Just be frank. That was the advice by President Ramaphosa’s economic advisor in 2018 as the campaign to change the Constitution to ease expropriation without compensation (EWC) was gaining momentum – and the government’s investment envoys were finding marketing the country infinitely more challenging.
One has to wonder whether this had much impact. ‘Communicating this, I think, is a bigger challenge than what we thought,’ said Trevor Manuel. What, after all, could one say to a sceptical investor when the government had really nothing to offer but a seemingly unshakeable commitment to giving itself the enhanced power to seize assets?
Yet frankness has its undeniable virtues. Not only does a clear understanding of intentions enable those subjected to government policies to plan, but it is also a species – perhaps a backhanded one – of respect to one’s audience. Where governments are involved, this is surely nothing less than acknowledging citizens’ roles and rights.
Yet on EWC, frankness– not towards foreign investors, but towards South Africa’s people – remains elusive. This is so even as the agenda is pushed forward, both in reducing property protections in the Constitution and in expanding the state’s latitude to take without payment through the Expropriation Bill.
If the EWC push has been a deterrent to investment, and a contributor to South Africa’s dismal economic performance over the past three years, the challenge it poses to millions of ordinary people verges on the existential. At issue here is home ownership.
Buying a home is the largest financial commitment that most households – those fortunate enough to be able to do so – will ever make. Doing so typically requires incurring massive debt, whose repayment, under favourable conditions, will be made over decades, with interest ensuring that the sum repaid comfortably (uncomfortably?) exceeds the sum borrowed. That’s the way of things – banks risk their capital when making loans (to the national tune of some R1.6 trillion) with the intention of profiting by it.
The question that will in all likelihood soon become unavoidable is: What will become of those home loans if the properties are expropriated at ‘nil’ compensation, or at very little compensation, as a result of various ‘discount factors’ that the state has granted itself? (The Valuer-General’s regulations allow for some particularly generous discounts, while the Expropriation Bill weights the process heavily in favour of the state).
Having lost the property, will the (former) owner nonetheless be liable for the loan – in other words, suffer secondary abuse by having to service a loan which brings no benefit? Certainly, the government is highly unlikely to take on this responsibility. EWC is, after all, about avoiding financial responsibility.
What of the banks? Their priority seems firmly fixed on keeping their loans serviced. Repayments should be ‘guaranteed’, said the former head of the Banking Association of South Africa. Other institutions have signalled that they would regard their clients as liable for the debt.
This would inflict a crippling blow, destroying people’s futures.
The abuse inherent in this course of action is such that the EWC policy should not even be considered. But if it is, it behoves both the government and the financial sector to come clean about it. It will come as no comfort to a hard-pressed population, but it would – perhaps – give homeowners and bondholders an opportunity to reflect on their situation, and to make such plans as they are able.
Be frank, in other words. Set intentions out clearly, and afford the free citizens of a constitutional republic a modicum of respect.
And if the country’s government and its financial institutions have failed to consider their course of action, then South Africa is probably in deeper trouble than most realise.
On this, Mr Manuel’s words might again be useful: ‘Communicating this, I think, is a bigger challenge than what we thought.’
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