The restitution of land is part of South Africa's broader reform programme to allow blacks, many of whom were evicted from ancestral lands, to apply to have their rights restored or to ask for financial compensation.
They can also seek government loans to purchase land.
Church and government fail to agree
The 25,200 hectare farm in diamond-rich Kimberly was owned by the Evangelical Lutheran Church and was acquired by the government following the failure to agree on a settlement after over two years of negotiations.
The church had requested 70m rand ($9.8m) but the state offered only 35.5m rand on a take-it-or-leave-it basis.
The land was claimed by 471 local families, among them workers on the farm.
Lulu Xingwana, South Africa's agriculture and land affairs minister, has blamed white farmers for inflating land prices and delaying change.
"I think it is most significant ... It is something that cannot lag forever"
Last year she set a six month deadline for price negotiations after which she said the government would take steps to expropriate.
The commission set up to deal with the restitutions said in August that 89 per cent of such cases had been settled, but many say the transfer of land to black South Africans has taken too long.
The authorities have been criticised for working too slowly and activist groups have threatened to invade certain areas of land.
The government has also been keen not to shake investor confidence given the chaos that accompanied a similar land redistribution process in Zimbabwe.
But now officials say they will use the full power of post-apartheid laws which allow enforced land sales to speed up the process and analysts dismiss comparisons with Zimbabwe, saying South Africa is merely acting in line with the promises of its post-apartheid constitution.
Ruth Hall, a land researcher at the University of the Western Cape, said the move to expropriate land would "give hope to many claimants who have been waiting patiently for more than 10 years now for their claims to be settled".
She said: "This is nothing new but a fulfillment of [the government's] obligations."