Categories: SA Valuer Blog1005 words3.8 min read

Sustainability Compliance in Agriculture


July 11, 2023


Human life depends on the earth as much as the ocean for our sustenance and livelihoods. Plant life provides 80 percent of the human diet, and we rely on agriculture as an important economic resource. Forests cover 30 percent of the Earth’s surface, provide vital habitats for millions of species, and provide important sources for clean air and water. Forests are also crucial for combating climate change but, more importantly, forests maintain food security.

The Taskforce on Climate-related Financial Disclosure (TCFD) and the Principles for Sustainable Banking are two international initiatives driving a stronger focus on, and disclosure of, the relationship between the banking sector and sustainable development. In South Africa, National Treasury and the banking sector are examining the roles and responsibilities of banks with regard to issues such as environmental sustainability, social development, and economic growth. It is likely in the near future that the current voluntary agreements, such as the Principles for Managing Environmental and Social Risk will be supplemented with more stringent requirements for disclosure by the banks on sustainability issues. This may have significant impacts on the financial performance of banks through suspended projects, reputational damage, negative business impacts on borrowers and thus, reduced loan repayments. A far greater risk is hidden in banks becoming financially liable for financing illegal development, as is the case of financing the development of a storage dam without legal registration of such. Financing a farmer in developing permanent crop production might result in direct liability if such development is found to be without due legal compliance with legislation such as the Conservation of Agricultural Resources Act, which requires approval. Ignorance of the law will be no excuse.

The Financial Sector Campaign Coalition (FSCC) was launched in 2001. Such campaigns shaped discussions within the National Economic Development and Labour Council (NEDLAC) and contributed to the development of the Financial Sector Charter (2004), the Code of Conduct for Managing Environmental and Social Risk (2011) and the subsequent Principles for Managing Environmental and Social Risk (2014/ 2018). The Banking Association of South Africa (BASA) was instrumental in the development of these agreements and the principles explicitly recognise “the role that banks can play in the protection, promotion and fulfilment of social, economic and environmental rights in South Africa”.

The bottom line is that essential finance must be subject to legislative compliance, as the financier is at risk of being held accountable for noncompliance, specifically in respect of environmental sustainability, and that has become a reality. The simple fact that such compliance enforcement issues tend to be neglected by the responsible authorities, will neither provide for a pardon in ignorance of legislation. The question of why it became necessary to enforce such legislation comes to mind, especially if the fact that land will outlive any landowner, implying that we are, but mere custodians of such land and our actions towards the maintenance of the integrity of this custodianship will be judged by the next generation.

All stakeholders, agricultural landowners, financiers, government, and each and every intermediatory professional should, as a matter of urgency, revisit existing legislation, confirming legal obligations and compliance requirements in respect of, more specifically, environmental sustainability issues, as liability will become inevitable with detrimental consequences for all. Environmental compliance should be a moral issue rather than a legal one – it is unquestionably the right thing to do.

There are no less than 17 Acts regulating environmental sustainability in South Africa, 8 Acts regulating crop production, 5 Acts regulating general agricultural production and 22 Acts on animal production. Then there are just as many in respect of social and economic responsibility.  This clearly indicates that the valuation of agricultural properties is more complicated than generally acknowledged in the valuation industry. The introduction of the Spatial Land Use Management Act (SPLUMA) highlighted issues such as the transgression of boundary and building lines of residential properties. The fact that such is rarely being reported in valuation reports, does not reflect positively on the professionality of the valuation industry at large. It is not far-fetched to accept that this act will become applicable to the agricultural property environment in the near future.

It may be a good preventative measure for property valuers to familiarise themselves with existing legislation, as the issue of environmental sustainability compliance, more than ever, is becoming critical and being pushed to the forefront due to climate change and the direct and more transparent influence on the agricultural production environment. The most important being, and currently most controversial issue, of water rights, and the direct correlation of such with the Conservation of Agricultural Resource Act may be a good starting point.

It may be argued that a Property Valuer is no legal expert but considering the direct influence of such compliance on the value of agricultural property, this argument may prove to be disastrous in respect of liability.

The fact of the matter is that land might, in “deed”, belong to an individual, but the natural resources belong not to an individual landowner, but to all citizens of a country, and the regulation of such to the benefit of all will always be a controversial issue. Compliance in respect of the regulations regulating the controlled utilization of such cannot be argued or ignored.

Financiers rely, as the first line of defence, heavily on the competence of property valuers in not only identifying, but clearly reporting any non-compliance issues in respect of environmental sustainability. This implies that property valuers should have thorough knowledge of legislation regulating such issues, and that they are morally obliged to clearly report such. The mere restrictive condition statement, which has become general practise in valuation reports, will not protect a valuer from liability in this regard, without clearly reflecting issues in the value calculations. Ignoring this might result in conspiring to cover up a crime.

Written by: Petrus Viljoen (CEO Agri Land Projects (Pty) Ltd) and Thys Beukes (Area Manager Agri Land Projects; Professional Valuer 3971/2)

Please note: The opinions expressed within the content are solely the author’s and do not reflect the opinions and beliefs of the website or its affiliates.