A DEPRESSING letter landed on my desk yesterday, highlighting the fact that SA has run out of money to pay for its ambitious land reforms. It was written by the Eastern Cape Land Claims Commission, informing a certain Mr Philander that the princely sum of R1270 he was due as reparations for his family's forced removal from a suburb of Grahamstown reserved for whites by the apartheid government could not be paid. "The payment has not been effected, as the commission has no budget," the letter said.

Philander joins thousands of rural communities, urban land claimants, farmers, game lodge owners, as well as black entrepreneurs applying for land grants, who have been told that there's no money to honour their sale agreements, buy back their ancestral land or pay them cash compensation for forced removals.

The shortage of funds is probably the single largest obstacle to implementing land reforms. At last count, the Department of Rural Development and Land Reform estimated that, at current market prices, it needed at least R70bn to meet its target of buying 30% of white-owned farmland for blacks. It has been allocated less than R30bn.

How to get land cheaper appears to have greatly exercised the minds of land officials and politicians of late. The common wisdom is that the "willing buyer, willing seller" model is at fault and must be ditched because it encourages land owners, who know the state is a captive buyer, to inflate prices. This view was repeated several times in the past week, including by land reform directorgeneral Thozi Gwanya, when announcing an expropriation law ditched last year would be revived, and deputy minister Joe Phaahla, who complained of farmers, valuers and officials colluding to inflate prices. There is a lot of truth to this.

Expropriation expert Gerrit Grobler, at the annual congress of farmers' union AgriSA last week, put it so: if the state wants to buy farms that aren't on the market, expect farmers to inflate prices. The same goes for anyone who doesn't really want to part with their property, whether the state wants to build the Gautrain, a soccer stadium or a poultry project on it.

Grobler, who wrote the 1975 Expropriation Act and was legal adviser to legislators drafting its controversial replacement, believes the solution is simple: expropriate, but be guided by the constitution when determining compensation.

I agree. The importance of section 25 does not lie in allowing the state to subtract apartheid subsidies and thereby pay below market value for farms. This is too difficult to determine anyway, and unlikely to be implemented. It's the fact that it requires the courts to decide on just compensation. As the courts have already ruled the departure point should be market value, there's no reason for land owners to be shortchanged. But it will discourage them from inflating prices.

The Expropriation Bill was shelved precisely because it allowed officials, not the courts, to decide compensation. According to Grobler, this was at the insistence of former deputy land reform minister Dirk du Toit , who was worried about escalating land prices. The result was "an unconstitutional absurdity", says Grobler. Let's not repeat the same mistake when the bill is revived.

Shortcomings of the "willing buyer, willing seller" land reform model are only part of the picture, though. But harping on about it does serve a useful purpose for officials and politicians who need to deflect attention from their own failures.

The colossal administrative inefficiencies of the land reform bureaucracy are well documented. A community leader who had to wait eight years to receive a reply to a fax sums it up for me. The commission naturally pays more for land the longer it takes to process claims.

Some argue a new expropriation law is also a waste of time and money. The only time the state is truly held over a barrel is when there's a land claim over a property whose owner doesn't want to sell. And the Restitution Act already provides for expropriation in line with the constitution in these cases.

Political pressure to settle land claims and speed up redistribution also resulted in reckless spending. Moreover, by the state's own admission about half of the land reform farms transferred so far have collapsed or are in decline. Money that could have bought more land is being used to revive them.

But trying to establish successful black commercial farmers with a maximum land grant of R430000 is wishful thinking. Grants should increase substantially, as should state subsidies on helping them access credit, markets and technical support.

In the meantime, the government has failed to implement cheap, effective reforms that could vastly improve many lives. Repealing a law preventing farms from being subdivided, expropriating plots for farm workers, and creating agri-villages have been promised for years. So has giving people stronger property rights to communal land.

We don't need to tinker much with land markets to implement effective land reforms. Just spend more smartly.

Hofstatter is a contributing editor.