Agricultural Land Privatization Policy

Issues for Debate

Ethiopia now stands at a defining moment whether or not to develop the private sector economy, if at all. The institutional inefficiency of the state economy, the low productivity trap of the population economy, and a growing surplus of labor underline the need for a long-term strategy of private sector development in Ethiopia. The economy cannot operate as usual and massive strategic change is inevitable. One of the core strategies and policies of private sector development in Ethiopia is the launching of institutional reform in the area of property rights. In political economy, there is a consensus that property rights matter a lot for investment incentives, efficient resource use, and economic growth.

The Ethiopian Constitution asserts state ownership of land; there are no private property rights in land. One of the fundamental problems of state ownership of land is its contested nature due to land tenure shifts, redistribution of land, resettlement programs (both voluntary and forced), and expropriation of land. To move towards a market economy, land privatization should be one of the most fundamental policy reform agenda of the government. However, the Government of Ethiopia is not prepared at this time to legalize private property rights in land, including agricultural land.

Some scholars argue that private property on land denotes the loss of the means of livelihood for smallholder farmers and their forced evictions. Others, including the writer of this article, think that privatization policy will help consolidate fragmented holdings, centralize and specialize the rural production system, guarantee tenure security, and enhance the efficiency of land markets.

In a recent EBR interview (edition number 83), the well-known scholar on agrarian reform study in Ethiopia, Desalegn Rahmato (PhD.), stated that he “does not support private land ownership” because “land ownership is now strongly linked to identity politics and ethnicity”. Instead, he proposed two recommendations. First, ensuring tenure security (legal assurance) to smallholder farmers instead of individual ownership and the institution of private property. He advised the government to formalize already existing and accepted tenure systems that can provide security to smallholder farmers. Second, he suggested the provision of support and incentives to smallholder farming and this includes removing restrictions on land renting for the purpose of consolidation, accessing finance from banks for renting machines, and providing similar privileges given to commercial farms (tax holidays, access to foreign currency, and duty-free import of capital goods).

Experiences of improving smallholder farmers’ activities
Professor Desalegn’s recommendations are not new and they have been earnestly tried in the past few decades particularly under the strategy of agriculture-led growth and transformation. Improving land security has been tried through donor-supported interventions and programs aimed at upgrading and transforming the land administration system. The process of registering land certificates has been conducted over the past fifteen years in different regions. Even if farmers felt that the certificate would prevent the government from pursuing land redistribution, farmers may lose their rights to use land under certain circumstances.

Certification program does not exclude the state from land as is the case in private ownership. Certificate owners cannot do with the land property as they like. They have the right to use the land and appropriate the yields, but cannot change the asset and/ or sell it. In some regions, there are also concerns about the process of updating land certificates, thus leading to a non-functionality of the system. The system is not operating uniformly, and the main source of non-functionality relates to the very ideology that frames the legal system of land in the country.

When it comes to supporting smallholder agriculture, the government has allocated 42% of GDP to the agricultural sector. The Ethiopian government has significantly increased public investment in agriculture from ETB15 billion in 2014/15 to ETB29 billion by 2019. It is believed that the agricultural sector greatly influences general economic performance in Ethiopia and should thus be given priority. The public agricultural extension service system, which is critical in promoting the adoption of improved farm technologies is the largest in Africa. What more is needed?

Miss-conceptualization of smallholder agriculture
Despite certification and agricultural extension services, we do not observe an increase in smallholder agriculture productivity. This outcome is not only related to the bad performance of land administration and agricultural extension service systems. It is mainly a result of the demographic nature and functions of smallholder farmers. Smallholders are primarily demographic units and not economic actors. Smallholder farm households are reproductive units, with a fertility rate of 4.9 children per woman. In Ethiopia, the population grows in rural areas and this does not happen in a vacuum. To survive, grow, and reproduce, smallholders need to feed on the land and household labor. Smallholder households are both a consumption and production unit. Their primary goal is production by any means including the use of market mechanisms. Just because they are cultivators, does not mean that they are entrepreneurs.

The demographic and reproductive nature of households should be taken into account in the economic analysis. Their number has increased from 4.5 million in 1984, to 5.2 million in 1996, and on to 13 million in 2019. They are spatially scattered in different agro-ecological zones requiring the use of different types of technology and massive extension programs that are beyond the capacity of the government. It should be noted that through its current agricultural policies (certification programs and extension services) the government was and is co-operating for further household reproduction, not for economic growth. One should not expect economic growth out of the demography’s multiplication. Demographic reproduction behavior is missing in the debate on the nature of smallholder farmers and agriculture development in the country. Neither land administration reform nor extension service programs change their basic demographic functions; justification for their existence. Because of their demographic behavior and functions, small farms do not positively respond to policy instruments and investment options related to commercialization, trade, price incentives, and technology adaptation. Small farms contribute to agricultural development if and when they dissolve themselves into an employment-based economy. Land privatization is a means to that end.

The Changing Context of Land Privatization
There are also other contextual factors which makes us reconsider our approach to the question of the land privatization policy. The idea of state ownership of land and ethical principle of distributive justice has its origins in the Ethiopian student movement. In 1975, the military government nationalized rural land without compensation and granted each peasant family so-called “possessing rights” to a plot of land not to exceed ten hectares. Since then, the context of land ownership has changed and is currently compounded by political movements, population growth, process of urbanization, globalization, and climate change.

The political development since the 1974 revolution specifically provided the state the overbearing role as owner-regulator and user of land resources. Currently, ethnic-based politics and organizations have given rise to historical claims and conflict over land. Political conflicts over the past decade have led to large numbers of internally displaced persons, raising complex issues about access to land, resettlement, and rehabilitation.

Population mobility has increased the number and size of urban centers. Even if Ethiopia is in the early stages of urbanization (with only 20% of its people classified as urban), the rate of urbanization is rapid by African standards (currently about 4.3%). This transition will continue for several decades to come. As with the increase in urbanization, land has acquired an importance in other sectors of the economy beyond agriculture. The process of urbanization is creating new demands on land and land-related resources for engagement in more sophisticated economic activities such as the provision of recreational, entertainment, and catering services irrespective of residential or urban settlement patterns. Economic diversification towards the manufacturing, service, and tourism sectors has increased the demand for land.

The impact of global warming on climate change is expected to affect land use systems in Ethiopia. Already, not much of the country’s land is arable or potentially arable. Large parts of the country is semi-arid and occupied by pastoralists. The arable part of the land is already facing resource degradation including deforestation due to population growth pressure. In many parts of the country, flood, erosion, and intermittent droughts have accelerated soil exhaustion and losses of land cover. Globalization and the ‘new scramble’ for Africa’s land resources are other context factors which should be addressed by land policy reforms. Globalization has introduced new foreign demands for land to address a wide range of investment interest in timber, commercial development, and food production. The land policy reform has to address this foreign investment and food production for consumption abroad.

As set out above, there are diverse contexts and various factors which shape access to, control, and utilization of land in the development process. It is wrong to approach the design of new land rights issue from a single challenge or angle such as ethnic politics and identity, and/ or from an ethical concept grounded in the principle of distributive justice. As the context of the land question has changed, we also have to change our early 1970s approach to land privatization. Currently, there are critical challenges which the government has to address through land policy reforms: employment creation for the rural surplus labor, covering food demand of the rapidly urbanizing population, need for capital accumulation, and rural industrialization. If the rural land sector is to play a primary role in the development process of Ethiopia, it has to change its owner from demographic forces to market forces.

The challenges of investment, productivity growth, urbanization, and industrialization currently facing the country can only be addressed through market forces. Smallholders are basically demographic units and they are there for reproduction and not for long-run economic growth. After nationalization of land, their number of 4 million has increased three fold mainly through their own efforts (use of household land and labor) and government support (certification and extension services). I call this type of government policy co-operation for further fragmentation. The question is should we continue with demographic reproduction or market development through privatization. Why are we dependent on the same path and fragmentation approach despite changes in the context of the land ownership question?

9th Year • Mar.16 – Apr.15 2020 • No. 84


Leave a Reply

Your email address will not be published. Required fields are marked *

Ethiopian Business Review | EBR is a first-class and high-quality monthly business magazine offering enlightenment to readers and a platform for partners.

2Q69+2MM, Jomo Kenyatta St, Addis Ababa

Tsehay Messay Building

Contact Us

+251 961 41 41 41