After a two-day policy huddle, the ANC announced that they have decided to proceed with changing the constitution to be able to expropriate land without compensation.
When Ramaphosa took over as president of the ANC, and a few months later as president of South Africa, he was dealt a weak hand. The party is divided between populists and traditionalist. Some care to continue the legacy of Nelson Mandela, to build an all-inclusive South Africa where everybody gets the same opportunity to work and create wealth. Others only care about enriching themselves, while some just care about winning the next election. After all, a politician is one of the best paid jobs in South Africa. Ramaphosa’ s first task would be to unite everybody within the ANC ahead of the next elections. That requires compromises, but surely none as great as giving in to populist policies that are sure to backfire. Sadly, that is exactly what he has done.
A commission was established to investigate the possibility of amending the constitution to allow expropriation of land without compensation. They are currently busy holding public hearings, where citizens can express their views. But before they are able to compile their report, or even finish the public hearing, the ANC, under the leadership of Ramaphosa, decided to amend the constitution, which makes the commission pointless. But that will be the least of their worries.
As a typical trait of modern times, the campaign has been fed by misleading information. According to the economist Johann Bornman, more than half of all farm land in the three most fertile provinces is currently already owned by black farmers. The Ingonyama Trust, whose sole trustee is the Zulu king, owns 3 million hectares, about the size of Belgium, making him the biggest landowner. Much of the rest is owned by companies such as Sappi and Ilovo. The three provinces with the lowest share of black ownership are the Western Cape, Northern Cape and Freestate, probably because most of the land is semi-desert making farming extremely difficult.
Through the ongoing re-distribution program, the government has already acquired vast amounts of land, on a willing seller willing buyer basis. Many emerging farmers could have been given land (which is just sitting idle now) were it not for the governments incompetence.
What many attendees of the public hearing seem to be focusing on though is urban land, rather than farm land. That makes sense. As South Africans became richer over the last 20 years, more have been drawn from the rural areas to the cities. This is a worldwide phenomenon.
No country has ever become richer by getting more people to take up farming.
A side effect is that there is an enormous pressure on urban land. Government is making progress though. According to the Race Relation Institute, a think tank, there are 10 new low-cost houses built for every informal shack erected. That is the inverse of what happened 15 years ago. But the pressure on housing is relentless, as evident by companies like Calergo M3, a low-cost housing developer. They just reported that they have had delays in delivery of units because of illegal occupants tried to “hijack” the units before they were finished.
The real problems are less obvious though. A move to take away land without compensation puts the whole banking system at risk. Banks lend out money and take the asset as security. The size of the loans are determined by the banks ability to recover the money in a fire sale, should the borrower default. If the bank can’t be sure that the applicant will always be the owner of the land, they will simply not lend any money at all. And if some of the banks current assets held as security are repossessed by the government, they will need to shore up their capital ratios to cater for the increase in non-performing loans. Simply put: banks will stop lending out money, and the money that do get lent out will be done at a higher interest rate. This would not only affect farmers, but everybody.
Secondly, white farmers would surely not be in a rush to invest in their farm if they can’t be sure that they will always own the land. This is already happening, as the debate continues. This not only affects our food security but puts thousands of seasonal workers at risk.
Thirdly, this change in constitution does nothing to shore up the confidence of international investors. They would rather invest their money in an environment where they can be sure that the rules they signed up to will stay throughout their investment. Have we not learned the effects of the constant changing of the mining charter? Foreign investment into our mining industry has almost dried up, declining sharply since 2003, through the biggest commodity boom the world has ever seen. Is the ANC willing to do the same to farming, just to counter the populists?
Lastly, it is a very highly charged moral issue. White settlers arrived in 1652, 50 years after the first Europeans settled in the USA. That is 150 years before the great Zulu king, Shaka Zulu took the reign, and expanded his territory dramatically. To which point in history would the government like to turn the clock back to? Besides that, most land has been bought by the present owners, no matter if they are black or white. Should they suffer from consequences from actions taken centuries ago? It can’t be denied that under the apartheid system there have been all sorts of dubious deal done (like the “rent” of the land on which the Wild Coast Sun casino is built), but that should be addressed through the ongoing land reform, where claimants can either get the government to buy back the land and give it to the rightful claimants or pay them a compensation.
The stakes are very high. The economy will not be limping along as it is now, but another recession will be much more likely.