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Depending on the scale of expropriation without compensation, the economic impact could be disastrous, writes Anthea Jeffery.
By ignoring the opinions of hundreds of thousands of South Africans, Parliament's Joint Constitutional Review Committee has blocked them from ever being able to bring their views to bear on the country's most important policy decision in the post-apartheid period.
In recommending on Thursday, 15 November that the property clause in the Constitution be changed to allow expropriation without compensation, the committee is mandating nationalisation by another name.
Yet the committee made this recommendation without ever having looked at 99.9% of the 450 000 "valid" written submissions sent in to it. (More than 720 000 written comments were reportedly initially received, but the committee claims the rest were "inquiries, unrelated, blank, and duplicate submissions" that did not need to be taken into account.)
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Had it properly considered all relevant submissions, as it should have done, it would have found it difficult to justify its recommendation, as at least 65% of them – and probably as many as 75% – were opposed to an expropriation without compensation constitutional amendment.
Some 77% of the oral presentations made to the committee – by organisations ranging from the IRR and Agri SA to the Banking Association of South Africa, Business Unity South Africa, the SA Institute of Black Property Practitioners, the National House of Traditional Leaders, the Legal Resources Centre, and the F W de Klerk Foundation – were also opposed to such a constitutional amendment.
By ignoring almost all the written submissions made available to it – and effectively relegating all this considered analysis to the rubbish bin – the committee has failed to hear and heed what South Africans have told it on the expropriation without compensation issue.
Yet this is the only opportunity that South Africans are likely to have to express their views on whether an expropriation without compensation constitutional amendment is needed at all.
The recommendation made by the committee this last Thursday will no doubt be endorsed by Parliament before the legislature rises for the festive season break.
A bill to amend the Constitution will be put forward after the May 2019 election, and public comment on its terms will have to be obtained before Parliament can adopt the measure.
But South Africans are likely to be told that the only issue then up for discussion is the way in which the constitutional amendment should be worded. They will not be allowed to comment on whether the Constitution should be amended at all, as that decision will already have been taken.
By ignoring what so many South Africans have told it, the committee has blocked them from ever being able to bring their views to bear on what is undoubtedly the most important policy decision to confront the country in the post-apartheid period.
Expropriation without compensation is sure to have many damaging economic consequences for South Africa, as recent research by the GOPA Group, a leading development consultancy in Europe, has highlighted. GOPA analysed the economic performance of various other countries which had gone the expropriation without compensation route. It found that these nations had experienced an average annual decline in capital formation, as a percentage of GDP, of some 14%.
This truncated capital formation (fixed investment in physical assets such as infrastructure, factories, tower cranes, and other machinery) in turn had major negative impacts on economic growth, tax revenues, employment, national budgets, and the ability of the countries concerned to sustain spending on education, infrastructure, and other core needs.
In South Africa, as GOPA warns, expropriation without compensation could well reduce capital formation by 10% of GDP a year. On that basis, GDP will, by October 2020, be some R455bn less than it might have been in the absence of expropriation without compensation. By then, moreover, the economy will long have been in recession, tax revenues will be down by R260bn, the budget deficit will be up to 6.5% of GDP, and the government's interest bill will have risen sharply. Moody's will have followed other ratings agencies in downgrading South Africa to junk status – and the government will be battling to maintain its spending on education, health, infrastructure, and other essentials. More than 2.3 million jobs might also have been lost, adding to the economic misery.
Depending on the scale of expropriation without compensation, the economic impact could be even worse. South Africa could experience the kind of economic meltdown now evident in Venezuela, once the wealthiest country in Latin America.
In Venezuela, expropriation without compensation was also initially supposed to be confined to "idle" land, but in practice it soon extended far beyond that. With property rights so obviously insecure, the Venezuelan economy has imploded over the past five years.
GDP has contracted sharply, the inflation rate is likely to reach 1 million per cent this year, the proportion of the population living in poverty is well over 80% – and extreme poverty now afflicts more than 61% of Venezuelans, sharply up from 24% in 2014.In the words of Greg Mills and Lyal White of The Brenthurst Foundation, in a May 2018 discussion paper on Venezuela's Populist Armageddon: "University professors now earn US$6 a month, as does a police superintendent with 17 years of experience. It requires an estimated 98 times the official minimum monthly wage of 700 000 Bolivars merely to survive... Basic water and electricity infrastructure is near collapse, and unemployment is rampant... Local industry has been destroyed and virtually everything has to be imported, including food, but the government no longer has the funds to do so." Hunger is widespread and millions of people have fled to neighbouring states.
That expropriation without compensation is likely to have major negative effects on all South Africans has been spelt out in depth not only in GOPA's submission but also in many of the other submissions the committee has pointedly ignored.
These cautionary comments do not fit with the committee's prejudging of the issues – and its determination from the start to decide in favour of expropriation without compensation – and so they have effectively been cast aside.
The committee cannot be allowed to get away with this. The one opportunity that South Africans have to raise their voices against an expropriation without compensation constitutional amendment cannot be negated in this way.
The IRR, for one, is determined to ensure that the committee fulfils its obligation to hear and heed what South Africans have said to it on the expropriation without compensation issue. It is busy briefing lawyers and plans to take the committee's flawed recommendation on judicial review.
- Dr Anthea Jeffery is Head of Policy Research at the IRR, a think tank promoting political and economic freedom. If you agree with what you have just read, SMS your name to 32823. Each SMS costs R1. Ts and Cs apply.
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