Agriculture and Land Affairs Minister Lulu Xingwana announced the "use it or lose it" initiative last week for farms which the black beneficiaries have left idle.
Xingwana said the ostrich farm in Hammanskraal, north of the capital Pretoria, was repossessed "following demeaning reports regarding the poor conditions of the ostriches".
The government had leased the farm to a cooperative since 2007 but the new farmers did not run it productively, she said.
"I have requested Phaphamang Ma-Africa (cooperative) beneficiaries to relinquish themselves from the lease agreement they have with the Department of Land Affairs," Xingwana said in a speech seen by Reuters on Friday.
She said the government was appalled at the deterioration of the farm since the cooperative took over two years ago.
"Of the 77 ostriches originally on the farm, only 57 could be accounted for," she said.
"Several of the birds were limping and they were in a chronic condition which would therefore probably not respond to treatment. This would consequently result in infertility."
The land affairs department will try to revive the farm and make it productive, treat the ostriches, repair the farm infrastructure and establish markets for the project.
Farmers organisations have given mixed responses to the government’s repossession policy.
Land reform is a sensitive issue in South Africa, brought into focus by the decline in agriculture in neighbouring Zimbabwe, where President Robert Mugabe’s government often violently evicted white commercial farmers.
"Clearly this ‘use it or lose it’ policy is a noble idea in terms of ensuring that our people are going to farm," said Motsepe Matlala, president of the National African Farmers Union, which represents new black farmers.
"Obviously we can’t all be farmers… The challenge now is (that) all the people that want to approach government for farms must be selected carefully," he told Reuters.
The redistribution programme is part of a government plan developed after the fall of apartheid in 1994 to hand 30 percent of all agricultural land to the black majority by 2014.
Apart from redistribution, which enables blacks to secure loans to buy or lease land from the government, the land reform programme also includes restitution, by which black communities recover ancestral land taken from them under apartheid.
But critics say the government has dragged its feet on giving land back to blacks, while others say the programme has been poorly implemented, with the government failing to provide adequate support to new farmers once they are allocated land.