Why "willing buyer, willing seller" is not the problem - Agri SA

Johannes Möller says over-pricing of land due to fraud, artificial demand etc.

"Willing buyer, willing seller" not the reason for high land prices

24 May 2012

"The "willing buyer, willing seller" dispensation is often misunderstood and wrongly targeted as the reason for excessive prices in some instances being paid for land by government", says Johannes Möller, president of Agri SA. He responded to recent debates in Parliament and accusations by political office bearers that government is paying excessive prices for land due to owners of land demanding prices of this magnitude.

Agri SA agrees that the system/process of acquiring land should be questioned if higher than market related prices are/were paid but welcomed Minister Nkwinti's view expressed in Parliament that role-players between farmers and the state should be blamed for excessive prices, rather than farmers.

Möller said that the "willing buyer, willing seller" is a well known concept used for taxation and accounting purposes depicting transactions taking place on an arm-length basis between unrelated parties. "Willing buyer, willing seller" is thus a notional concept of how transactions in a market related economy should take place.

"Any deviation from this can, therefore, not be regarded as an integral characteristic of the concept but should be attributed to factors like fraud, excessive market power by certain parties, the market for land not being transparent, valuations not properly done or an artificial demand having been created by e.g. government involvement. The fact that the Minister Nkwinti concurs with this conclusion gives us confidence that remedies for the real problems will be sought and implemented", said Möller.

It is Agri SA's view that it should not be expected from individual farmers to make sacrifices to serve a public purpose or public interest without receiving fair compensation. "This as per the Constitution would boil down to deprivation or even expropriation and should be subjected to fair and equitable compensation which currently can only be equated to market values despite other factors supposedly to be taken into consideration in terms of section 25 of the Constitution to which no content as yet could be added", Möller said.

Agri SA's acknowledges that governments' involvement in land reform and specifically land restitution has indeed brought about the state as a new player in the market and most likely also created an "artificial" demand. As government is not a voluntary (willing) but a mandatory (compelled) buyer of land it may lead to the "willing buyer, willing seller" dispensation being questioned.

"Agri SA maintains that this need not to be the case as the land market is dynamic enough to ensure that valuers have an objective and market related source of information on which to base valuations i.e. true market values to provide comparable sales on which to base valuations. Agri SA also maintains that matters such as fraud, poor valuations and a lack of market transparency to the extent that it had become systemic could be addressed by a "system overall" approach. We believe that this is precisely what the Green Paper on Land Reform sets out to achieve", said Möller.

"Stakeholders involved with the evaluation of the Green Paper should be allowed a reasonable opportunity to also address the perceived problems with the "willing buyer, willing seller" dispensation. Institutions envisaged in the Green Paper such as the Land Management Commission and a Valuer-general can in our view contribute a great deal towards addressing the criticism lodged at the "willing buyer, willing seller" dispensation by ensuring fair and equitable prices i.e. market prices having been determined by uninterrupted market forces.

A Valuer-general which is currently foreseen to oversee valuations as well as the auditing and vetting thereof should be allowed a chance to put the price determining mechanism of land on a more sound footing and to alleviate the aforementioned problem areas. We believe that this approach should be adopted and that abolishing the "willing buyer, willing seller" dispensation, in its correct form, should not be pursued", Möller said.

Statement issued by Mr Johannes Möller, President Agri SA, May 24 2012

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