By Olivia Kumwenda and Jon Herskovitz

SENEKAL, South Africa (Reuters) - South Africa's plans to undo the wrongs of apartheid by returning land seized from native blacks is embodied in the life of Koos Mthimkhulu.

He was born on a white-owned farm in 1955 and attended a school set up by white farmers to give him just enough education for a life as field hand. A short childhood gave way to decades of milking cows, driving tractors and ploughing fields for poverty-level wages.

When white-minority rule ended in 1994, the new democratic government made it a priority to return land to those dispossessed. It wrote the idea into the constitution and made a plan that would make people like Mthimkhulu independent farmers.

Yet the practice under the African National Congress (ANC) has fallen far short of targets and disappointment is stocking up new risks of social, racial and economic crisis to threaten the very democracy intended to save South Africa from disaster.

The post-apartheid government selected Koos Mthimkhulu for a program under which it would buy agricultural land from white farmers and turn parcels over to blacks who had claims on the territory. It offered him money, advice and moral support.

Greying at the temples and at ease tending a herd of cattle and tilling fields, he now grows corn and sunflowers in the central flatlands of the Free State, no longer tethered to white bosses and proud of his substantial 500-hectare (1,200-acre) holding, of which about a quarter is suitable for crops

But Mthimkhulu does not own the land, the government does. And in all likelihood, without ownership, he seems destined for the failure that has hit many like him who thought themselves among a fortunate few to get land: "I struggled for a long time and I can't get a loan from banks because I can't use the farm for security," he said in the local Sesotho language.

That is not the only drawback small farmers like Mthimkhulu face; South Africa's land reform ideals are being crushed by government mismanagement and the economics of pitching the new, small-scale operations into competition with the industrial-size farms that have made the country a global agricultural powerhouse, exporting billions of dollars in farm products.

Most food is grown at places like the Royal Dawn orange farm, 300 km (200 miles) northeast of Mthimkhulu's homestead, in Mpumalanga province.

There, hundreds of hectares of carefully maintained citrus groves are crisscrossed by a network of pipes for automated irrigation. Each row of trees is alphabetized and bar-coded, enabling the farm manager, a white man like the owners, to keep a computerized track of fertilizer needs and use.

The system allows supermarkets in export markets as far away as Beijing to trace an individual box of oranges back to the row from which they were picked - by a black laborer.

Other African states are even recruiting South Africa's big commercial farmers, most of whom are white, to grow in their countries, hoping their expertise will increase their overall revenue from farming. Small local outfits can barely compete.

RACIAL INJUSTICE

The origins of the problem the ANC has tried to resolve lie deep. A century ago, under British rule, South Africa's 1913 Natives' Land Act set aside 87 percent of all land for the small white minority and 13 percent for black Africans.

Two decades of land reform under the ANC, which this year seems set to retain President Jacob Zuma as the leader who will continue its one-party dominance at elections in 2014 [ID:nL5E8FN1X1], have done little to change those land ownership ratios set 100 years ago.

Plans drawn up under the first black president, Nelson Mandela, were meant by 2014 to hand over to blacks 30 percent of commercial farmland - a type of land that had been almost exclusively owned by whites, who form less than a tenth of the population. The government says so far it has achieved only 8 percent, but still says wants to reach 30 percent in two years.

One reason for that has been its reluctance to act by force. Its "willing buyer, willing seller" program means the pace is set by white farmers agreeing to trade. Striking deals at market rates is often elusive, raising allegations of corruption in the setting of prices, and in the disposal of state funds.

And even when farms are returned to black residents, many are doomed to fail. Then real estate developers or factory farming businesses, mostly owned by whites, may step in and buy the land back - reversing progress toward the land target.

"Restitution needed to be done. But something went terribly wrong with the implementation," said Theo de Jager, vice president of AgriSA, a body which represents the agriculture industry and principally large white-owned businesses.

Echoing officials at the Department of Land Reform, who say most reallocated farmland is "unproductive", de Jager said: "I visited more than 200 farms that have been transferred over the last two and half years and I haven't been on one that is a commercial success. None of those farmers are making a profit.

"And if it is not profitable, it's not sustainable."

A TIME BOMB

Land is at the heart of racial injustice in South Africa and has the potential to dent a democracy where about 40 percent of the population of 50 million lives in rural areas. The crisis is not now, but without action now it will grow as a threat.

"The land issue is a symbol for blacks of everything that has been lost to whites," said James L. Gibson, a professor of government at Washington University in St. Louis, Missouri, who has studied the issue intensively in South Africa.

Gibson sees land reform as a time bomb, given the large number of the black majority who feel they have been victimized and the glacial pace at which land is being returned.

One of his surveys indicates that an overwhelming majority of blacks feel land was unfairly taken by the colonizers and current white holders have no right to the land today.

"The ANC is fearful on many fronts that a demagogue is going to come along and present a serious challenge to the establishment. I don't think that it will spontaneously erupt. It has to be sparked by a leader," he said.

The ANC this year expelled the most prominent voice calling for an expropriation of white-owned farms, its youth leader Julius Malema. His demands had raised the prospect of a seizure of white-owned farmland, like that in neighboring Zimbabwe, which many argue ruined a thriving agricultural economy.

But even with Malema being sent to the political wilderness, there are other prominent voices calling for a seizure of white-owned land, including Irvin Jim, the general secretary of the powerful metalworkers trade union NUMSA.

Weighing in the minds of ANC policy makers is what happened when Zimbabwean President Robert Mugabe started seizing white-owned farms a decade ago. Land has gone fallow and the breadbasket of Africa has been pushed to the brink of famine.

One of the ANC's policy priorities for this year is completing its latest policy paper on land reform. A draft released last year said the goal "is to ensure that all land reform farms are 100 percent productive", and to meet the 30 percent redistribution target by 2014.

Lechesa Tsenoli, land reform deputy minister, said complex claims to ancestral property slowed the process. Often, he said, relatives disagreed over which of the three types of available settlement they wanted - namely getting the land that belonged to their forebears, getting alternative land or cash.

"It will impossible until we start doing things that we think we will solve it," he said.

"The issue is potentially explosive."

A TOUGH BUSINESS

Seeking to make good on commitments to make reallocated farms a success, South Africa offers one of the strongest farmers advisory agencies on the continent.

With hundred of offices in every province, the Agricultural Research Council helps match crops to local soil, gives advice on irrigation and helps diversify the gene pools of livestock.

But coordination among government agencies can be poor, adding the troubles of those pitched into running new farms. The Department of Land Reform is separate from the Agriculture Ministry. Other local bodies, seed suppliers and specialized financiers are often not coordinated. And the ARC may not be notified of small farmers needing help until it is too late.

"If you are not in the market with the right product at the right time, you are not really going to make it," said Shadrack Moephuli, ARC's president and chief executive. "If all the role players are not there for you at the right time, and sequenced appropriately, you are likely to lose out."

If beneficiaries can make their way through financing, seed purchases, planting, growing and mechanized harvesting, they often fail in finding a place to sell their product.

The window shuts quickly for success or failure with one poor harvest enough to bankrupt a new farmer.

Some want the government to set up cooperatives to help the beneficiaries of its land reform program get better prices on seeds and fertilizers and share costs of agricultural machinery.

Moephuli of the ARC says the government should keep costs down, too, when it buys land to redistribute and not rush to give it away to people ill-equipped to work it profitably: "Farming is not an emotional thing," he said.

"It is a business, and a very complex business."

Koos Mthimkhulu has learned that lesson all too well.

Strolling through his acres of corn, on the plain where he also grazes cattle close to the farmhouse he took over when the white owners moved on, he fears the government grants that got him started may soon dry up.

Without profits to plough back in, he then may no longer be able to afford seed - unless he goes back to laboring for a wage on other farms in the area still owned by wealthier whites.

"It's hard to make it as a farmer without the right support," he said. "Without the right help, we will fail."

(Editing by Alastair Macdonald)