relolacted in this manner from "Black Spots" between 1960 and 19833. Labor laws that discriminated against blacks in favor of white workers and generous capital subsidies to white farmers contributed to successive evictions of large parts of the black population from white farms, where they had been employed as labor tenants and farm workers (Binswanger and Deininger, 1993).

While the Native Lands Act was repealed in 1993, the momentous task of a comprehensive reversal of the other policies and their consequences was left to the government that entered power following the 1994 elections. In attempting to do so, this government had to contend not only with the extremely unequal land distribution (the average amount held per person was 1.3 hectares by blacks compared to 1,570 hectares by whites).<sup>4</sup> This was exacerbated by the lack of any local government structure, widespread absence of administrative capacity, and the legacy of mis-directed agricultural policies which included subsidies to capital and fertilizer, public sector marketing monopolies, and a legislative environment that undermined the operation of factor markets.

The impact of policy distortions in the agricultural sector can be appreciated from the fact that, instead of the specialization in labor-intensive production of high value crops and agro-exportables that one would expect given the country's natural endowment, South Africa's agricultural sector focused on crops (e.g. wheat) not in line with its comparative advantage and with very low potential for employment generation. In the relatively small homeland areas, millions of poor relied on scarce natural resources to complement remittances and pensions from 'outside' as part of a survival strategy. On white commercial farms, by contrast, abundant natural resources were used by a small number of the 'privileged' to produce increasing surpluses. There is agreement that, even though these policies allowed the country to achieve selfsufficiency in food and create a highly technified agricultural sector, the costs - in social as well as economic terms- of doing so have been very high (Wilson and Ramphele 1989).

To reverse this trend and establish a more diverse rural structure, a liberalization program was initiated (Kirsten et al. 1998) to (i) further reform the input and output marketing system; (ii) reduce concentration in the agro-processing sector; (iii) restructure the system of rural financialintermediation; (iv) revise land sub-division legislation and other legal acts that had been established with the express goal of discriminating against the black population; and to (v) upgrade of agricultural support services and invest in an improved physical and social infrastructure in the former homelands. These measures set in motion a serious decline in the profitability of 'traditional' crops, an increase in productivity due to a shift to higher value production, and a dramatic increase in the number of indebted farms (van Rooyen et al.

> 3The comprehensive reports produced by the Surplus People's Project have documented this history, see SPP 1983. 4The white-owned, large-scale farm sector accounted for 90 per cent of the value added and owns 86 per cent of the agricultural land.

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