As South African Parliamentarians get ever closer to deciding whether land expropriation without compensation – dubbed EWC – will become a reality, the alarm bells are ringing loud and clear that such a policy would be very negative for the country’s long-term prospects. The most recent red flag – a clear warning against implementing land EWC in SA – is the $3.5 billion deal signed by the Zimbabwean government to compensate white commercial farmers who were evicted from their land two decades ago. The South African economy is already fractured and currently facing ever-increasing debt, load shedding, government mismanagement and Covid-19-related expenses. Land EWC would be disastrous for our economy and for the South African people. This thought-provoking piece helps show us why. – Nadya Swart
By Chris Hattingh*
On 23 July 2020, the Governor of the Reserve Bank (SARB), Lesetja Kganyago, said that the SARB currently expects GDP in 2020 to contract by 7.3%. I consider this to be an optimistic figure, as contraction between 12% – 15% is likely more accurate, especially with the ever-present threat of load shedding. For the next few years, GDP is expected to grow by 3.7% in 2021, and by 2.8% in 2022. In the midst of such depressing news, we have to give some time to thinking about the future – and the kind of thinking the country needs to adopt if we are to turn things around. South Africa will have a fighting chance post-Covid-19, only if property rights are recognised and strengthened.
While the Covid-19 lockdown has proven to be a truly devastating, paradigm-shifting occurrence – especially for countries that were struggling with very low economic growth – it has served to drive home a lesson that South Africans must accept.
This lesson is that government interventions in the economy have suffocated businesses, high entry barriers to employment (such as the National Minimum Wage) have driven up unemployment, and the very consideration of policies such as expropriation without compensation (EWC) have served to undermine the country’s capital investment and growth environment. This kind of thinking that severely hobbled the economy before Covid-19 – thinking that places more and more economic control in the hands of the state – is not the kind of thinking we will need in the post-virus world.
If section 25 of the Constitution is amended to allow for EWC, South Africa will send a signal to citizens and foreign investors that the work they do here, the businesses they grow, the people they employ, the property they work to acquire, will never be secure from the arbitrary whims of future politicians and bureaucrats. The concept of EWC undermines the very recognition of individual agency and ownership that is entwined with property rights.
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The graph from the SARB above will look rosy by comparison if South Africa adopts EWC. To have any serious economic investment, capital accumulation, and growth, a country needs recognised, secure property rights. Kizito Okechukwu, co-chairperson of the Global Entrepreneurship Network (GEN) Africa, wrote in 2019 that, “property rights as a key enabler for economic development.” Economic activity, to be impactful and generate the kind of poverty-alleviation so many South Africans have desired, requires long-term planning, thinking, and investment – these cannot happen without property rights underpinning the whole structure.
Okechukwu goes on to explain that “the difference between prosperity and poverty is property. Nations prosper when private property rights are well-defined and enforced.” South Africa cannot continue down the path of thinking redistributionism will lift people out of poverty. This ‘solution’ is temporary at best, and the resources of the state are steadily shrinking. Without secure property rights, people cannot create wealth for themselves – there will be no businesses, entrepreneurs, and investors for them to trade with.
There is nothing radically transformative about EWC, an idea that seeks to grow the power and control of the state to massive levels. It entails rendering all property meaningless because the state will be able to seize anyone’s property, for its own reasons and purposes – including those citizens who gained their first rights to own property in 1991. EWC hearkens back to regimes of the past, where black South Africans were denied their property rights for the arbitrary reason that they had the wrong skin colour. Property rights are a necessary ingredient for human dignity and agency.
South Africa has tried socialist, big-government ideas until now. Where did the philosophy of government control lead us? To the point where, even in the midst of seriously limited economic activity, Eskom could not even keep the lights on. EWC will contribute to placing ultimate control of what people earn, what they build, what they want to leave for their children, in the hands of the government. At any point, the government of the day could decide, for any reason they desire, to take away what people have earned and built; no one can succeed in such an environment.
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According to the Department of Rural Development and Land Reform in 2017, landownership hectares by race showed the largest amount of land was owned by white South Africans. What the data do not help us piece together, is the amount of land owned by the state (and is not being used to its potential) nor does it tell us anything about the quality of land measured. For example, some of the land may be urban, some may be rural, and some might be arid land in the Northern Cape. Unfortunately there is no standard given by which to show progress in land reform and restitution. The data tell only some of the broader context. The threat of EWC means all land and property will be subject to arbitrary seizure from the state.
To give the state complete control over all people’s property, as EWC will entail, will not produce the desired growth results. The country needs a shift in thinking, from waiting for the state to solve problems, to giving South Africans the economic freedom to address and solve problems themselves – that is truly radical thinking.
We need a radical, fresh path out of this pandemic – not the kind of ideas and policies that destroyed the economy before Covid-19. The majority of South Africans have, for too long, been denied real economic freedom. A signal that the government will respect and enhance property rights is precisely the message that citizens and foreigners need, a positive message that, while other countries are trending in the wrong direction, South Africa is embracing the radical path of economic freedom and prosperity.
- Chris Hattingh is Project Manager at the Free Market Foundation. The views expressed in the article are the author’s and are not necessarily shared by the members of the Free Market Foundation.
