Eroding property rights will put South Africa on the path to a Zimbabwe-type economic implosion, with devastating consequences.
The report of the Presidential Advisory Panel on Land Reform and Agriculture will enormously encourage the use of expropriation, even though the panel says this is only ‘one’ of ‘several’ methods for acquiring land.
But the other methods it proposes – donations by land owners, or purchases where this is ‘reasonable’ – are likely to count little in practice. In addition, many of the sales to the state that it envisages will not truly be voluntary. Rather, they will be backed up by the threat of expropriation if owners fail to accept low prices for their land.
The panel also endorses expropriation without compensation (EWC) in supposedly limited (but in fact open-ended) circumstances. It lists ten instances in which zero compensation would be appropriate: for example, where land has been ‘abandoned’ or is held ‘purely for speculative purposes’. But it also makes it clear that the circumstances meriting ‘nil’ compensation are ‘not limited to’ the ones it lists.
The panel further suggests that Section 25 of the Constitution (the property clause) be amended to ‘move away’ from the mandatory compensation it now requires. The panel also proposes the wording to be used, saying the amendment could simply authorise ‘Parliament to enact legislation determining instances that warrant expropriation without compensation for purposes of land reform’.
This proposed wording is inordinately dangerous. It would authorise the adoption of virtually any land EWC law – including one which vests all land in the custodianship of the state without compensation having to be paid.
Moreover, once the constitutional amendment is in place – and the constitutional settlement that now protects the property rights of all South Africans has been unravelled in this way – any such ‘custodianship’ bill will need only a bare parliamentary majority to be enacted into law.
The panel also recommends a new ‘compensation policy’, under which compensation will range from ‘zero’ to ‘minimal’ to ‘substantial’ to ‘market-related’, depending on the circumstances. This suggests that market value will become an exception to be allowed sparingly, if at all – for even ‘market-related’ compensation need not be the same as market value.
The panel claims such a policy would be in keeping with the Constitution. But the Constitution in fact requires compensation which is ‘just and equitable’, and which ‘reflects an equitable balance between the public interest and the interests of those affected’.
This ‘equitable balance’ generally requires the payment of market value, unless the four ‘discount’ factors listed in Section 25 – prior state subsidies, for instance – are clearly relevant. Individual owners should not be expected to foot the bill for effective land reform, which is a governmental responsibility. Nor should they be expected to compensate for the state’s failures to generate investment, growth, skills, and jobs over the past 25 years.
The panel further recommends that all municipalities, including those in urban areas, should use ‘the input of local residents’ to identify well-located and appropriately serviced land that is suitable for redistribution. ‘Individual owners of properties that meet the criteria of land required for redistribution…may [then] offer their land as donations, or enter into negotiations with the state, failing which the state may proceed to expropriate’, it says.
This is fundamentally coercive. It also guarantees that expropriation will become the favoured means of land acquisition, despite the panel’s statement that it should be only one of several mechanisms.
In practice, this approach will also make it very difficult for banks to accept land as collateral for loans – as virtually any land in any part of the country could be identified for redistribution in this way and then expropriated at well below market value.
This will make it hard for farmers to raise working capital. It will also make it far more difficult for families to borrow to buy homes, thereby undermining one of the most important foundations for upward mobility.
The panel makes no attempt to quantify the overall costs of its proposals. These range from extensive land acquisition (to be done on the cheap, of course) to the establishment of a host of bureaucratic bodies to plan, implement, and monitor its manifold interventions.
Nor does the panel provide any convincing analysis of how these unquantified costs are to be covered. Its financing suggestions include a land tax on commercial farms, donations, and land reform bonds to be issued by the Land Bank.
The panel also seeks the introduction of ‘prescribed asset’ rules, though it does not use this terminology. Instead, it urges ‘a specific drive to mobilise the private sector, ie commercial banks, asset managers and pension funds, to respond to the urgency of financing the excluded majority’. This drive, it says, should also ‘mobilise land-reform related funding’.
The panel’s recommendations are profoundly damaging in other ways as well. It wants ever more bureaucratic bodies, ever more interventionist laws, and ever more intrusion by the state into the production and distribution of food as part of a supposed agrarian ‘revolution’.
Overall, the panel’s report reflects an infinite belief in the benevolent power of the state to direct and control the use of land. Yet any automatic belief in the efficiency, wisdom, and probity of government is dubious in many countries. To maintain such a belief in South Africa is astonishing, for here pervasive state incompetence, callousness, venality, and corruption are glaringly apparent.
Expand the powers of the state in the ways the panel proposes – and these core characteristics of ANC rule will quickly spread into the space provided. Erode property rights in the way the panel recommends – and this will also put the country on the path to a Zimbabwe-type economic implosion, with consequences likely to be devastating.
Dr Anthea Jeffery, Head of Policy Research at the IRR, is the author of People’s War: New Light on the Struggle for South Africa, now available in all good bookshops and as an e-book in abridged and updated form.
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