14 May 2015
By Pierre Heistein
The New plans to reduce the size of commercial farms, announced by Rural Development and Land Reform Minister Gugile Nkwinti last week, clash violently with my economic training.
I hear talk of cutting up large farms into smaller pieces and I think back to the theory of long-run average cost curves and how limiting the size of operations will reduce economies of scale, push up production costs and raise prices.
I read statements about how expropriated land will be compensated “on the basis of the just and equitable principle” and my knee-jerk reaction is to think of how the lauded “foreign investor” will now be deterred from South Africa.
But economic theory is often wrong and each policy needs to be evaluated on its own merits.
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