Zimbabwe is an economic basket case, thanks to land expropriation without compensation. Every South African who keeps an eye on current affairs knows that – yet many politicians continue to beat the drum of land grabs. Anthea Jeffery of the IRR has been tackling the issue from a variety of angles, with a view to trying to drive home the point that taking away property rights will have devastating consequences. This is not a figment of her imagination. If you can’t accept that Zimbabwe’s ills are a result of the denigration of property rights because it is too close to home, look at South America where Venezuela was once a thriving country. Today, Venezuelans are dirt poor, struggle to access healthcare and are staring at a miserable future. A common denominator between Zimbabwe and Venezuela: land expropriation. – Jackie Cameron
Don’t think it can’t happen to you
By Anthea Jeffery*
‘I have heard it said many times, by…people [elsewhere in] the world, that what has happened to Venezuela could never happen to them…. And that’s exactly what we in Venezuela also said some 20 years ago. That it could never happen to us. Because Venezuela was a vibrant society, with institutions, resources, and…a well-educated middle class, and it was close to the USA. And look where we are now… Over 30m Venezuelans cannot believe how horrible, how terrible the destruction and devastation have been. There are no indicators, no numbers, not even images, that can convey the degree of the pain that Venezuela is going through… So don’t think it can’t happen to you.’
This, in essence, was the message that Maria Corina Machado, a Venezuelan opposition MP and presidential candidate in 2012, had for South Africans at a conference on property rights organised by the Free Market Foundation in Johannesburg in November 2018.
This conference took place a week after Parliament’s Constitutional Review Committee (CRC) had recommended that Section 25 of the Bill of Rights should be amended to allow expropriation without compensation (EWC).
Ostensibly, this amendment is supposed to speed up land reform and turn it, in some way yet to be explained, from failure to success. The real motive, however – as Cosatu described it in 2018 – is to give the state control over all land in the country and so cripple the free market economy.
The CRC’s 2018 recommendation has now given rise to the Draft Constitution Eighteenth Amendment Bill of 2019. This bill provides that ‘nil’ compensation may at times be paid on the expropriation of both land and all ‘improvements’ on it. The bill also empowers Parliament to adopt, by simple 51% majority, any number of new laws setting out the ‘specific instances’ in which nil compensation should apply.
Ms Machado’s message – which had to be sent by video recording to Johannesburg as she had long been prohibited from leaving Venezuela and was under close surveillance by its security forces – is just as salient to South Africa today as it was some 15 months ago.
The EWC process in oil-rich Venezuela started small, with a constitutional amendment that seemed to target only ‘large’ and ‘idle’ estates or latifundios. These latifundios had to be broken up (said President Hugo Chavez) to ‘allow peasants to gain ownership of the land they cultivated’. Before long, however, EWC had spread to some 20% of total farming land, while production of maize, rice, sorghum and other crops had dropped by 40% in general and often more.
Shortfalls were initially made up by using Venezuela’s oil wealth to import food. After 2014, however – when the oil price decreased dramatically – imports of all essentials, including food, became far more difficult for the government to afford.
The resulting food shortages were blamed on ‘hoarding’, and rationing was introduced. Price controls were also tightened up, forcing farmers to sell at prices below production costs and curtailing supply still further.
Food riots began in 2016, as did the hijacking of food trucks and the violent looting of stores. President Nicolas Maduro (who had taken over in 2013 on the death of his predecessor) began urging the 80% urbanised population to start growing food and raising chickens at home. Often people were expected to achieve this on balconies and roof tops.
Moreover, despite all assurances to the contrary, EWC in Venezuela did not stop at farming land. Instead, it soon spread to oil companies, mines, banks, factories, and other enterprises. The economic consequences were catastrophic.
Before it embarked on ‘21st century socialism’, Venezuela had been the richest country in Latin America. Between 2012 and 2019, however, its GDP halved, while public debt expanded rapidly. Soon hyperinflation rose to more than 2 million percent a year. Savings were wiped out, unemployment and poverty soared, food, medicines, and electricity became ever scarcer, and more than 3 million Venezuelans (roughly 10% of the population) fled to neighbouring states. Many families, as Ms Machado notes, now have to survive on US$5 to $10 a month and often on less.
A similar story is evident in Zimbabwe, where the farm confiscations that began in 2000 soon triggered a far broader economic implosion. Once the property rights of a small group of white farmers had been destroyed, business confidence fell sharply. So too did investment, growth, employment, production, and tax revenues, prompting millions to flee. The government started printing money to sustain its spending. This triggered hyperinflation at a globally unprecedented rate of 89.7 sextillion percent within eight years.
Some 20 years later, food, water, electricity, and fuel remain in critically short supply. Unemployment is sky high, at roughly 90%. Even civil servants earn less than US$1.90 a day, putting them below the extreme poverty line. Now that the Zimbabwean dollar (‘zollar’) is back, the inflation rate has already sped up above 500% in what could prove to be a devastating replay of the past.
Experience in Venezuela and Zimbabwe should provide a salutary warning to all those in the upper echelons of the ANC who may believe that EWC will work well for them – that their proven party loyalties will give them preferential access to confiscated land, houses, farms, or factories and add to their existing wealth.
Instead, many of these cadres could find themselves engulfed by the crippling consequences of EWC. The impact will be even worse if the government responds to falling revenue and rising debt by raiding pension funds and printing money, which is sure to send inflation soaring.
In time, millions of well-paid public servants could find, like their counterparts in Venezuela and Zimbabwe, that their earnings have dropped to US$2 a day or even less. This would be a far cry from the monthly salaries they now enjoy.
For the rest of the middle class – to say nothing of the already jobless and destitute – the suffering would be even more acute. Moreover, unlike in Venezuela and Zimbabwe, there would be nowhere else for unskilled and desperate South Africans to go.
Public comment on the Constitution Eighteenth Amendment Bill has been extended by a month until 29 February 2020. Millions of South Africans, both in and outside the ANC, must use this extra time to voice their vehement objections to this EWC amendment. There is simply no room for complacency – nor for the unfounded belief that ‘it can never happen to us’.
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- Dr Anthea Jeffery holds law degrees from Wits, Cambridge and London universities, and is the Head of Policy Research at the IRR. She has authored 11 books, including People’s War: New Light on the Struggle for South Africa and BEE: Helping or Hurting? She has also written extensively on property rights, land reform, the mining sector, the proposed National Health Insurance (NHI) system, and a growth-focused alternative to BEE.