Africa is a rich and diverse country. It has a vibrant cultural diversity and a wonderful range of plant species, biodiversity, climate, and soil types. Agriculture land specializes in farms and smallholdings for sale and offers to South African buyers;

• A select list of available farms ranging from mixed, crop, fruit, livestock farming to game and eco-tourism farming and all possible options are included.
• Free Market assessment of Property for Committed Sellers.
• Conducting soil and water analysis.
• Rental management service.

In South Africa, the economic, political, and cultural value of land often exceeds its productive value. Both proponents and opponents of the ongoing land grab debate in South Africa have expressed concern about the implications of land reform for the use of land for food and agricultural production.

The purpose is to determine the ownership and use of agricultural land in South Africa. Land access is critical to effective agricultural production, food security, and poverty alleviation in sub-Saharan Africa, where rural households have limited access to productive land. In South Africa, a long history of colonization, ethnic domination, and land grabbing has resulted in the vast expanse of agricultural land owned by the white minority.

For rural households, the land is more than an asset or input in the production process, but it also has historical and cultural values. If the factors affecting land access and use are identified, our understanding of how land reform policy works will increase. The high potential agricultural land purchase is a costly affair that should be approached with good information about the market. Unlike residential property, the agricultural land subdivision is a strictly regulated area that can have an impact on food security and agriculture in general.

Advantages of buying agricultural land in South Africa

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Let’s look at the different benefits of agricultural land;

• Agricultural land investment offers a high level of capital protection as it is backed by physical property. With the limitation of agricultural land supply, anyone who owns a piece of land is in the right position and extremely safe. There is a growing interest in investing in agricultural land across the country – join the early adopters to reap the most benefits! With diligence, you can acquire agricultural land as part of your investment.
• Owning an agricultural farm is a useful option for generating long-term wealth and income from agriculture is exempt from income tax.
• There is a similarity in supply and demand across the country due to which the prices of agricultural commodities increase.
• You will reap huge benefits in the long run as the value increases with time.
• The compensation for rural land is higher than urban land in terms of government acquisition. If you become an owner under the Land Polling Policy, you will be guaranteed a regular return from the pool.
• High levels of capital security and low levels of risk – Investments in agriculture are supported by a solid asset that is unlikely to depreciate. Well-organized farming is a renewable resource that remains productive until it is sold.
• Agricultural land is an effective inflation counter – Agricultural values ​​have risen faster than inflation, making agriculture an effective means of controlling inflation and protecting capital. Becomes the source. This can be especially appealing to investors who are concerned about government policies regarding inflation.
• Agricultural land is a stable income-generating asset – Unlike other mainstream options such as commodities and precious metals, farming also provides regular income to the investor, which allows him to make cash deposits due to low-interest rates and makes a useful alternative to ‘risk-free’ earnings lost on bonds. Though the real estate sector may not necessarily be the most lucrative, the revenue is generated on assets that are unlikely to depreciate.
• The agricultural land investment provides low-income fluctuations – When it comes to agricultural commodity prices, long-term growth trends are caught in the form of asset capital increases. However, fixed rents have the effect of reducing short-term recurring instability as the risks of pricing are borne by the tenant farmers rather than the landlords.
• Agricultural land investments provide higher total returns – Farmland investments offer both operating and capital returns in the form of a combination of rental income and asset value addition. According to past data, total profits from farming have consistently outperformed popular assets such as stocks, bonds, real estate, etc.

Agricultural land use in South Africa

On land use (as opposed to farm size), approximately, the total land used for commercial agriculture was 46,4 million hectares, which represents 37,9% of the total land area of South Africa (122. 5 million hectares). Commercial agricultural land consists mainly of arable land (36.5 million hectares) and arable land (7.6 million hectares). Pasture land is used for livestock and sports farming, and arable land is used for crop production.

Due to the combination of climatic soils, only 12% of the country is suitable for the production of rainfed crops. Much of South Africa’s land surface (69%) is suitable for grazing, and livestock farming is by far the largest agricultural sector in the country. Fertile land in South Africa is limited and the majority of crop growers need to increase the fertility of their soil to get good crop yields. Farmers in fertile areas also need to maintain the fertility of their land, as repeated cultivation depletes the soil of nutrients.

The cost of agricultural land in South Africa

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Arable farms cost with high potential and high-water table in the North West have grown in price from R200 / ha to R50000 / ha in the last 50 years. Prices have fluctuated somewhat, depending on the rainfall, but have continued to rise over the years. Irrigation farm prices have also risen sharply in areas such as Vaalharts and Upington.

Land prices in the Western Cape continue to rise. The average value of agricultural land with high potential cultivable grain production is between R40000 / ha and R50000 / ha, the Karoo grazing farms are around R2000 / ha, and the irrigated farms are between R150000 / ha and R200000 / ha.

Factors to be considered – The value of arable land should be assessed by a registered assessor, and farm potential should be assessed by an agronomist who is assisted by grid mapping and soil analysis, among others. Chemical analysis of soil conditions is also important. As well as location and proximity to markets, issues such as rainfall and infrastructure must be considered.

Potential buyers should also clarify the status of water rights, mineral rights, and land claims. Relevant information is available from the regional offices of the concerned state departments. Buyers must compare the asking price with the potential income generated from the farm. Purchasing any form should be supported by a detailed business plan that includes hidden costs such as transfer costs, taxes, and attorney’s fees. The contract must clearly state the equipment and supplies involved in the sale. Potential buyers are also finding it difficult to obtain financing from commercial banks. In Bothaville, for example, high arable land was recently leased for R2450 / ha.

Note – The cost of agricultural land depends on several factors and also the cost of land changes from region to region and time to time.

Subdivision of Agricultural Land Act South Africa

The purpose of the Subdivision of Agricultural Land Act 70 of 1970 (the Act) is to prevent the conversion of high-yielding agricultural land into non-economic sub-units. The Act may apply in the above circumstances and except Section 2 of the Act, the written approval of the Minister of Agriculture, Forestry, and Fisheries is required for legalization of subdivision. These include where such distribution is in favor of the state or any legal entity and where it is under the temperament of the testator who died before the commencement of the Act.

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Application for subdivision of agricultural land – To obtain approval from the Minister for subdivision, the services of a surveyor should be included in preparing the sketches for the required subdivision, and with the application, they should be assessed by the Minister and can be submitted for approval. In situations where the parties intend to subdivide it for various reasons such as above or otherwise, we assist in this process, and we encourage the parties to consult us in this regard.

Agricultural laws and agreements for buying agricultural land in South Africa

South Africa is a member of the;

• World Trade Organization (WTO).
• Food and Agriculture Organization (FAO).
• International Plant Protection Convention (IPPC).
• Office International des Epizooties (IOE) or World Organization for Animal Health.

South Africa was the first African country to approve transgenic crops (a type of genetically modified crop) for commercial purposes and is the leader in agricultural biotech research and development in Africa. The area is seen as a tool to address development challenges such as food security and better healthcare. Transgenic crops are already commercialized. This is due to South Africa’s abundant natural resources, and modern financial, communications, and transport sectors.

South Africa has various international trade agreements. The major trade agreements related to agriculture are;

• South African Customs Union (SACU).
• South African Development Community (SADC) protocol on trade in goods.
• Trade, Development and Cooperation Agreement.
• European Free Trade Association (EFTA) – South African Customs Union Free Trade Agreement.
• Economic Partnership Agreement between the SADC, the States Parties to the Economic Partnership Agreement, and the European Union and its member states.
• SACU-Southern Common Market.
• General system of priorities.
• Africa Development and Opportunities Act

Restrictions on buying agricultural land in South Africa

Before buying agricultural land, consider any restrictions on local and foreign investors and legal entities. Currently, there are no restrictions on land acquisition (including agricultural land) by any foreign party or South African resident (both natural persons and legal entities) in South Africa. The new regulations of the Agricultural Land Holdings Bill (Land Bill), which have not yet been enacted, will be amended. The Land Bill seeks to address South Africa’s past racially discriminative laws and dispossession. There has been public consultation and now, if necessary, it will be amended and sent to Parliament, where it will be constitutionally tested.

The Land Bill proposes that;

Foreign nationals and legal entities will no longer be able to own agricultural land in South Africa but will be allowed to enter on a long-term lease for at least 30 years. The average size of commercial farms in South Africa is estimated at 1,200 hectares of land and is likely to be large. South African law provides for the confiscation and reclamation of land seized through historical racial discrimination laws during apartheid.

A foreign company doing business in South Africa must be registered as a foreign company if it is a party to the employment contract or engages in activities that could reasonably be considered a company that is South African. Intends to continue business activities in Africa, but apart from acquiring it, the interest in land in South Africa can also be used by a foreign entity to acquire or lease land to a foreign-owned South African company.

South African Land and Agricultural Development Bank

Land and Agricultural Development Bank operates in the areas of basic agriculture and agribusiness. In the medium term, South Africa’s Land and Agricultural Development Bank was expected to focus on expanding its credit book in its ongoing efforts to facilitate the entry of a generation of black agribusinesses into the sector and in doing so, will create appropriate opportunities.

Equity investment frameworks and opportunities, to help existing farmers access their supplier and enterprise development programs to grow their businesses, increase funding for agro-processing, and continue to help small agribusinesses access supplier and enterprise development programs to expand their operations.

Ownership and acquisition of agricultural land in South Africa

South African farmers mostly own or lease the agricultural land on which they cultivate. In addition, some measures in South Africa have given black farmers the right to use the land under their control by traditional leaders. Acquisition of agricultural land is done with any other type of immovable property and is regulated by Deeds Registries Act No. 47 of 1937 (Deeds Act). The agreement for the sale of immovable property must be in writing and specified;

• Seller
• Purchaser
• Property
• Purchase price.

The conveyancer (an attorney responsible for the transfer and registration of immovable property, bonds, and immovable property rights), the relevant documents, and the deposit and/or payment of the purchase price (paid to the conveyancer in trust) affect the property transfer for a fee.

The conveyancer requires the below applications to transfer the property:

• Sale of immovable property agreement.
• Original title deeds.
• A power of attorney to approve the transfer.
• An electrical compliance certificate from the property seller.
• If applicable, a gas compliance certificate.
• Rates and clearance certificates from the municipality.
• Solvency and marital status of the buyer.
• Value-added tax (VAT) and transfer duty declaration.

If relevant, details of any bonds registered on the property, details of the bondholder, and cancellation figures for the cancellation of the bond. If relevant, no guarantee of the payment of purchase price. The conveyancer files the relevant documents in the Deeds Registry in the district where the property is located. The transfer takes 7 to 14 days after filing and takes time to issue a receipt or exemption of the transfer duty to the South African Revenue Services (SARS).

Use rights for buying agricultural land

Property use rights can be obtained through servitude and lease. Leases are commonly used to hold agricultural land and cultivate it.

Servitudes – The servitudes are real or personal rights to be enjoyed on someone else’s land registered by the conveyancer in the relevant deed registry. There is a real right to use servitude which must be recorded in the title deed of the land. A successor to the title to the land provided the new owner is aware of the servitude that results from registering servitude on the title deed. However, the landowner does not need to take any positive action in the matter of servitude.

The right of the registered holder is limited to certain real servitude. The holder cannot occupy the land or transfer its rights to any third party.

Personal services are linked to a registered right holder. They last for up to 100 years until a specific event occurs or for the life of the holder or if the holder is a legal person. Personal servitude includes the use and enjoyment of land, or the right to occupy it while the ownership remains with the owner of the land and not with the rightful holder.

What foreigners need to know for buying agricultral land in South Africa

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Favorable exchange rates and a well-regulated real estate industry make investing in real estate in South Africa attractive to foreigners. South Africa is known for one of the best deed registration systems in the world, with exceptionally accurate records kept in regional deed offices, where relevant documents are available for public viewing. This ensures that the process is transparent and secure, minimizing the possibility of fraudulent transactions.

Property is a long-term investment, and even if the price growth in South Africa is slow at the moment, it has historically increased in value over the years.

Experts agree that the slowdown in price growth is the best time to invest in an asset that has traditionally been shown to increase in value over the medium to long term.

Who can buy agricultural land in South Africa?

South Africa has one of the accessible property markets, where foreigners are allowed to buy agricultural property. It is one of only five out of 54 African countries to have foreign buyers on the radar. Other countries are Botswana, Namibia, Morocco, and Egypt, for example, agricultural land is not available to foreigners. Property is a long-term investment, and even if the price rise in South Africa is slow at the moment, it has historically increased in value over the years.

Experts agree that the slowdown in price growth is the best time to invest in an asset that has traditionally been shown to increase in value over the medium to long term.

Key points for buying agricultural land in South Africa

There are several factors to consider when buying land for agricultural purposes. South Africa has some of the largest agricultural lands in the country and different areas are better than others for different crops. In assets helps buyers and sellers sell and purchase agricultural land to ensure that both parties get the best results.

Here are some key points to consider when buying agricultural land in South Africa;

• Assess the value of the land through a registered appraiser, and evaluate the potential of the farm by an agronomist with the help of grid mapping soil analysis, among others.
• Avoid making emotional purchases. A piece of land may look amazing, but it does not make for a successful farm.
• Soil should be chemically analyzed and factors such as proximity to markets as well as rainfall and infrastructure should be considered.
• Avoid buying land that is close to informal settlements or settlements due to limited resale opportunities.
• Explain the status of water rights, mineral rights, and land claims. This information is often available from the regional offices of the relevant state departments.
• Before the transfer, labor issues on the farm must be resolved by the seller, and labor contracts legally terminated. Then, the buyer can decide if he would like to invite the workers to reapply.
• State what equipment is included in the sale.
• Last but not least, buying land does not make you a farmer.

Ways to get agricultural land in South Africa

1. Redistribution of Land for Agricultural Development (LRAD) – This program provides grants for the acquisition of land for agriculture to the already backward people. Applicants who wish to cultivate can apply for an LRAD grant but must contribute cash or labor. To a minimum of R5000-more if the grant is larger. Grants vary from a minimum of R20000 to a maximum of R100000.

Individuals or groups can apply. In many cases, collective land-use groups already owned by local authorities may apply to the program to purchase additional land.

2. Buy a farm through Land Bank – Land Bank is a commercial bank that can lend you up to 60% of the value of the farm. If you are already from a backward group, you can get a loan of up to 90%.

Land Bank can also help you with any farming expenses, including;

• Farm purchases
• Capital financing for machinery and farm equipment like tractors
• Production loans
• Farm improvement; and
• Infrastructure development (both basic and agricultural processing).

The client requirements to access funding from the Land Bank include;

• Become a South African citizen or permanent resident holder;
• Have a clean credit record;
• Submit a detailed business plan;
• There is enough security, which is equal to the amount being borrowed; and
• Be able to afford debt payments.

3. Lease of government land for farming purposes – Department of Agriculture, Land Reforms and Rural Development (DALRRD) provides opportunities on the official website every year. The current period of land allotment applications has expired, but they keep coming up from time to time.

4. Program for Casidra’s Agriculture and Land Reform – The purpose of this Western Cape Government program is to manage specific government farms sustainably so that the recipient can be transferred to the relevant receiving entity. It aims to ensure a sustainable support mechanism for new and established farmers, including land reform beneficiaries and farmworkers.

5. Land Reform Empowerment Facility – Land Reform Empowerment facility is a broad-based black economic empowerment funded by the Department of Rural Development and Land Reforms and supported by the European Union. LREF is a wholesale financing facility through which small enterprise finance agencies provide loans to commercial banks and other reputed agricultural lenders to lend to land beneficiaries. The LREF, therefore, aims to expand the control, management, and ownership of black South African citizens in land-based, high-value-generating assets in the agricultural sector.

6. Loans from Commercial Banks – Agricultural loans provide the ability to purchase new farms or expand existing operations. Many of our banks in Mzansi offer dedicated agribusiness services such as Standard Bank, FNB (First National Bank), ABSA (Amalgamated Banks of South Africa Limited), and Nedbank.

7. Comprehensive Agricultural Aid Program (CASP) – Have you acquired your land for farming in South Africa? Collaborate with CASP for your upcoming farming enterprise. Many people who acquire land through land and agrarian reform programs need help to use it effectively. The program provides support services to already backward landowners to promote and facilitate agriculture. CASP has six priority areas;

• Information and technology management;
• Technical and consulting support;
• Marketing and business development;
• Training and capacity building;
• On/off-farm infrastructure and input of the product; and
• Financial assistance.

Disclaimer: This article is for basic information purpose only. It is not financial advice and does not guarantee accurate information, and always do your own research.